Were a distributor's sales of utility poles, anchors, guy wire, and conduits exempt from Tennessee sales and use tax before the items were installed?

Plain-English summary

Sales of utility poles, anchors, guy wire, and conduits were not subject to Tennessee sales and use tax when the items were used to provide utility services. The exemption did not depend on the purchaser's identity or on the items already being erected and installed.

The taxpayer was a Tennessee distributor selling those four categories of equipment. Ordinarily, Tennessee taxed retail sales of tangible personal property. But the statutory definition expressly excluded utility poles, anchors, guys, and conduits and deemed those facilities real property for sales-and-use-tax purposes.

The ruling relied on a Tennessee Court of Appeals decision rejecting the argument that the facilities first had to be installed and in use before receiving real-property treatment. The Department added one limiting condition: the items had to be sold for use in providing utility services.

What this means for you

Utility-equipment distributors

The ruling focused on the product and its intended utility use, not on whether the buyer was itself a utility company.

Contractors and installers

The Department did not require installation before the statutory treatment applied. A qualifying sale could be nontaxable while the equipment was still uninstalled.

Purchasers with nonutility uses

The ruling did not extend the treatment to every pole, anchor, guy, or conduit. It expressly required use in providing utility services.

Common questions

Q: Did the buyer have to be a utility?
A: No. The ruling said purchaser identity did not control.

Q: Did the equipment have to be installed first?
A: No. The cited court decision rejected that requirement.

Q: Was every conduit sale nontaxable?
A: No. The Department conditioned its conclusion on use in providing utility services.

Q: Why was the sale outside the sales-tax base?
A: The quoted statute excluded the listed utility facilities from tangible personal property and deemed them real property.

Q: Is this revenue ruling binding on the Department? A: No. Its own scope says it is advisory and not binding.

Citations and references

• Tenn. Code Ann. § 67-6-202(a) — retail sales of tangible personal property generally subject to tax.
• Tenn. Code Ann. § 67-6-102(28) — utility poles, anchors, guys, and conduits excluded from tangible personal property and treated as real property.
• United Inter-Mountain Telephone Co. v. Commissioner of Revenue, 1994 Tenn. App. LEXIS 107 — cited by the ruling for treatment before installation; the exact official database citation was preserved, although the citation-verification database did not resolve it.

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/97-02.pdf

Original ruling text

TENNESSEE DEPARTMENT OF REVENUE
REVENUE RULING # 97-02

WARNING
Revenue rulings are not binding on the Department. This presentation of the ruling in a redacted form is information only. Rulings are made in response to particular facts presented and are not intended necessarily as statements of Departmental policy.

SUBJECT
The applicability of the sales and use tax to the sale of utility poles, anchors, guys, and conduits. SCOPE Revenue rulings are statements regarding the substantive application of law and statements of procedure that affect the rights and duties of taxpayers and other members of the public. Revenue rulings are advisory in nature and are not binding on the Department. FACTS The Taxpayer is a distributor doing business in Tennessee. The Taxpayer makes sales of utility poles, anchors, guy wire, and conduits. QUESTION Whether the Taxpayer’s sales of utility poles, anchors, guy wire, and conduits are subject to Tennessee sales and use tax, regardless of to whom the Taxpayer sells them and regardless of how they are used by the Taxpayer’s customers. RULING

The sales of utility poles, anchors, guy wire, and conduits are not subject to Tennessee sales and use tax, regardless of to whom the Taxpayer sells them, provided that such items are used in the provision of utilities.

ANALYSIS
The retail sale of tangible personal property in this state is subject to sales tax. T.C.A. Section 67-6-202(a). Tangible personal property means and includes personal property, which may be seen, weighed, measured, felt, or touched, or is in any other manner perceptible to the senses . . . . ‘Tangible personal property’ does not include utility poles, anchors, guys, and conduits, and such facilities shall be deemed to be real property for the purposes of this chapter. T.C.A. Section 67-6-102(28). The Tennessee Court of Appeals has interpreted this provision to mean that utility poles, anchors, guys, and conduits are not subject to Tennessee sales and use tax, rejecting the argument that these items must be erected or installed and in use before they are deemed real property. United Inter-Mountain Telephone Co. v. Commissioner of Revenue, 1994 Tenn. App. LEXIS 107. Under this decision, the sale of utility poles, anchors, guys, and conduits is not subject to sales tax, regardless of to whom these items are sold. It is the Department’s position that utility poles, anchors, guys and conduits must be sold for use in the provision of utilities services in order for such facilities to not be subject to sales and use tax.

Stephen Smith
Tax Counsel

APPROVED: Ruth Johnson

DATE: 1/28/97