Is the sale and installation of an above-ground swimming pool subject to Tennessee sales and use tax, or does it count as a non-taxable improvement to real property?

Subject

Whether the sale and installation of an above-ground swimming pool is taxable tangible personal property or a non-taxable improvement to realty.

Plain-English summary

The Tennessee Department of Revenue ruled that selling and installing an above-ground swimming pool is subject to Tennessee sales and use tax, because the pool remains "tangible personal property" rather than becoming a fixture/improvement to real estate.

Tennessee generally taxes tangible personal property and the service of installing property that stays tangible personal property after installation — but installation that turns property into an improvement to realty (a fixture) is not taxed. Whether an item becomes a fixture turns on the intent of the parties, tested through objective factors: the type of structure, how it's attached, and its use and purpose. Courts have held property stays personal property if (1) it's meant to be removable at the owner's pleasure, (2) removing it wouldn't seriously damage the real property, and (3) removal wouldn't destroy its essential character as personal property.

Applying those factors, the installer's above-ground pools checked all three boxes: they're built so owners can move them to a new site (and occasionally do); installation only requires digging a shallow 6-8 inch depression and using removable concrete blocks, so removal doesn't seriously damage the yard; and the pool is not connected to the home's water or electrical systems (the homeowner wires the filter motor separately) and can be reassembled elsewhere, so it keeps its character as a self-contained personal-property item throughout. The Department noted the cost or inconvenience of removing something isn't decisive by itself — courts have found even one-story bank buildings remained personal property when built to be portable.

What this means for you

Pool installers and other contractors selling semi-permanent structures

Whether your installed product is taxable tangible personal property or a tax-free "improvement to realty" doesn't hinge on size or how much work goes into installing it — it hinges on removability, damage-on-removal, and whether the item stays intact and usable after removal. If your product can be relocated without serious damage to the site and without destroying its own character (like an above-ground pool, or the portable bank buildings and grain bins discussed in the cited cases), expect it to be treated as taxable tangible personal property, no matter how substantial the installation work looks.

Accountants and tax professionals

This ruling is a compact application of Tennessee's fixture test from Magnovox Consumer Electronics v. King and General Carpet Contractors, Inc. v. Tidwell, contrasted against Process Systems, Inc. v. Huddleston (conveyor system became realty because removal would damage the building and destroy the system's character) and Harry J. Welchel Co. v. King / Hubbard v. Hardeman County Bank (portable grain bins and buildings stayed personalty). Useful precedent set for any client selling large but relocatable structures — sheds, portable buildings, above-ground pools, modular units.

Common questions

Q: Does the size or cost of a structure determine whether it's a taxable "tangible personal property" sale or a tax-free improvement to realty?
A: No. Size and installation effort aren't decisive. The test is whether the item is intended to be removable, whether removal seriously damages the real property, and whether removal destroys the item's own essential character as personal property.

Q: Would connecting the pool to the home's electrical or plumbing system change the outcome?
A: The ruling notes the pool here is a closed, self-contained filtration system with no connection to the home's water supply, and the homeowner (not the installer) wires the filter motor — a factor supporting personal-property treatment. Deeper integration with home utilities could point toward the opposite (realty) conclusion.

Q: Is installation labor taxed separately from the pool itself?
A: Under Tenn. Code Ann. § 67-6-205(c)(6), installation of tangible personal property that stays tangible personal property after installation is itself taxable, so both the pool and its installation are subject to tax here.

Q: Does this ruling apply to my structure/installation business?
A: No. A Tennessee letter ruling binds the Department only for the specific taxpayer and facts addressed and cannot be relied on by others, though the fixture-test factors it applies are of general use.

Citations and references

Statutes, rules, and cases:

• Tenn. Code Ann. § 67-6-202 (2007) (sales tax on retail sales of tangible personal property)
• Tenn. Code Ann. § 67-6-102(80) (2007) (definition of "tangible personal property")
• Tenn. Code Ann. § 67-6-205(c)(6) (2007) (tax on installing property that remains tangible personal property)
• Tenn. Code Ann. § 67-6-209(c) (2007); TENN. COMP. R. & REGS. 1320-5-1-.27 (improvement-to-realty installation exempt)
• General Carpet Contractors, Inc. v. Tidwell, 511 S.W.2d 241 (Tenn. 1974) (intent-of-the-parties fixture test)
• Magnovox Consumer Electronics v. King, 707 S.W.2d 504 (Tenn. 1986) (removable-at-pleasure property is not a fixture)
• Harry J. Welchel Company v. King, 610 S.W.2d 710 (Tenn. 1980); Hubbard v. Hardeman County Bank, 868 S.W.2d 656 (Tenn. Ct. App. 1993) (portable structures stayed personalty)
• Process Systems, Inc. v. Huddleston, 1996 Tenn. Ct. App. LEXIS 695 (conveyor system became realty; damage-on-removal and character-destruction tests)

