Which quality-assurance testing machines and supplies used by a Tennessee food manufacturer qualify for the industrial machinery exemption?

Plain-English summary

A frozen-food manufacturer asked Tennessee which of its quality-assurance (QA) testing machines and supplies qualify for the industrial machinery exemption. To be exempt industrial machinery, an item must clear a four-part test: the buyer is a manufacturer at that location (more than 50% of the location's revenue comes from making products for resale), and the item is (1) machinery/apparatus/equipment, (2) necessary to processing the product, and (3) used primarily for that processing. A parallel rule exempts industrial materials — supplies that come into direct contact with the product and are consumed within 25 days.

The dividing line the Department drew was timing: testing that happens during manufacturing qualifies; testing that happens before the product is made, or that keeps equipment and the building sanitary, does not.

• Exempt — in-process testing. Equipment that tests the product as it is being made (metal detectors; fat analyzers, penetrometers, viscometers, consistometers, pH meters, water-activity meters; sample-prep equipment) is exempt industrial machinery. The in-process testing supplies (micro-testing supplies, allergen kits, pipettes, pH kits, sterile bags, sanitary scoops) are exempt industrial materials because they touch the product and are used up within 25 days — and that stays true even for listeria/salmonella swabs the manufacturer sends to an outside lab.
• Exempt — production-environment control. Airflow equipment and dehumidifiers are exempt because they keep the conditions the food needs to be made correctly (not for the comfort of the building or employees).
• Not exempt — pre-process and housekeeping. Testing ingredients before they enter the process is not part of manufacturing (and the statute excludes items used before or after exempt machinery). Testing equipment and facility surfaces for sanitation (ATP kits; food-surface and non-food-surface swabs; annual metals/pesticide/E. coli kits) is housekeeping, not a manufacturing function — and the timing ("before a production batch," "annually") confirms it. Cleaning supplies are out too: they are not an integral part of a functioning machine and are not consumed in processing.
• Third-party services. Calibration of an exempt machine is a "repair service," and because the machine is industrial machinery, the repair parts and labor are exempt. Water-quality testing is not an enumerated taxable service, so it is non-taxable.

What this means for you

Tennessee manufacturers

QA is not automatically exempt or automatically taxable — the exemption follows the manufacturing process in time. Items that test or condition the product while it is being made generally qualify; items used to vet inputs beforehand or to keep machines and rooms clean generally do not, even when food-safety law requires them. Map each test to when and what it touches, and confirm the >50%-of-location-revenue manufacturer threshold at each plant.

Two traps: "before/after" and "housekeeping"

(1) Tennessee's exemption statute expressly excludes machinery used before or after the use of exempt industrial machinery, so ingredient screening that precedes processing falls out. (2) Keeping equipment and facilities sanitary "may be important to production, but it is not a manufacturing function," so sanitation test kits and cleaning supplies are taxable — and an item used only "before a production batch" or once a year fails the requirement that an accessory be used during the process (Nuclear Fuel Services).

Don't overlook repair/calibration

Calibrating an exempt machine counts as repair services. Repair services are normally a taxable enumerated service, but when the property being calibrated is itself industrial machinery, the repair parts and labor ride the machinery exemption and come out exempt. Separately, services that aren't on Tennessee's enumerated list (here, water-quality testing) are simply non-taxable.

Accountants and advisors

The four-part test is at § 67-6-102(46)(A)(i); the before/after exclusion is § 67-6-102(46)(F); the industrial-materials/25-day rule is Rule 1320-05-01-.40(2) (with § 67-6-329(a)(12) for materials that become a component). Repair services are enumerated at § 67-6-205(c)(4) and defined at Rule 1320-05-01-.54(2). Use Tibbals Flooring for "equipment," Woods v. General Oils for "primarily," and Nuclear Fuel Services for the temporal "during manufacturing" requirement.

Common questions

Q: Is quality-assurance testing exempt in Tennessee?
A: Some of it. Equipment and supplies used to test the product during manufacturing are exempt as industrial machinery or industrial materials. Testing ingredients before processing, and testing equipment/facilities for sanitation, are not.

