When a sign company makes and bolts an illuminated storefront sign to a building, is the sale and installation subject to Tennessee sales tax, or does the sign become real property?

Plain-English summary

A sign company made and installed an illuminated sign — LED channel letters and a tagline welded to an aluminum "raceway" — and bolted it to the storefront of a retail tenant. The company charged the customer sales tax on the labor, materials, and equipment, but the customer disagreed, arguing the sign had become part of the building (real property) and so should not be taxed as a sale of goods.

The Tennessee Department of Revenue sided with the sign company: the sign remains tangible personal property, so making and installing it is a taxable sale. In Tennessee, the sale and installation of an item that stays tangible personal property after installation is taxable; but if the item becomes a permanent improvement to real estate, the sale itself is not taxed (instead the installer owes use tax on the materials it consumes). The whole dispute therefore came down to the "law of fixtures."

Because the customer and the company disputed what they had intended, the Department weighed the objective facts: the sign is only bolted on (a superficial attachment removable with ordinary drills and drivers); removing it does no serious damage to the building (the holes are filled with silicone and painted); the sign can be taken down intact and reused elsewhere; and it is meant to stay only as long as that business operates there under that name — later tenants put up their own signs. All of these point to personal property, not a permanent improvement, so the sale and installation are subject to sales and use tax.

What this means for you

Sign makers and installers

When you fabricate and install a sign, whether the job is a taxable sale (tax on the full selling price) or a construction-style contract (you owe use tax on your materials) depends on whether the installed sign stays personal property or becomes part of the building. Bolt-on signs that can be removed with hand tools, leave only patchable holes, and aren't meant to last the building's life are likely taxable sales. A sign welded or built so securely that removal damages the structure may instead be treated as a realty improvement.

Retail tenants and landlords buying signage

Expect to be charged sales tax on a typical bolted-on storefront sign. The customer here argued the sign was real property to avoid the sales tax, but the Department disagreed because nothing about the installation showed an intent to permanently annex it to the building.

Accountants and tax professionals

This is a clean application of Tennessee's fixture analysis to signage. The Department leaned on the objective factors from Whelchel — mode of attachment, damage on removal, whether removal destroys the item's character as personalty, and whether it's meant to remain for the property's useful life — and on Rule 65, which taxes signs that remain TPP and treats permanently affixed signs as realty improvements. Note prior Ruling 01-34: raceway-mounted wall signs can go either way depending on how securely and permanently they are attached.

Common questions

Q: Is a storefront sign taxable in Tennessee?
A: If the installed sign remains tangible personal property — as a typical bolted-on illuminated sign does — the sale and its installation are subject to sales and use tax. A sign attached so permanently that it becomes part of the building is treated differently: the sale is not taxed, but the installer owes use tax on the materials it uses.

Q: My sign is bolted on and the holes have to be patched when it comes down. Doesn't that make it part of the building?
A: No. Tennessee found that bolting a sign on with drills and drivers is a superficial attachment, and that filling and painting small holes is not "serious injury" to the building. Those facts show the sign is meant to be removable, so it stays personal property.

Q: What decides whether an installed item is personal property or real property?
A: The "law of fixtures." Courts look at the parties' intent through objective factors — the type of structure, how it's attached, its use and purpose, whether removal would seriously damage the building or destroy the item's character, and whether it's meant to stay for the property's useful life — plus any stated intent.

Q: Can I rely on this ruling?
A: Not directly. A Tennessee letter ruling binds the Department only as to the taxpayer and exact facts it addressed and cannot be relied on by anyone else. A sign attached more permanently than this one could be treated as a realty improvement. Tennessee sales tax is state-administered, so there is no separate self-collected city tax to track.

Citations and references

Statutes and rules:
- Tenn. Code Ann. § 67-6-201 (sales tax on retail sales of tangible personal property and enumerated services)
- Tenn. Code Ann. § 67-6-205(c)(6) (installation of TPP that remains TPP is a taxable service; contractor's use tax on materials used in realty improvements)
- Tenn. Comp. R. & Regs. 1320-05-01-.65 ("Rule 65"; signs that remain TPP vs. signs that become improvements to realty)
- Tenn. Comp. R. & Regs. 1320-5-1-.27(2) (installer as user/consumer of materials)