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/08-18.pdf

Original ruling text

TENNESSEE DEPARTMENT OF REVENUE
LETTER RULING # 08-18

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 Tennessee sales and use tax to the installation of above-ground swimming
pools.
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 retroactive revocation of the ruling must inure to his detriment.
FACTS
[TAXPAYER] is a Tennessee corporation engaged in the business of selling and installing
above-ground swimming pools. The pools range in size from [MEASUREMENTS], not
including a standard patio deck. The pools come with a 30-year limited warranty.

To install a swimming pool, the installation crew levels the ground to provide a stable platform
for the pool. On perfectly flat, level ground, the crew removes the sod and digs to a depth of
between six and eight inches; five tons of sand are then placed in the depression. On unlevel
ground, the grade is cut to a depth necessary to provide a “virgin” pad four to six feet larger than
the outside dimension of the pool; five tons of sand are then placed on the site to provide
protection between the pool liner and the ground. Concrete blocks are then positioned under each
of the pool’s vertical support beams to provide a stable base for the swimming pool. If a site does
not have firm soil, patio blocks must be used under the base straps around the pool
circumference and under the base straps at the patio. A solid foundation, such as a concrete slab
or patio blocks, must be placed so that the pool ladder rests firmly and securely when in the
“down” position. The pool is then assembled using nuts and bolts.
No electrical work is performed by the Taxpayer. Rather, the homeowner has the responsibility
of providing an electrical connection for the pool filter motor. The pool filtration system is a
closed, recirculating system with no connection to the owner’s home’s water supply.
While the swimming pool can be, and occasionally is, moved from one site to another, the
original site requires that the five tons of sand be excavated and removed. Topsoil must also be
brought in and graded over the site, and grass seed must be applied.
QUESTION
Is the sale and installation of an above-ground swimming pool subject to the Tennessee sales and
use tax?
RULING
Yes.
ANALYSIS
The sale and installation of an above-ground swimming pool is subject to the Tennessee sales
and use tax, because the pool remains tangible personal property following installation.
Tenn. Code Ann. § 67-6-202 (2007) generally imposes sales tax on all retail sales of tangible
personal property in Tennessee, unless specifically exempted from the tax. Tenn. Code Ann.
§ 67-6-102(80) (2007) defines “tangible personal property” as “personal property that may be
seen, weighed, measured, felt, or touched, or is in any other manner perceptible to the senses.”
Additionally, Tenn. Code Ann. § 67-6-205(c)(6) (2007) imposes the Tennessee sales and use tax
on the service of installing tangible personal property that remains tangible personal property
after installation. However, Tenn. Code Ann. § 67-6-209(c) (2007) provides that the transfer of
tangible personal property by a contractor who “contracts for the installation of such tangible
personal property as an improvement to realty” does not constitute a sale for purposes of the
sales tax. Additionally, TENN. COMP. R. & REGS. 1320-5-1-.27 provides that charges made for
installing tangible personal property that becomes a part of real property are not subject to the
sales tax.