Q: My testing supplies get sent to an outside lab — does that break the exemption?
A: No. The Department held that sending in-process testing samples (e.g., listeria/salmonella swabs) to a third-party lab does not remove those supplies from the industrial-materials exemption, as long as they meet the direct-contact and 25-day-consumption test.

Q: Are cleaning supplies exempt because a clean plant is required to make the food?
A: No. Cleaning supplies are not an integral part of a functioning machine and are not consumed in processing the product; sanitation is important but is not itself a manufacturing function, so they are taxable.

Q: Is paying an outside company to calibrate my machines taxable?
A: Calibration is treated as a repair service. If the machine being calibrated is exempt industrial machinery, the repair parts and labor are exempt too. (Water-quality testing, by contrast, is non-taxable because it isn't an enumerated service.)

Q: Can my business rely on this ruling?
A: No. A Tennessee letter ruling binds the Department only as to the taxpayer it was issued to and cannot be relied on by anyone else; it can be revoked or modified. Use it to understand the Department's reasoning, then confirm your own facts.

Citations and references

Statutes (Tennessee Code Annotated):
- § 67-6-206(a) — exempts "industrial machinery"
- § 67-6-102(46)(A)(i) — definition of industrial machinery (necessary to, and primarily for, processing TPP for resale)
- § 67-6-102(46)(F) — excludes items used before or after the use of exempt industrial machinery
- § 67-6-329(a)(12) — industrial materials that become a component part of the finished product are exempt
- § 67-6-205(c)(4) — repair services to TPP/software are a taxable enumerated service
- § 67-6-206(b)(2) — manufacturer = more than 50% of a location's revenue from processing TPP for resale
- § 67-6-201 — imposition of sales and use tax

Rules (Tenn. Comp. R. & Regs.):
- 1320-05-01-.40(2) — materials in direct contact and consumed within 25 days are not taxed
- 1320-05-01-.54(2) — definition of "repair services"

Cases:
- Tibbals Flooring Co. v. Olsen, 698 S.W.2d 60 (Tenn. 1985) — "equipment" = physical resources used in an operation or activity
- Beare Co. v. Tenn. Dept. of Revenue, 858 S.W.2d 906 (Tenn. 1993) — undefined statutory terms take their common usage
- Woods v. General Oils, Inc., 558 S.W.2d 433 (Tenn. 1977) — "primarily" means first of all, principally, fundamentally
- Nuclear Fuel Services, Inc. v. Huddleston, 920 S.W.2d 659 (Tenn. Ct. App. 1995) — an accessory must be used during the manufacturing process
- Tenn. Farmer's Coop v. State ex rel. Jackson, 736 S.W.2d 87 (Tenn. 1987) — manufacturer threshold

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/25-06.pdf

Original ruling text

Applicability of Tennessee sales and use tax industrial machinery exemption to equipment and
supplies used in quality assurance testing

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”) is a frozen food products company headquartered in [REDACTED]. The
Taxpayer supplies products to [REDACTED].
The Taxpayer operates [REDACTED] manufacturing facilities in Tennessee at the following locations:
[REDACTED]
1

The Taxpayer’s integrated manufacturing process includes the usage of quality assurance (“QA”)
equipment and supplies in the process of manufacturing [REDACTED] products. For food product
safety purposes, strict production methods and processes must be followed. Food product safety
oversight regulations are promulgated by the Tennessee Department of Agriculture, the United States
Food and Drug Administration, and the United States Department of Agriculture. Furthermore, strict
customer-specific criteria and metrics must be maintained. The Taxpayer cannot successfully
manufacture or sell its products without QA testing and the QA equipment, and these supplies are
not used for other purposes.
To comply with government oversight and customer specifications, the following activities, supplies,
and equipment are required for QA purposes:
•
•
•
•

Ingredients testing
In-process product testing (each batch of product)
QA machinery, equipment and supplies used in production
QA testing of surfaces within the manufacturing facility

