Tennessee Contractor Exempt from Sales Tax on Water Treatment Equipment

• Tennessee contractor can buy water treatment equipment without sales tax
• A Tennessee ruling explores if equipment purchases qualify for the state’s industrial machinery exemption
• The ruling also examines if a contractor can claim this exemption when buying equipment for a manufacturing customer
• State rules differ on what types of equipment are exempt and if contractors can make exempt purchases for customers
• Aprio’s SALT team offers consultations to help understand sales tax implications for specific projects
• The case involves a contractor building a water treatment facility and purchasing specific piping
• The facility processes non-potable water into drinkable water
• The piping transports water and aids in the preliminary treatment process
• The ruling clarifies that contractors usually pay sales tax on property used in contracts unless it qualifies for an exemption
• The exemption depends on whether the piping is considered industrial machinery under Tennessee law
• To be exempt, the piping must be used in manufacturing and meet specific criteria as machinery or equipment
• The ruling confirmed that converting raw water to potable water is a manufacturing process and the piping qualifies as exempt industrial machinery

Source: aprio.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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