Cases:
- Magnavox Consumer Electronics v. King, 707 S.W.2d 504 (Tenn. 1986) (law of fixtures; permanent-annexation test)
- General Carpet Contractors, Inc. v. Tidwell, 511 S.W.2d 241 (Tenn. 1974) (intent of the parties controls; tackless-strip carpet became realty)
- Harry J. Whelchel Co. v. King, 610 S.W.2d 710 (Tenn. 1980) (objective factors; bolted grain bins were personalty)
- Hubbard v. Hardeman County Bank, 868 S.W.2d 656 (Tenn. Ct. App. 1993) (portable branch-bank buildings were personalty)
- Keenan v. Fodor, No. M2011-01475-COA-R3-CV, 2012 WL 3090303 (Tenn. Ct. App. July 30, 2012) (ornamental gate on a concrete foundation was personalty)
- Process Systems, Inc. v. Huddleston, No. 101801-I, 1996 WL 614526 (Tenn. Ct. App. Oct. 25, 1996) (conveyor system became an improvement to realty)
- Hermann Holtkamp Greenhouses, Inc. v. Metro Nashville & Davidson County, 2010 WL 366697 (Tenn. Ct. App. Feb. 2, 2010) (large greenhouses became realty)
- Tenn. Dep't of Revenue Letter Ruling 01-34 (raceway-mounted wall signs)

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/24-11.pdf

Original ruling text

Letter rulings are binding on the Department only with respect to the individual taxpayer being
addressed in the ruling. This ruling is based on the particular facts and circumstances
presented and is an interpretation of the law at a specific point in time. The law may have
changed since this ruling was issued, possibly rendering it obsolete. The presentation of this
ruling in a redacted form is provided solely for informational purposes and is not intended as
a statement of Departmental policy. Taxpayers should consult with a tax professional before
relying on any aspect of this ruling.

Application of Tennessee sales and use tax to a sign attached to a storefront.

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 the taxpayer’s
detriment.

[REDACTED] (the “Taxpayer”) manufactures and installs electric signs. The Taxpayer manufactured
and installed a sign for a customer that operates a retail store. The sign was designed such that the
illuminated letters spelled out the name of the customer’s store. The Taxpayer charged the customer
sales tax on the costs of labor, materials, and equipment used to manufacture and install the sign.
The invoice charges the customer for “[l]abor, materials, and equipment to manufacture and install

one new set of LED illuminated channel letters mounted to raceway and one set of tagline letters
mounted to raceway.”
The raceway is a 2” by 8” aluminum channel. The letters and the tagline are permanently welded to
the raceway during the fabrication process. The raceway, with attached letters and tagline, is mounted
to the building with anchors and bolts. There is no additional mounting between the letters and
building, other than the raceway.
The customer is a tenant of the building in which it operates the store. The tenant does not own the
building, and when the tenant leaves, the sign will be removed. The sign is attached to the building
with bolts and anchors. The sign is not intended to be removed on a regular basis. When the sign is
removed, there will be holes in the storefront fascia, which are typically filled with silicone and painted
to match the fascia.
The sign can be removed with drills and drivers. Due to the size and location, the sign should be
removed by skilled sign technicians with access to a crane/bucket truck for access. The sign could be
removed by others without such equipment, but it would be risky to do so.
Typically, a sign is expected to stay on the storefront as long as the customer needs it. At time of
removal, a sign can be left intact if a customer requests to keep the sign or move it to a new location,
but that is rarely the case. Typically, signs are disposed of at removal.
There is a dispute between the Taxpayer and customer as to whether the sign and installation is
considered real property or tangible personal property.

Did the sign become real property for purposes of Tennessee sales and use tax when it was
installed?
Ruling: No. The sign is considered tangible personal property, and the sale of the sign,
including its installation, is subject to sales and use tax.

Under the Retailer’s Sales Tax Act,1 the retail sale in Tennessee of tangible personal property and
specifically enumerated services is subject to sales and use tax, unless an exemption applies. 2 One
specifically enumerated service taxable at retail is the installation of “tangible personal property that
remains tangible personal property after installation. . . where a charge is made for the installation.” 3
Thus, the sale and installation of the sign will be subject to Tennessee sales and use tax if the sign
remains tangible personal property following installation. If, on the other hand, the sign becomes an
improvement to realty upon installation, the sale and installation of the sign will not be subject to
sales and use tax, but rather, the Taxpayer would be liable for use tax with respect to all tangible

1

Tennessee Retailer’s Sales Tax Act (codified at TENN. CODE ANN. §§ 67-6-101 to -907 (2022).

2

TENN. CODE ANN. § 67-6-201 (2022).