Ingredients Testing
Perishable ingredients such as [REDACTED] are tested after removal from inventory as the first step
in the manufacturing process. Test kits and supplies are used for testing microbiology coliforms and
standard plate counts to ensure the product has an acceptable range of bacteria. Test kits include
pipettes, swabs, media, and chemicals.
In-Process Product Testing
The Taxpayer completes several tests on each batch of in-process products at the manufacturing
facilities in Tennessee. Most tests are performed within the production area or in an on-site testing
lab. For some tests (e.g., listeria, salmonella), the Taxpayer collects and sends test media (e.g., swabs)
to outside third-party labs. In both scenarios, the Taxpayer is the consumer of the testing equipment
and supplies. Various supplies are used for in-process product testing. These supplies include: 1)
micro testing supplies, 2) allergen test kits, 3) pipettes, 4) PH test kits, 5) listeria and salmonella testing
kits, 6) sterile bags, and 7) sanitary scoops. Quality assurance testing could not occur without the use
of these supplies. All supplies are consumed within twenty-five days.
QA Machinery, Equipment, and Supplies Used in Production
Metal Detectors
Even though small objects such as jewelry are not permitted in the production areas, there exists a
small risk that a metal object could accidentally be introduced into food products. If this were to occur,
a consumer could suffer physical injury. Metal detectors are used on all products prior to packaging
to ensure that no metal objects have been introduced into manufactured food products.
Product Attribute Testing Equipment
Various equipment is used to test product attributes; examples include:

2

Equipment Used

Attributes Measured and Tested

Fat Analyzer

Fat and solids content

Penetrometer

Thickness/strength

Viscometer

Viscosity

Consistometer

Consistency

PH Meter

PH and alkalinity

Water Activity Meter

Water content

The product attributes noted above must be carefully monitored to ensure successful manufacturing
of each food product. As a result of testing, if any criteria are not within proper specifications, changes
are made to the production process to bring the products back within specifications. This equipment
is commonly used to test [REDACTED] products.
Water Activity Meters
Water activity is a critical factor that determines the shelf life of food products, while temperature, pH,
and several other factors can influence if and how fast organisms grow in food products. Water activity
is vital in controlling product spoilage. By measuring the water activity of a food product, it is possible
to predict which microorganisms will and will not be potential sources of spoilage. The Taxpayer uses
water activity meters for [REDACTED] products.
Other Equipment
Other equipment is used to prepare samples for testing. Examples of other equipment include: 1)
[REDACTED]used to prepare in-process [REDACTED] products for testing; 2) [REDACTED] dispensers
used to [REDACTED] and dispense [REDACTED] for testing; 3) [REDACTED] used to test [REDACTED]
samples, and 4) [REDACTED] used to [REDACTED] samples of product for testing.
Equipment and Facility Testing
The Taxpayer must ensure its facilities and equipment remain sanitary as per state and federal
government regulations. To ensure that proper sanitary conditions are met, the Taxpayer uses test
kits (e.g., testing for ATP (adenosine triphosphate), metals, pesticides, bacteria, etc.) to evaluate “foodsurface” equipment. “Food-surface” equipment is equipment that touches the product in the
manufacturing process.
Test kits are also used to evaluate various “non-food-surface” equipment and surfaces within the
manufacturing facility (e.g., floor surfaces, floor drains, etc.). “Non-food-surface” equipment and
surfaces do not touch the product but must remain sanitary so that food products can be successfully
produced. This testing enables the Taxpayer to maintain sanitary food product manufacturing
conditions within state and federal government regulations.
Equipment and Supplies to Maintain Sanitary Food Production Environment
The Taxpayer’s operations require maintaining a completely sanitary and controlled production
environment. Cleaning supplies are used on both the manufacturing equipment and in other parts of
manufacturing facilities to maintain a sanitary environment.

