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Tennessee: Agricultural Sales or Use Tax Exemption Certificates Don’t Exempt Everything


 Or not.

In Tennessee, many agriculture-related purchases are eligible for an exemption from sales tax. As a result, many agricultural businesses have agricultural sales or use tax exemption certificates. Yet these exemption certificates do not give businesses a blanket exemption from all sales and use tax. Recently, the Tennessee Department of Revenue sent a letter to holders of agricultural sales or use tax exemption certificates, reminding them of that.

In the letter, the DOR states that agricultural exemption certificate holders “must pay tax on items that do not qualify for exemption,” including but not limited to:

  • Clothing;
  • Automobiles, trucks, automotive oil, tires, parts and repair;
  • Trailers for use over the road, except livestock trailers…;
  • Materials that become real property when installed, including gravel, concrete, building materials and fencing materials…;
  • Water, for any use or purpose;
  • Household appliances;
  • Lawn mowers; and
  • Pet food and medications.

A list of items that qualify for the agricultural exemption is included in the letter.

The department also reminds that when non-exempt items are purchased from out-of-state sellers that don’t collect sales tax, “agricultural certificate holders must self-assess and pay Tennessee use tax to the Department of Revenue based on the price of those purchases.”

Breaking the law

Taxpayers who fail to pay sales or use tax on taxable purchases are “violating state law,” even if they’re agricultural certificate holders. In other words, they should “anticipate an assessment from the Department of Revenue that will include unpaid tax, interest and applicable penalties.”

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Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
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.