Tennessee Releases Guidance for Upcoming New Farm Equipment Exemption

The Tennessee Department of Revenue has released guidance on the application of the state’s revised farm equipment sales and use tax exemption that will come into effect on January 1, 2023. The new regulations replaced the prior list of specifically enumerated items qualified for exemption, and exempts building materials, fencing material, warranties, and most other items of tangible personal property used primarily in agricultural from tax. Automobiles, trucks, household appliances, and fuel for vehicles operated on public highways do not qualify for the exemption.

The state included key definitions to help taxpayers comply with the new law:

• “Agricultural Operations” refers to land, buildings, and machinery used in, or activities carried on in connection with, the commercial production of farm products and nursey stock.
• “Farm Products” are forage and sod crops; grains and feed crops; dairy and dairy products; poultry and poultry products; livestock, including breeding and grazing; fruits; vegetables; flowers; seeds; grasses; forestry products; fish and other aquatic animals used for food; bees; equine; and all other plants and animals that produce food, feed, fiber, or fur.
• “Nursery Stock” refers to trees, shrubs, or other plants, or parts of such trees, shrubs, other plants, grown or kept for, or capable of, propagation, distribution, or sale on a commercial basis.

To obtain the exemption for qualifying purchases, farms must present their vendor with a copy of their Tennessee Agricultural Sales and Use Tax Certificate of Exemption or Streamlined Sales Tax Certificate of Exemption. (Tennessee Sales and Use Tax Notice #22-14, November 2022)