3

Airflow equipment and humidifiers are used to maintain proper temperatures and humidity levels
that can influence if and how fast organisms will grow in food products. The airflow equipment and
humidifiers are specific to the proper conditions for the manufacturing of the food product and not
for the general comfort of the building or employees.
Third-Party Quality Assurance Services
To maintain proper quality assurance, the Taxpayer may receive assistance from third-party service
providers due to the highly technical nature of modern manufacturing equipment. [REDACTED] on
the product line must be calibrated to ensure proper ingredient [REDACTED] quantities, and
[REDACTED] that [REDACTED]the manufactured product must be calibrated to ensure [REDACTED].
Water quality testing services are required to ensure that water used in production, which ultimately
becomes an ingredient in the product, meets acceptable criteria.

Item Descriptions (Vendor)

Usage

Ingredients Testing
Microbiology choloform test supplies
[REDACTED] and standard plate count
(SPC) test supplies (aka, "aerobic plate
count") [REDACTED]

Supplies used to test [REDACTED] and [REDACTED] for
product safety purposes.

In-Process Product Testing
Supplies
Micro testing supplies [REDACTED],
allergen test kits [REDACTED], pipettes
[REDACTED] and PH test kits, sterile
bags, sanitary scoops [REDACTED].

Listeria and salmonella testing kits—
Swabs purchased by the Taxpayer for
outside third-party lab testing

Test kits and supplies used to test each product batch at
the beginning, middle, and end of each batch production
run. The supplies are used for in-house testing in
manufacturing plant labs to test product QA (allergens,
contamination, product specs).
Provided to third-party lab tester—[REDACTED] for food
safety.

Equipment
Metal detectors [REDACTED]

Fat analyzers [REDACTED],
penetrometers, viscometers
[REDACTED], consistometers
[REDACTED], PH meters, water activity
meters.

Equipment used to detect metal objects that may have
accidentally entered products.
Equipment used to: 1) Measure % fats and % solids in
products to meet product specifications [REDACTED], 2)
viscosity (thickness, flow), PH/alkalinity, and water content
[REDACTED]

4

[REDACTED] in test lab [REDACTED]

[REDACTED] dispenser [REDACTED]

[REDACTED] in the production area

Equipment used to [REDACTED] [REDACTED] product as
preparation for QA multiple tests.
Equipment used to prepare [REDACTED] for multiple tests.

Equipment
used
in
testing
[REDACTED]production ([REDACTED]).

to

monitor

Equipment used [REDACTED] to ensure proper
specifications. If not correct, ingredients and/or production
are adjusted.

[REDACTED]

Equipment and Facility Testing
ATP (adenosine triphosphate) test kits
[REDACTED]

Swabs--"food-surface" testing supplies
(i.e., to test production mixers)
[REDACTED]
Swabs--"non-food surface" testing
supplies (i.e., to test production
facility) [REDACTED]
Annual test kits--metals, pesticide,
E.coli [REDACTED]

Test kits and supplies used to measure organic content on
food surface equipment in [REDACTED] production.
Generally, testing is done on product filler surfaces.
Test kits and supplies used to identify contaminates in
production equipment before a production batch.
Test kits and supplies used to obtain samples from
locations around the production area to identify
contaminates before a production batch.
Test kits and supplies used to obtain samples from
locations around the production area (both food-surface
and nonfood-surface) to identify contaminates.

Equipment
and
Supplies
to
Maintain Sanitary Food Production
Environment
Airflow equipment and dehumidifiers

Cleaning supplies [REDACTED]

Third-party
services:

quality

Equipment that ensures a proper environment for food
product manufacturing. Without this equipment,
successful production would not be possible.
Supplies used to make the production environment clean
and safe for food product manufacturing. Without these
supplies, successful production would not be possible.

assurance

Calibration service—[REDACTED]
[REDACTED]

Service to calibrate production [REDACTED].

5

Calibration service—[REDACTED]
[REDACTED]
Water
quality
[REDACTED]

testing

service

Service to calibrate production [REDACTED].
Quarterly testing to ensure water meets regulatory safety
specifications.

