BUS-42 - Qualifying for the Manufacturing Exemption

To qualify for the manufacturing exemption, a taxpayer must meet each of the requirements listed below.

  • A business must qualify for the exemption on a per location basis.
  • The business must be engaged in one of the activities described under Division D of the SIC Index or be otherwise primarily engaged in fabricating and processing tangible personal property for resale and consumption off the premises.
  • More than 50% of the business’s gross receipts must be derived from sales of product manufactured at same location.
  • The sales of the manufactured products must be made from the manufacturing location subject to ad valorem tax. Location includes any adjoining buildings and any buildings on the same parcel of land that, combined, make up a manufacturing campus.

If a business qualifies as a manufacturer, sales made from the qualified location of items not manufactured at that location but incidental to the business’s manufacturing sales are also exempt.

If a business location qualifies for exemption, the business will not register the location or get a business tax license for the location. 

Reference: Tenn. Code Ann. § 67-4-712(b)(2); Tenn. Comp. R. & Regs. 1320-04-05-.16.

Note: This article was updated for clarification purposes on January 12, 2022. The previous version of BUS-42 is available here.

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