Rules & Regulations of the State of Tennessee
Title 1320 - Revenue
Subtitle 1320-05 - Sales and Use Tax Division
Chapter 1320-05-01 - State Sales and Use Tax Rules
Section 1320-05-01-.15 - ENERGY FUEL AND WATER

(1) All energy producing fuels such as coal, coke, electricity, natural or petroleum gases, fuel oil, and other combustibles, and water except as indicated in paragraph (3) of this rule, are subject to the Sales and Use Tax. In the event the purchaser does not pay the applicable Sales or Use Tax to the vendor, he must report the purchases, and pay the tax due thereon directly to the department.

(2) A manufacturer whose principal business at a specified location is fabricating or processing tangible personal property for resale and for ultimate use or consumption off of his premises may apply to the Commissioner and be authorized to purchase energy fuel and water for use at that location at such reduced rate as may be authorized by law. Manufacturers authorized to purchase energy fuels and water at the reduced tax rate shall furnish a certified or photostatic copy of the authorization to the vendors of any energy fuel or water being claimed at the reduced rate of tax, and pay the tax to the vendor if the vendor is qualified to collect the applicable Sales or Use Tax.

(3) Manufacturers who qualify for energy fuel or water at the reduced rate may apply for and be granted authority to purchase those energy fuels or water which are separately metered or shown to be solely used in a manner coming into direct contact with or as a component part of an article being fabricated or processed for sale without the payment of any sales or use tax. Manufacturers authorized to purchase and use energy producing fuels or water shall furnish a certified copy of the authorization given by the Commissioner enumerating what energy fuels or water the manufacturer may purchase without paying sales or use tax to the vendor and shall pay direct to the Commissioner the tax on those energy fuels or water upon which no tax has been paid to the vendor and which do not come into direct contact with or become a component part of an article being fabricated or produced for sale.

(4) Manufacturers claiming the benefits of this rule must submit applications for the reduced rate or complete exemption for each place engaged in manufacturing or processing tangible personal property for sale. Energy fuel and water used by manufacturers in other places where business may be conducted and in those places for which a specific authorization has not been granted by the Commissioner are subject to the full rate of tax.

(5) The Commissioner may from time to time require a manufacturer to furnish additional or current information concerning the right of one who has been authorized to either purchase and use energy fuel or water at the reduced rate or to purchase and use energy fuel or water without payment of tax. Upon notice from the Commissioner, the manufacturer shall immediately furnish such information as the Commissioner may deem necessary to ascertain whether the conditions necessary for the authorization have changed, and whether the manufacturer is or has been entitled to the reduced rate of tax or a complete exemption on part of the energy fuel or water. Failure to submit any necessary information to the Commissioner to make this determination shall be a basis for revoking any authorization given to the manufacturer.

(6) Vendors selling energy fuels or water to a manufacturer claiming a partial or complete examination from paying the tax on energy fuels or water shall have appropriate copies of the authorizations granted by the Commissioner to the manufacturer in their files as evidence to show why the full tax rate has not been collected and paid to the department. Vendors shall be liable for any tax due from manufacturers where proper evidence is not obtained from the manufacturer.

(7) Vendors shall report the total sales of energy fuel and water sold to manufacturers with any other sales of energy fuels, water and any other tangible personal property and taxable services. The total amount of sales of energy fuels and water sold to manufacturers furnishing certified copies of the appropriate authorizations shall be reported on the forms and in the manner provided by the Commissioner. Manufacturers purchasing energy fuel and water without paying the appropriate tax to the vendor, when any is due, shall include and indicate the amount of purchases of energy fuel and water on their returns, and pay the appropriate tax direct to the department.

(8) Manufacturers and processors authorized to buy any energy fuel or water without paying any tax to the vendor shall maintain accurate records showing what energy fuel or water has been used in a manner so as to be to totally exempt from tax and the total purchases of such energy fuel or water. In cases of electricity, natural or artificial gas, water, and any other item that is metered, accurate meter readings showing readings of the exempt portion and the total purchases of energy fuel and water at least once each month, preferably at the time the readings are made by or for the vendor for billing purposes, shall be maintained by the manufacturer or processor.