Are the above-described items exempt from Tennessee sales and use tax?
Ruling: See chart below.

Item Descriptions (Vendor)

Exempt?

Ingredients Testing
Microbiology choloforms test supplies [REDACTED] and
standard plate count (SPC) test supplies (aka, "aerobic plate
count") [REDACTED]

No

In-Process Product Testing
Supplies
Micro testing supplies [REDACTED], allergen test kits
[REDACTED], pipettes [REDACTED], and PH test kits, sterile
bags, sanitary scoops [REDACTED]

Listeria and salmonella testing kits—Swabs purchased by the
Taxpayer for outside 3rd party lab testing

Yes

Yes

Equipment
Metal detectors [REDACTED]
Fat analyzers [REDACTED], penetrometers, viscometers
[REDACTED], consistometers [REDACTED], PH meters, water
activity meters.
[REDACTED] [REDACTED]

Yes
Yes

Yes

6

Yes

[REDACTED] dispenser [REDACTED]

Yes

[REDACTED]in the production area

Yes

[REDACTED]
Equipment and Facility Testing

No

ATP (adenosine triphosphate) test kits [REDACTED]
Swabs--"food-surface" testing
production mixers) [REDACTED]

supplies

(i.e.,

to

test

Swabs--"non-food surface" testing supplies (i.e., to test
production facility) [REDACTED]
Annual test kits--metals, pesticide, E.coli [REDACTED]

No

No

No

Equipment and Supplies to Maintain Sanitary Food
Production Environment
Airflow equipment and dehumidifiers
Cleaning supplies [REDACTED]

Yes
No

Third-party quality assurance services
Calibration service—[REDACTED]
Calibration service—[REDACTED]
Water quality testing service [REDACTED]

Yes
Yes
This is a nontaxable service.

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 Under
TENN. CODE ANN. § 67-6-329(a)(12) (Supp. 2023), industrial materials for future processing,
manufacture, or conversion into articles of tangible personal property for resale, where the industrial

1

Tennessee Retailer’s Sales Tax Act (codified at TENN. CODE ANN. §§ 67-6-101 to -907 (2022 and Supp. 2023)).

2

TENN. CODE ANN. § 67-6-201 (2022).

7

materials become a component part of the finished product, are exempt from sales and use tax. TENN.
COMP. R. & REGS. 1320-05-01-.40(2) further clarifies that materials and supplies coming in direct contact
with and which are consumed within twenty-five consecutive calendar days in the processing of
manufactured products are not subject to sales and use tax.
TENN CODE ANN. § 67-6-206(a) (2022) exempts “industrial machinery” from the sales and use tax. In
general, “industrial machinery” is defined as:
[m]achinery, apparatus and equipment with all associated parts, appurtenances and
accessories, including hydraulic fluids, lubricating oils, and greases necessary for
operation and maintenance, repair parts and any necessary repair or taxable
installation labor therefor, that is necessary to, and primarily for, the fabrication or
processing of tangible personal property for resale and consumption off the premises
. . . where the use of such machinery, equipment or facilities is by one who engages in
such fabrication or processing as one’s principal business.3
Manufacturing is a taxpayer’s principal business if more than fifty percent of its revenue at a given
location is derived from fabricating or processing tangible personal property for resale. 4
In the context of analyzing industrial machinery, the Tennessee Supreme Court in Tibbals Flooring Co.
v. Olsen, 698 S.W.2d 60, 62 (Tenn. 1985), consulted WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY (1976)
to define “equipment” as “the physical resources serving to equip a person, [such as] the implements
. . . used in an operation or activity.”
The term “apparatus” has not been defined by the Tennessee Code or by Tennessee courts for
purposes of the industrial machinery exemption. When a statute does not define a term, the
Tennessee Supreme Court has stated that it is proper to look to common usage to determine the
term’s meaning.5 MERRIAM WEBSTER’S COLLEGIATE DICTIONARY, 11TH edition (2003) defines “apparatus” as “a
set of materials or equipment designed for a particular use” or “an instrument or appliance designed
for a specific operation.”
The term “necessary” is not defined by the Tennessee Code or the Tennessee courts for Tennessee
sales and use tax purposes. A common definition of “necessary” is “absolutely needed: required.” 6 The
term “primarily” has been defined by the Tennessee Supreme Court for purposes of the industrial
machinery exemption as “first of all; principally; or fundamentally” and as “first in rank or importance,
chief, principal, basic or fundamental.” Woods v. General Oils, Inc. 558 S.W. 2d 433, 436 (Tenn. 1977)
(citing WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY (1961)).
Thus, the items will be exempt from Tennessee sales and use tax as industrial machinery as defined
by TENN. CODE ANN. § 67-6-102(46)(i) (Supp. 2023), if four requirements are met. First, the Taxpayer
must be a manufacturer at each location. Second, the items must be machinery, apparatus, or
equipment, including all parts, appurtenances and accessories, or repair parts and labor. Third, the
items must be necessary to the fabrication or processing of the products sold by the Taxpayer. Fourth,
the items must be primarily for the fabrication of the products sold by the Taxpayer.
3

