Section 1320-04-05-.29 - MANUFACTURERS AND PROCESSORS(1) Sales of industrial materials and services to manufacturers and processors who further process, manufacture or convert such materials as a component part of articles of tangible personal property, or use the services in preparing such a product for sale or resale, are considered to be sales at wholesale and, therefore, are subject to the Business Tax.(2) Sales of machinery and supplies and services, other than those in (1) above to manufacturers or processors, are retail sales, unless the property or services are shown by the manufacturer or processor to be for resale, in which case the sales are wholesale sales subject to the wholesale tax.(3) Sales of tangible personal property manufactured or processed by a manufacturer or processor, who is subject to the ad valorem tax under Part 5 of Chapter 5 of Title 67, T.C.A., are exempt from the Business Tax if made at the manufacturing or processing location within this state. Sales of such property which is not manufactured or processed by a manufacturer or processor but which is incidental to the operation of such manufacturer or processor are also exempt from the Business Tax if made at the manufacturing or processing location or outlet that is subject to the ad valorem tax under provisions of said Chapter.(4) Sales of tangible personal property manufactured or processed by a manufacturer or processor from locations other than the manufacturing or processing location where the ad valorem tax is paid are subject to the Business Tax. Such sales are taxable at either the retail or wholesale tax rate, whichever is applicable.(5) A manufacturer or processor who is subject to ad valorem tax under the provisions of Part 5 of Chapter 5 of Title 67, T.C.A., and who also sells tangible personal property which he has manufactured outside the state, or has brought tangible personal property or services for resale, shall be liable for the ad valorem and personal property taxes as follows:(a) All property used exclusively in the manufacturing or processing operation shall be subject to the tax imposed by Part 5 of Chapter 5 of Title 67, T.C.A..(b) All property used exclusively in the sales of property manufactured by him outside the state, or tangible personal property or services bought for resale, shall be exempt; from the provisions of Part 5 of Chapter 5 of Title 67, T.C.A., and personal property taxes.(c) The value of property used partially in connection with manufacturing operations exempt from the Business Tax and partially in connection with sales subject to the Business Tax shall be prorated. Such proration shall be as determined by the ratio of sales of property manufactured in this state subject to the tax imposed by Part 5 of Chapter 5 of Title 67, T.C.A., and receipts from other sales subject to the Business Tax. The portion of the value applicable to property used in connection with manufacturing operations shall be subject to the ad valorem tax imposed by Part 5 of Chapter 5 of Title 67, T.C.A., and that portion of the value applicable to other sales activities shall be exempt from the provisions of Part 5 of Chapter 5 of Title 67, T.C.A., and personal property taxes.
Tenn. Comp. R. & Regs. 1320-04-05-.29
Original rule certified June 7, 1974. Amendment filed April 28, 1987; effective July 29, 1987.Authority: T.C.A. §§ 67-1-102, 67-4-702, 67-4-703, 67-4-704, and Part 5 of Chapter 5, Title 67, T.C.A.