Rules & Regulations of the State of Tennessee
Title 1320 - Revenue
Subtitle 1320-05 - Sales and Use Tax Division
Chapter 1320-05-02 - Local Sales and Use Tax Rules
Section 1320-05-02-.04 - ENERGY FUEL AND WATER

The locally imposed tax applies to any sales of water for use and consumption. Any sales of water, however to a manufacturer, are subject to tax at the rate applicable under T.C.A. 67-6-702(b). If a manufacturer has been exempted by the Commissioner from paying the state sales tax to the vendor because of his use of the water, the manufacturer shall not pay any local sales tax to the vendor, but shall report and pay the applicable tax on that portion of the water used which is not entirely exempt from the tax, as provided for in the state sales tax law, direct to the local government if it is collecting its own tax, or to the Commissioner if he is collecting the locally imposed tax for the local government. Where the Commissioner collects the tax for a local government, the authorizations given a manufacturer to purchase water at the state rate of one percent (1%) tax, or to be entirely exempt from the tax on a portion of the water because of the way it is used by the manufacturer, shall be deemed sufficient to authorize the manufacturer to be entitled to the reduced rate applicable under T.C.A. 67-6-702(b) or entirely exempt from the locally imposed tax.

Authority: T.C.A. §§ 67-1-102, 67-6-402, 67-6-701.