TENN. CODE ANN. § 67-6-102(46)(A)(i).

4

Tenn. Farmer’s Coop v. State ex rel. Jackson, 736 S.W. 2d 87, 91-92 (Tenn. 1987); see also TENN. CODE ANN. § 67-6-206(b)(2).

5

See, e.g., Beare Co. v. Tenn. Dept. of Revenue, 858 S.W.2d 906, 908 (Tenn. 1993).

6

Merriam-Webster’s Collegiate Dictionary (11th ed. 2007).

8

As a preliminary matter, each of the Taxpayer’s locations qualifies as a manufacturer. Thus, the first
requirement is met for all the items discussed below.
Ingredients Testing
The items used in the testing of ingredients prior to use in the manufacturing process do not qualify
as industrial machinery or industrial materials. TENN. CODE ANN. § 67-6-102(46)(F) specifically excludes
from the definition of “industrial machinery” any machinery, apparatus, or equipment that is used
before or after the use of exempt industrial machinery. The test kits are used to test ingredients before
they are processed into product. While it is important to the manufacturing process to ensure safe
ingredients are being used, the ingredient testing is not a part of the manufacturing process itself. 7
Thus, the items used for testing ingredients prior to use in manufacturing do not qualify as industrial
machinery.
The testing ingredients likewise do not qualify as exempt industrial materials because the testing
items are not consumed in the processing of manufactured products. The ingredient testing takes
place before the processing occurs.
In-Process Product Testing
Supplies
The in-process product testing supplies are exempt from sales and use tax as industrial materials
under TENN. COMP. R. & REGS. 1320-05-01-.40(2) because they come into direct contact with the
products during the manufacturing process and are consumed within twenty-five days. Sending the
testing samples to an outside third-party lab for evaluation does not remove these materials from the
exemption.
Equipment
The in-process product testing equipment is exempt from sales and use tax as industrial machinery.
The Taxpayer engages in manufacturing at each of its locations. The in-process testing equipment
qualifies as machinery, apparatus, or equipment. In-process testing is necessary because without such
testing, the Taxpayer could not successfully produce its products for resale. The in-process testing
equipment is used primarily for manufacturing because the purpose of the equipment is to test
product attributes during the manufacturing process.8
Equipment and Facility Testing
The test kits and supplies that the Taxpayer uses to ensure that its equipment and facilities remain
sanitary are not exempt industrial machinery or industrial materials. Maintaining sanitary equipment
and facilities may be important to production, but it is not a manufacturing function. Moreover, the
fact that test swabs are used “before a production batch” and one of the tests is performed annually
further indicate that the testing is not part of the manufacturing process.

7

See Tenn. Dept. of Rev. Ltr. Rul. 10-23 (Nov. 12, 2010).

8

See Tenn. Dept. of Rev. Ltr. Rul. 10-23 (Nov. 12, 2010).

