Bass, Berry & Sims attorneys Michael Sontag, Steve Jasper, Sara Morgan and Robert Guth authored an article for Tax Notes State examining the Tennessee Court of Appeals’ recent Alsco ruling, explaining why that decision could help other taxpayers determine whether their activities qualify as manufacturing for sales tax exemption purposes. In this case, the court overruled a Department of Revenue (DOR) decision denying Alsco’s sales tax exemption based on its conclusion that the company’s “highly specialized and industrial sanitation process did not constitute ‘processing’ tangible personal property for resale within the meaning of the state’s sales tax laws that define the activities of a manufacturer entitled to the industrial machinery exemption.”
The court disagreed and allowed the exemption. In the article, the authors point out that the court’s decision reversed “the DOR’s long-standing policy that cleaning, laundering, and sanitation processes do not qualify for the industrial machinery exemption” and added that the decision “opens the door for other commercial cleaners to apply for the industrial machinery exemption.”
More importantly, as a result of this decision, the attorneys recommend that “every taxpayer and practitioner that pays or provides guidance regarding Tennessee sales tax should take this opportunity to refresh their understanding of what can qualify for the industrial machinery exemption and the sale-for-resale exemption more generally.”
The full article, “Tennessee Puts Its Manufacturing Exemption Through the Spin Cycle,” was published by Tax Notes State on October 16 and is available online (subscription required).