TENN. CODE ANN. § 67-6-205(c)(6) (2022). “Tangible personal property” includes “property that can be seen, weighed, measured,
felt, or touched, or that is in any other manner perceptible to the senses.”
3

2

personal property used in the performance of its contract, unless the Taxpayer had already paid sales
and use tax on the purchase of such items.4
For purposes of Tennessee sales and use tax, the law of fixtures determines whether tangible
personal property remains tangible personal property after installation or becomes an improvement
to real property.5 The Tennessee Supreme Court has held that the question of when an item is
considered a fixture must be resolved by ascertaining the intent of the parties. 6 The Court has
explained that “only those chattels are fixtures which are so attached to the freehold that, from the
intention of the parties and the uses to which they are put, they are presumed to be permanently
annexed, or a removal thereof would cause serious injury to the freehold.” 7
Therefore, if the property is intended to be removable at the pleasure of the owner, it is not a fixture.8
Both objective and subjective factors may show such intent. 9 Objective factors include the type of
structure, the mode of attachment, and the use and purpose of the property. 10 The subjective factor
is the expressed intent, if any, of the parties.11
Courts have also found that tangible personal property becomes a part of realty if removing the
personalty would seriously damage the building to which it is affixed. 12 Further, courts have held that
tangible personal property is more akin to a fixture if removal would destroy its essential character as
personalty.13
For example, in the Tennessee Supreme Court case of Harry J. Whelchel Co., which involved large grain
bins that were bolted to a concrete base, the court looked to both the stated intent of the parties, as
well as the objective factors noted above to reach the conclusion that the large grain bins were
personalty.14 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 of preventing them from blowing over
in a high wind when empty.15 Additionally, the bins were financed as personal property, sold at
foreclosure as personal property, and installed by lessees on leased farms. 16 Likewise, the Tennessee
Court of Appeals in Keenan v. Fodor found that a large ornamental gate remained personalty despite
having a substantial concrete foundation poured for its support that would leave craters were it

4

TENN. CODE ANN. § 67-6-205(c)(6) (2022); TENN. COMP. R. & REGS. 1320-5-1-.27(2); TENN. COMP. R. & REGS. 1320-05-01-.65(2) (1974).

5

See Magnavox Consumer Electronics v. King, 707 S.W.2d 504, 507 (Tenn. 1986).

6

Gen. Carpet Contractors, Inc. v. Tidwell, 511 S.W.2d 241, 242-43 (Tenn. 1974).

7

Magnavox Consumer Elects. v. King, 707 S.W.2d 504, 507 (Tenn. 1986) (quoting Hickman v. Booth, 173 S.W.438 (Tenn. 1914)).

8

Id.

9

Hubbard v. Hardeman Cnty. Bank, 868 S.W.2d 656, 660 (Tenn. Ct. App. 1993).

10

Harry J. Whelchel Co. v. King, 610 S.W.2d 710, 713-14 (Tenn. 1980).

11

Id.

See Process Sys., Inc. v. Huddleston, No. 101801-I, 1996 WL 614526, at *3 (Tenn. Ct. App. Oct. 25, 1996) (citing Memphis Hous.
Auth. v. Memphis Steam Laundry-Cleaner, Inc., 463 S.W.2d 677, 679 (Tenn. 1971)).
12

13

Id.

14

610 S.W.2d at 714.

15

Id.

16

Id.

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removed.17 The Court lent greater significance to the person’s stated intention that the gate would be
moveable and that it was designed so as to be moveable if necessary. 18
On somewhat different facts, the Tennessee Court of Appeals in Hubbard v. Hardeman Cnty. Bank
reached a similar conclusion in holding that two one-story branch bank buildings were personal
property.19 It based the ruling on the facts that the leased buildings were constructed to be portable,
such that they could be moved or sold as market conditions or need for the buildings changed, and
that the leases expressly provided that the buildings were not to become fixtures. 20
In contrast, the Tennessee Supreme Court in General Carpet Contractors Inc. v. Tidwell examined carpet
that was laid using the tackless strip method and was therefore easily removable. 21 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.22 Similarly, the Tennessee Court of Appeals found in Process Systems, Inc.
v. Huddleston that removal of a conveyor system would damage the building in which it was installed
and would destroy the system’s essential character.23 Accordingly, the conveyor system was held to
be an improvement to real property.24
Additionally, the Tennessee Court of Appeals found in Hermann Holtkamp Greenhouses, Inc. v. Metro
Nashville & Davidson County that greenhouses became realty upon installation based on their
enormous square footage, built-in restrooms and lunchrooms, and concrete tunnels. 25 The Court
expressed that each of these facts reflected an intention that the greenhouses remain permanently
installed on the property.26
Guidance on applying the law of fixtures in the context of signs is provided by T ENN. COMP. R. & REGS.
1320-05-01-.65 (1974) (“Rule 65”). Signs that are and remain tangible personal property after
installation are subject to sales and use tax, and charges for installing such signs are subject to sales
tax.27 “Signs which are and remain tangible personal property are th[o]se which are not attached in a
permanent fashion to buildings or which are not an integral part of such structure or buildings, or
which are not displayed on structures securely anchored in the ground.” 28
For signs that are so attached to the property that they become fixtures, Rule 65 states:

17

No. M2011-01475-COA-R3CV, 2012 WL 3090303, at *8-9 (Tenn. Ct. App. July 30, 2012).

