BUS-37 – Taxable Sales by Exempt Entities

Businesses exempt from business tax for services rendered are not exempt when they sell otherwise taxable tangible personal property. For instance, a veterinarian may not be subject to business tax on medical services provided to animals but would be subject to business tax and licensing if they sold animal food, leashes, pet beds and other items.

Additionally, sales of tangible personal property by exempt organizations such as nonprofit agencies, including food and beverages, are subject to the business tax. An exempt organization pays business tax on tangible personal property it sells if gross sales exceed $3,000. The ‘umbrella’ that protects an exempt entity from paying taxes does not cover operations that are not the ‘usual and customary’ operations. For example, a church would be usually exempt, but if it were selling books from its bookstore that the church had bought to sell to church members, it would pay business tax just like any bookstore doing retail sales.

Reference: Tenn. Comp. R. & Regs. 1320-04-05.32.

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