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Tennessee DOR on Taxability of Farm Equipment, Machinery


The Tennessee Department of Revenue recently released a letter ruling regarding the applicability of the state sales and use tax to purchases of equipment by a qualified farmer or nurseryman.

The letter ruling mentions Tennessee Tax Code Ann. § 67-6-207(a)(1), which allows an exemption for "[a]ny appliance used directly and principally for the purpose of producing agricultural products, including nursery products, for sale and use or consumption off the premises… ." (Emphasis mine). The same section excludes from the exemption "an automobile, truck household appliances or property that becomes real property when erected or installed… ."

Pursuant to that tax code, "transportation of farm commodities to market for sale is not part of the production process" and therefore does not qualify for the exemption.

Letter Ruling 12-22 reveals that a particular taxpayer's stainless steel wash lines, water chillers, and pulse sanitizing instrumentation -- which are all used in the production of the taxpayer's produce -- qualify for the exemption.

On the other hand, the letter ruling finds that the taxpayer's ice machines, ice storage and distribution system, racking and office equipment are not directly involved in the production process. Rather, they are part of the "post-production packaging" of the produce. As such, they are subject to the state sales and use tax.

It's a fine line, really, but one that is clearly delineated in TENN. CODE  ANN. § 67-6-207(a)(1).

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Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.