Were staffed truck-washing services exempt when performed on vehicles used in interstate commerce?

Plain-English summary

Tennessee held that a staffed truck wash had to charge sales tax for washing trucks and trailers even when the vehicles qualified for the interstate-commerce vehicle exemption.

The exemption in Tenn. Code Ann. § 67-6-331 applied to the transfer of qualifying vehicles. Washing did not dispose of, sell, lease, or otherwise transfer the vehicle; the owner simply received the cleaned vehicle back. The business was selling a cleaning service, and Tenn. Code Ann. § 67-6-205 taxed laundering or dry-cleaning tangible personal property except for specified coin-operated facilities.

The Department also relied on Serodino, Inc. v. Woods, where an exemption for purchasing interstate-commerce equipment did not extend to repairing or renewing that equipment. In the same way, an exemption for transferring a truck did not exempt later services performed on it.

What this means for you

Truck-wash operators

Vehicle status did not exempt the washing charge. A staffed, non-coin-operated facility was providing a taxable cleaning service under the law applied in the ruling.

Motor carriers and fleet managers

An exemption for buying or transferring qualifying interstate equipment does not necessarily extend to repair, maintenance, washing, or other services. Each charge needs its own exemption basis.

Common questions

Q: Did interstate use make the truck-washing service exempt? A: No.

Q: Why did the vehicle-transfer exemption not apply? A: Washing did not transfer the vehicle or any ownership interest; it was a service followed by return of the same vehicle.

Q: Did the ruling address coin-operated washes?
A: The taxpayer planned an employee-staffed, non-coin-operated facility. The ruling noted a statutory exception for certain coin-operated facilities but did not decide different facts.

Citations and references

• Tenn. Code Ann. §§ 67-6-205 and 67-6-331
• Serodino, Inc. v. Woods, 568 S.W.2d 610 (Tenn. 1978)

Source

• Landing page: https://www.tn.gov/revenue/tax-resources/legal-resources/tax-rulings.html
• Original PDF: https://www.tn.gov/content/dam/tn/revenue/documents/rulings/sales/04-36.pdf

Original ruling text

TENNESSEE DEPARTMENT OF REVENUE
LETTER RULING # 04-36
WARNING
Letter rulings are binding on the Department only with respect to the individual taxpayer being addressed in the ruling. This presentation of the ruling in a redacted form is informational only. Rulings are made in response to particular facts presented and are not intended necessarily as statements of Department policy. SUBJECT Application of the sales tax exemption for certain vehicles used in interstate commerce to a truck washing business. SCOPE This letter ruling is an interpretation and application of the tax law as it relates to a specific set of existing facts furnished to the department by the taxpayer. The rulings herein are binding upon the Department and are applicable only to the individual taxpayer being addressed. This letter ruling may be revoked or modified by the Commissioner at any time. Such revocation or modification shall be effective retroactively unless the following conditions are met, in which case the revocation shall be prospective only: (A) The taxpayer must not have misstated or omitted material facts involved in the transaction; (B) Facts that develop later must not be materially different from the facts upon which the ruling was based; (C) The applicable law must not have been changed or amended; (D) The ruling must have been issued originally with respect to a prospective or proposed transaction; and (E) The taxpayer directly involved must have acted in good faith in relying upon the ruling; and a revocation of the ruling must inure to the taxpayer’s detriment. FACTS
[THE TAXPAYER] operates truck washing facilities. It anticipates expanding its business to Tennessee in [DATE] and is currently in the process of constructing a noncoin operated, employee staffed truck washing facility in Tennessee, where washing and cleaning services will be performed on motor vehicles and trailers used in interstate commerce.

QUESTION
Does the sales and use tax exemption in Tenn. Code Ann. §67-6-331 for the transfer of certain motor vehicles used in interstate commerce apply to truck washing services performed on vehicles meeting the exemption criteria under §67-6-331? RULING No. The sales and use tax exemption for the transfer of certain motor vehicles used in interstate commerce does not apply to truck washing services. ANALYSIS Tenn. Code Ann. §67-6-331 provides an exemption from sales and use tax for: the transfer, by any dealer in personal property, of motor vehicles with a gross vehicle weight rating (GVWR) of a class three (3) or above as defined in §55-4-113 and trailers, semi-trailers and pole-trailers as defined in §§55-1-105 and 55-4-113 which shall be used to transport passengers or cargo principally in interstate or foreign commerce by a carrier holding common or contract operating authority… The question is whether this exemption would apply to truck washing services which clean the vehicles exempted in §67-6-331. Tenn. Code Ann. §67-6-205 makes the laundering or dry cleaning of any kind of tangible personal property, with the exception of certain coin-operated facilities, subject to sales tax. Therefore, unless an exemption applies, the truck washing services are subject to sales tax. The problem with applying the Tenn. Code Ann. §67-6-331 exemption to the sales tax on cleaning services is that the exemption only applies when there is a “transfer” of a qualified vehicle. Although “transfer” is not defined in the statute, it is typically defined to mean “any mode of disposing of or parting with an asset or an interest in an asset, including the payment of money, release, lease or creation of a lien or other encumbrance.” BLACK’S LAW DICTIONARY (7th ed. 1999). When a vehicle is washed or cleaned, there is no disposal of the vehicle, nor is there a parting between the owner and the vehicle. Rather, the vehicle is cleaned and immediately returned to its owner. No transfer occurs. Furthermore, the truck washing facilities are providing a service; the statute does not provide an exemption for services. A similar situation occurred in Serodino, Inc. v. Woods, 568 S.W.2d 610 (Tenn. 1978), where a taxpayer sought a refund of sales taxes paid for repairs performed on barges used in interstate commerce. The Court found that an exemption from sales and use tax for the purchase of equipment used in interstate commerce did not apply to repair or renewal services. Specifically, the Court found that neither the repair nor the renewal of a barge was equivalent to a sale or transfer.

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In this situation, the washing of a vehicle used in interstate commerce would not constitute a transfer or a sale of the vehicle; therefore, the washing services would not be exempt from sales tax.

Deborah A. Toon
Tax Counsel
Approved:

Date:

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Loren L. Chumley
Commissioner of Revenue
11/23/04