9

Equipment and Supplies to Maintain Sanitary Food Production Environment
Airflow equipment and Dehumidifiers
The airflow equipment and dehumidifiers qualify as machinery, apparatus, or equipment. They are
necessary to the fabrication or processing of the products sold by the Taxpayer because successful
production would not be possible without them. They are primarily for the fabrication of the products
sold by the Taxpayer because their purpose is to ensure a proper environment for food product
manufacturing, and they are not for the general comfort of the building or employees. Accordingly,
the airflow equipment and dehumidifiers are exempt from sales and use tax as industrial machinery.
Cleaning Supplies
In a previous letter ruling, the Department concluded based on similar facts that cleaning supplies
were not exempt industrial machinery. 9 The cleaning supplies do not qualify as accessories or
appurtenances to industrial machinery. The examples given in the statute are “hydraulic fluids,
lubricating oils, and greases necessary for operation and maintenance.” TENN. CODE ANN. § 67-6102(46)(A)(i). The examples indicate that an item must be an integral part of a functioning machine to
be included in the exemption. The cleaning supplies at issue are not an integral part of a functioning
machine, and they are not analogous to the examples included in the statute.
Furthermore, the industrial machinery exemption has a temporal requirement, as described in
Nuclear Fuel Services, Inc. v. Huddleston, 920 S.W.2d 659, 663 (Tenn. Ct. App. 1995). To qualify for the
industrial machinery exemption, the accessory or appurtenance must be used “during the
manufacturing process.” Id. The cleaning supplies at issue do not meet this temporal requirement.
Likewise, the cleaning supplies do not qualify as industrial materials because they are not consumed
in the processing of manufactured products.10 The cleaning takes place before the processing occurs.
Third-party quality assurance services
The sales tax applies to retail sales of services only if the service is specifically enumerated. Services
subject to the tax include “[t]he performing, for a consideration, of any repair services with respect to
any kind of tangible personal property or computer software.” TENN. CODE ANN. § 67-6-205(c)(4). The
third-party services include calibration of the Taxpayer’s [REDACTED]. The [REDACTED] are tangible
personal property, so the question becomes whether calibration constitutes repair. Repair or repair
services is defined by rule as “work done to preserve or restore to or near the original condition made
necessary by wear, normal use, wastage, injury, decay, partial destruction, or dilapidation; mending,
correction, or adjustment made for any defect or defective portion; alterations; refinishing; any
cleaning that is a necessary part of any repair work; ‘service calls’ where any repair work is done or
contemplated; and changes in the size, shape, or content.” Tenn. Comp. R. & Regs. 1320-05-01-.54(2).
The relevant definition of “calibrate” is “to adjust precisely for a particular function.” Merriam-Webster
Online Dictionary available at https://www.merriam-webster.com/.

9

See Tenn. Dept. of Rev. Ltr. Rul. 00-53 (Dec. 14, 2000).

10

See TENN. COMP. R. & REGS. 1320-05-01-.40(2); Tenn. Dept. Rev. Ltr. Rul. 02-23 (July 19, 2002).

10

Calibration of the [REDACTED] qualifies as repair services since the property is being altered, adjusted,
and preserved or restored to its intended condition.11 The [REDACTED] are industrial machinery since
they are necessary to and primarily for the Taxpayer’s fabrication or processing of tangible personal
property for resale. Repair parts and necessary repair labor are included in the definition of industrial
machinery. Therefore, since calibration of the [REDACTED] qualifies as repair services, the repair parts
and labor are exempt from the sales tax as industrial machinery.
The third-party water quality testing services do not appear to fit within any of the specifically
enumerated services that are subject to sales tax. Therefore, the water quality testing services are not
subject to sales tax.

11

APPROVED:

David Gerregano
Commissioner of Revenue

DATE:

June 18, 2025

See Tenn. Dept. Rev. Ltr. Rul. 11-31 (July 12, 2011); Tenn. Dept. Rev. Ltr. Rul. 98-45 (Nov. 13, 1998).

11