Tax on Water and Energy Fuels — Exemptions. [Effective on July 1, 2021.]

  1. Law
  2. Tennessee Code
  3. Taxes and Licenses
  4. Privilege and Excise Taxes
  5. Special User Privilege Tax Law [Effective on July 1, 2021.]
  6. Tax on Water and Energy Fuels — Exemptions. [Effective on July 1, 2021.]

Checkout our iOS App for a better way to browser and research.

  1. There is levied a tax of one and one half percent (1.5%) on the purchase price of water, and a tax of one and one half percent (1.5%) on the purchase price of gas, electricity, fuel oil, coal, and other energy fuel, sold to or used by manufacturers.
  2. For the purpose of this section, “manufacturer” means one whose principal business is fabricating or processing tangible personal property for resale.
  3. Water, gas, electricity, fuel oil, coal, and other energy fuel sold to or used by manufacturers shall be exempt from the tax levied by this section whenever it may be established to the satisfaction of the commissioner, by separate metering or otherwise, that the substance is exclusively used directly in the manufacturing process, coming into direct contact with the article being fabricated or processed by the manufacturer, and being expended in the course of the contact. Whenever the commissioner determines that the use of the substance by a manufacturer meets such test, the commissioner shall issue a certificate evidencing the entitlement of the manufacturer to the exemption. The certificate may be revoked by the commissioner at any time upon a finding that the conditions precedent to the exemption no longer exist. The commissioner's action as to the granting or revoking of a certificate shall be reviewable solely by a petition for common law certiorari addressed to the chancery court of Davidson County.
  4. Any water or energy fuel used by a manufacturer in fabricating or processing tangible personal property for resale shall be exempt from the tax imposed by this section when the water or energy fuel is produced or extracted directly by the manufacturer from facilities owned by the manufacturer or in the public domain.
  5. Notwithstanding the requirement of direct contact, there shall be exempt entirely from the tax imposed by this section electricity used to generate radiant heat for production of heat-treated glass when sold to or used by manufacturers; provided, however, that the manufacturer has applied for and received a certificate of exemption as required by this section.
    1. The tax levied by this section shall also apply to the use of such substances by a person engaged at a location in packaging automotive aftermarket products manufactured at other locations by the same person or by a corporation affiliated with the manufacturing corporation such that:
      1. Either corporation directly owns or controls one hundred percent (100%) of the capital stock of the other corporation; or
      2. One hundred percent (100%) of the capital stock of both corporations is directly owned or controlled by a common parent.
    2. “Packaging”, as used in subdivision (f)(1), refers only to the fabrication or installation, or both, of that packaging that will accompany the automotive aftermarket product when sold at retail. The tax shall apply only to such substances used in the packaging process, if the use is established to the satisfaction of the commissioner by separate metering or otherwise.
  7. Notwithstanding the requirement of direct contact, natural gas used to generate heat for the production of primary aluminum and aluminum can sheet products when sold to or used by manufacturers shall be exempt from the tax imposed by this section; provided, however, that the manufacturer applies for and receives a certificate of exemption as required by this section.
  8. There is also levied a tax of one and one-half percent (1.5%) on the purchase price of electricity sold to or used by a qualified data center as defined in § 67-6-102.
    1. The tax collected on the use of water shall be distributed as follows:
      1. Sixty-seven percent (67%) shall be deposited in the state general fund; and
      2. The remaining thirty-three percent (33%) shall be distributed to incorporated municipalities in the proportion that the population of each bears to the aggregate population of the state and to counties in the proportion that the population of unincorporated areas of the county bears to the aggregate population of the state, according to the most recent federal census or other census authorized by law.
    2. The tax collected on the use of gas, electricity, fuel oil, coal, and other energy fuel shall be deposited in the state general fund.


Download our app to see the most-to-date content.