Factory-manufactured homes (i.e., mobile homes) are defined in Tennessee law as homes with a permanent chassis. This is different than a modular home for sales or tax purposes, as modular homes do not have a chassis.
The sale of a new factory-manufactured home is subject to sales tax on the total installed price at one-half of the normal state sale tax rate (3.50%). Additionally, the local tax single article limitation and the additional state single article tax (at half the state single article rate) would apply to the total sales price. For example, a factory-manufactured home with an $80,000 installed price would be taxed as follows:
- State sales tax – $80,000 x 3.50% = $2,800
- Local tax – $1,600 x 2.25% = $36 (assuming a 2.25% local rate)
- Single article tax – $1,600 x 1.375% = $22 (½ state tax on a single article, even on double and triple wide homes)
TOTAL TAX = $2,858
The sale of a used factory-manufactured home is exempt from the sales tax if the taxpayer shows that someone paid Tennessee sales tax on it in a prior transaction.
For factory-manufactured homes, contractors providing installation of items for the home (septic systems, footings, driveways, etc.) may buy materials using a sales tax resale certificate and bill the prime contractor or manufactured home dealer without paying tax. The value of the contractor’s billing is factored into the total selling price and taxed as in the above example.
Conversely, because a modular home is not specifically defined in law as equal to the factory manufactured home, the modular home must be subject to traditional sales and use tax treatment. No reduced rates are allowed for modular homes.
Reference: Tenn. Code Ann. §§ 67-6-216(a) and 67-6-336.