2

Because a swimming pool comes within the definition of “tangible personal property,” the sale
and installation of the pool is potentially subject to the Tennessee sales and use tax. However, if
the sale and installation of a swimming pool is considered an improvement to realty, the
transaction will not be subject to the sales and use tax.
The issue of whether an item of tangible personal property becomes part of realty depends upon
the application of the law of fixtures to the particular factual circumstances. The Tennessee
Supreme Court has held that the question of when an item is considered a fixture is resolved by
ascertaining the intent of the parties. General Carpet Contractors, Inc. v. Tidwell, 511 S.W.2d
241, 242-243 (Tenn. 1974). The Court has also stated that “only those chattels are fixtures which
are so attached to the freehold that, from the intention of the parties and the use to which they are
put, they are presumed to be permanently annexed, or a removal thereof would cause serious
injury to the freehold.” Magnovox Consumer Electronics v. King, 707 S.W.2d 504, 507 (Tenn.
1986).
Thus, if the property is intended to be removable at the pleasure of the owner, it is not a fixture.
Id. Both objective and subjective factors may show such intent. Hubbard v. Hardeman County
Bank, 868 S.W.2d 656, 660 (Tenn.Ct.App. 1993). Objective factors include the type of structure,
the mode of attachment, and the use and purpose of the property. Harry J. Welchel Company v.
King, 610 S.W.2d 710, 713-714 (Tenn. 1980). The subjective factor is the expressed intent, if
any, of the parties. Id.
The courts have also held that tangible personal property becomes a part of the realty if removing
the personal property would seriously damage the building to which it is affixed. See Process
Systems, Inc. v. Huddleston, 1996 Tenn.Ct.App. LEXIS 695 (Tenn.Ct.App. October 25, 1996)
(citing Memphis Housing Authority v. Memphis Steam Laundry-Cleaners, Inc., 463 S.W.2d 677,
679 (Tenn. 1971)). Tangible personal property also becomes a part of the realty if removal would
destroy its essential character as personalty. See id. (citing Green v. Harper, 700 S.W.2d 565,
567 (Tenn.Ct.App. 1985)).
For example, the Tennessee Supreme Court in Harry J. Welchel Co., 610 S.W.2d at 714, looked
at both the stated intent of the farmers, as well as the objective factors noted above, and reached
the conclusion that the grain bins at issue were personalty. Although the bins were large in size
and bolted to a concrete base, the court found that they were attached to the concrete base solely
for the purpose preventing them from blowing over in a high wind when empty. Id. Also, the
bins were financed as personal property, sold at foreclosure as personal property, and installed by
lessees on leased farms. Id. Likewise, the Tennessee Court of Appeals in Hubbard, 868 S.W.2d
at 660, found that two one-story branch bank buildings were personal property because they
were constructed to be portable, such that they could be moved or sold as market conditions or
need for the buildings changed. Further, the ground leases for the buildings expressly provided
that the buildings were not to become fixtures. Id.
In contrast, the Tennessee Supreme Court in General Carpet Contractors, 511 S.W.2d at 243,
examined carpet that was laid using the tackless strip method and was therefore easily
removable. The court found that the carpet became realty because the parties installed it with the
intent that it remain in place for the length of its useful life. The method of installation simply
allowed for easy replacement of the carpet when it was worn out. Id. Similarly, the Tennessee

3

Court of Appeals found in Process Systems, Inc., 1996 Tenn. App. LEXIS 695, that removal of a
conveyor system would damage the building in which it was installed and would destroy the
essential character of the conveyor system. Accordingly, the conveyer system was held to be an
improvement to real property. Id.
In the Taxpayer’s case, the facts indicate that the swimming pools remain tangible personal
property following installation.
First, the swimming pools are intended to be removable at the pleasure of the owner. Tangible
personal property that is intended to be removable does not become a fixture following
installation. Magnovox Consumer Electronics, 707 S.W.2d at 507. The Taxpayer has stated that
installed swimming pools can be, and occasionally are, moved from one site to another; this fact
indicates that the swimming pools are constructed so that owners may remove them at will.
Second, removal of a swimming pool does not cause serious injury to the real property on which
it is installed. The courts have held that tangible personal property becomes a part of the realty
only if removing the personal property would seriously damage the real property to which it is
affixed. Magnovox Consumer Electronics, 707 S.W.2d at 507; Process Systems, Inc., 1996 Tenn.
App. LEXIS 695; Memphis Housing Authority, 463 S.W.2d at 679. Here, no serious damage
results to the real property from which the pool is removed. On level ground, the Taxpayer digs a
hole no deeper than eight inches to install a pool; it is very unlikely that a shallow hole such as
this cannot be refilled with topsoil and reseeded or otherwise restored to its original condition.
The concrete blocks used to support the pool are also readily removed from the site without
serious damage to the real property. Additionally, the pool is not connected to the water supply
of the owner’s home, and its removal therefore does not threaten to damage the owner’s home.
The facts all indicate that no serious damage to the underlying real property occurs upon removal
of a swimming pool.1
Third, removal of a swimming pool does not destroy its essential character as personal property.
The Tennessee Court of Appeals has stated that tangible personal property becomes a part of the
realty if removal would destroy its “essential character as personalty.” See Process Systems,
Inc., 1996 Tenn.Ct.App. LEXIS 695; Green, 700 S.W.2d at 567. The Taxpayer has stated that a
swimming pool may be removed from the site upon which it is installed and moved to a new
location. This indicates that the swimming pool’s “essential character” remains intact upon
removal and relocation.
These facts indicate that the swimming pools remain tangible personal property following
installation. Accordingly, sale and installation of an above-ground swimming pool by the
Taxpayer is subject to the Tennessee sales and use tax.

1

While considerable effort may be required to remove a swimming pool, the cost or inconvenience of removal is not
a determinative factor. As discussed above, the court have found that large items, such as a one-story bank building,
remained tangible personal property following installation; presumably, the removal of an entire building requires
considerable effort and expense. Hubbard, 868 S.W.2d at 660.

4

Kristin Husat
Senior Tax Counsel

APPROVED:

Reagan Farr
Commissioner of Revenue

DATE:

3/3/08

5