Tennessee Utility Sales Tax Exemption
Tennessee provides a sales and use tax exemption on electricity, natural gas, and water when these utilities are used directly in manufacturing, processing, or industrial operations. To qualify, more than 50% of the utility consumption at a location must be used in exempt production activities. If usage is mixed, only the qualifying portion may be exempt.
Filing Requirements
A detailed utility usage study is often required to substantiate the exemption. The study must:
- Identify all equipment and processes using the utility.
- Separate exempt usage (production-related) from non-exempt usage (lighting, HVAC, administrative, etc.).
- Document consumption levels to determine whether more than 50% of the utility qualifies.
Filing Requirements
To claim the exemption, businesses must provide the utility supplier with a completed Streamlined Sales and Use Tax Certificate of Exemption. If sales tax has already been paid on qualifying usage, businesses may file a refund claim with the Tennessee Department of Revenue. Refunds can generally be requested for up to three years from the date of payment, and supporting documentation such as utility bills, exemption certificates, and utility studies should be maintained.