No Gross sales or Use Tax Due on Supplies and Gear Used to Assemble and Set up Steam Facility at Tennessee Manufacturing Plant

Lawyer & Insurance

In a letter ruling revealed March 16, 2020, the Tennessee Division of Income concluded {that a} contractor’s buy of supplies and tools to be used within the building and set up of a brand new steam manufacturing facility at a federally owned manufacturing plant was exempt from Tennessee gross sales and use tax.  Tenn. Letter Rul. No. 20-02 (issued Feb. 10, 2020).

Contractors in Tennessee are topic to make use of tax on tangible private property they use within the efficiency of a contract except an exemption applies.  Part 67-6-209(e) of the Tennessee Code Annotated exempts, amongst different issues, supplies and tools bought or used for the development or set up of, in, or as a part of any useful resource restoration facility owned by the USA or any company thereof the place steam or electrical vitality is produced.  To qualify for the exemption, the supplies and tools should turn out to be a part a part of the ability.

Letter Ruling No. 20-02 concerned a contractor that operates and manages a federally owned manufacturing plant in Tennessee.  The manufacturing processes on the plant are powered by steam generated by an current facility on web site.  The steam is delivered via a closed loop system.  Steam used within the manufacturing processes turns into water, which is then recovered and transformed into steam for use once more to energy the manufacturing processes.  The federal authorities and the contractor entered into an settlement pursuant to which the contractor, straight and thru subcontractors, was to assemble a brand new on-site steam facility, together with a constructing and a tank farm.

In ruling that the supplies and tools which turn out to be a part a part of the brand new steam facility, together with the constructing and tank farm, would qualify for the gross sales and use tax exemption below part 67-6-209(e), the Division of Income concluded that the steam produced on the facility constitutes a reusable useful resource and the ability and loop system collectively function as a useful resource restoration system.

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