18

Id.

19

868 S.W.2d at 660.

20

Id.

21

511 S.W.2d at 243.

22

Id.

23

1996 WL 614526 at *3.

24

Id.

25

No. M2009-00345-COA-R3-CV, 2010 WL 366697, at *9 (Tenn. Ct. App. Feb. 2, 2010).

26

Id.

27

TENN. COMP. R. & REGS. 1320-05-01-.65(1) (1974)

28

Id.

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Sales of signs which are attached in a secured and permanent fashion to buildings,
which are an integral part of such buildings, or which are displayed on structures
securely anchored in the ground, are subject to [s]ales tax based on the selling price
thereof. Any charges for installing, repairing or maintaining such signs are not subject
to the tax, but the person so installing, repairing or maintaining such signs shall be
regarded as the user and consumer of tangible personal property which is used in
connection with such installation, repair or maintenance, and shall be liable for the
[s]ales or [u]se [t]ax on such materials in this case, the tax is due on the actual selling
price of the sign which is securely and permanently attached to the building or to
structures bolted to the building or to structures permanently anchored in the ground
on heavy wood or steel poles.29
The Tennessee Department of Revenue has provided guidance on wall signs in a prior ruling. Tenn.
Dept. Rev. Ltr. Rul. 01-34 (“Ruling 01-34”) states that, in the absence of contrary intent, wall signs
attached directly to the walls of buildings probably become improvements to real property if they are
attached in a secure and permanent fashion. Ruling 01-34 goes on to suggest that wall signs attached
to raceways probably become improvements to real property if they are attached in a secure and
permanent fashion to raceways attached to buildings. However, the ruling then states that wall signs
attached to raceways probably do not become component parts of the buildings if they are not
attached to the buildings in a secure and permanent fashion and are not intended to remain during
their useful life. It should be noted that Ruling 01-34 did not determine when a wall sign is attached
in a secure and permanent fashion to a wall.
The sign at issue in this ruling comprises letters and a tagline permanently welded to a raceway. The
letters, tagline, and raceway must all be attached to the building together and removed together
because they are permanently welded together.
The subjective factors in this ruling are clouded because the parties dispute the intent behind the sale
and installation of the sign, so this ruling will focus on the objective factors to determine the intent of
the parties.
First, the mode of attachment demonstrates the intent of the parties that the sign remains tangible
personal property. The installation only requires the bolting of the sign into the wall with drills and
drivers. This mode of attachment is a relatively superficial connection to the surrounding realty and
indicates that the parties intend for the signs to be removable at will.
Second, the removal of the sign is unlikely to cause injury to the real property on which it is installed.
No serious damage to the property occurs, and the wall remains structurally intact following the
removal of the sign. The holes left in the fascia by removal of the sign are easily repaired with silicone
and paint. Although using skilled technicians with a bucket lift to remove the sign is recommended for
safety reasons, detaching the sign from the wall is a simple matter involving only the use of drills and
drivers. This suggests that the sign remains tangible personal property following installation.
Third, the removal of the sign would not destroy its essential character as personal property. Although
signs of this type are typically thrown away upon removal, at the customer’s direction the sign may be
removed without physical damage or alteration to the sign. The sign can be reused at another
location. This is indicative that the sign remains tangible personal property following installation.

29

TENN. COMP. R. & REGS. 1320-05-01-.65(2).

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Lastly, the sign is not intended to remain on the building for the rest of its useful life. Instead, the sign
is intended to remain on the building so long as the customer conducts business at that location
(under the name spelled out in the sign). Should the customer move locations, go out of business, or
otherwise cease operating at that location under the name spelled out in the sign, then the sign will
likely be removed. Businesses previously operating at that location had their own sign installed on the
building, and subsequent businesses will have their own sign installed as well.
The totality of the circumstances indicates that the sign remains tangible personal property following
installation. As a result, the sale and installation of the sign is subject to the Tennessee sales and use
tax. This conclusion is based on the facts presented and could be impacted by new or different facts.

APPROVED:

David Gerregano
Commissioner of Revenue

DATE:

November 26, 2024

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