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In Tennessee, a church made additions to an already existing sanctuary and the Department of Revenue deemed it to be church construction for sales and use tax criteria. This meant the contractor was responsible for paying all sales and use tax on any materials purchased and used for this particular project and the church would not be responsible for paying any sales tax for materials they purchased and then were used by the contractor. The church was also exempt from having to pay any taxes on the purchase and installation of the carpeting. (Letter Ruling No. 02-11, TN Department of Revenue, April 26, 2002, received September 9, 2002)


All lease payments made after July 15, 2002 are effected by this law change regardless of when the lease originally started. In addition, changes contained in TCA Sec. 67--6-702(d) will effect leases of tangible personal property with single items that require a payment of more than $1,600 dollars beginning after July 15, 2002. An increase in the tax rate of 2.75% will be applied to the amount of the lease payment for each item that is greater than $1,600. If a lease payment amount is more than $3,200 on a single item, the original state rate is applied on any amount that exceeds the cap of $3,200. (Important Notice, Tennessee Department of Revenue, July 12, 2002)


Tennessee has recently been in some serious budget trouble. Consequently, the Tennessee legislature proposed a special session meeting. As a result, effective July 15, 2002, the state Sales and Use tax rate is increasing from 6% to 7%. The new state rate does not, however, apply to food and food ingredients further described in the bill. These remain taxable at the previous 6% rate. The increased state rate also applies to all telecommunications charges that are currently subject to sales tax except interstate telecommunication services, which remain taxable at 7.5%. Additionally, the tax cap that applies at the local level has been modified. Currently the taxable single article cap limit is $1,600 of the purchase amount for tangible personal property. Effective July 15, 2002 this amount changes to $3,200. Amounts ranging from $0.01 to $1600 are taxable at the applicable local rates. Amounts ranging from $1600.01 to $3200 will now be levied an additional state rate of 2.75%, regardless of the local rate in the applicable jurisdiction. This summary is not a complete listing and does not fully represent all amendments made. (Bill No. 3110, July 9, 2002, Special Session, Laws 2002)


Tennessee allowed an exemption for a manufacturing incentive program through which the manufacturer allows customers to earn points to purchase or obtain merchandise. The merchandise shipped to out-of-state customers was not taxable because title to and possession of the tangible personal property pass to the customer outside of the state. (Letter Ruling No. 01-25, Tennessee Department of Revenue, October 29, 2001, received February 21, 2002)


The industrial machinery exemption includes certain broadcasting equipment if used by broadcasting companies to process and fabricate tangible personal property such as broadcast signals. This machinery includes but is not limited to: receivers, controllers, field recorders, decoders, transmitters, towers, and transmission lines. Typically such services are not included in this exemption, however broadcast signals are found to be considered tangible personal property since they are perceptible to the senses and their characteristics can be measured. Also since the signals are considered as processed for resale to advertisers, the exemption is applicable. (Tennessee Court of Appeals, No. M2000-03111-COA-R3-CV, January 8, 2002)



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