Step 4: Exemptions

Overview:

The Department administers exemptions for multiple tax types. Review each tab to determine if your business meets the criteria for any exemptions relevant to the tax type.

Certain entities under specific circumstances are exempt from paying the business tax.  These may include, but are not limited to, people acting as employees, manufacturers, religious and charitable entities selling donated items, direct-to-home satellite providers, and movie theaters.   

  • Business Tax Information:  An overview of the tax that includes information about tax due dates, tax rates, registration, tax filing & payment, tax exemptions and more.  
  • Business Tax Manual: The tax manual provides more comprehensive tax guidance and is a resource to help taxpayers better understand the collection and remittance of business tax.  See Chapter 8 for information on business tax exemptions and exclusions.

Generally, the sale of all tangible personal property and specifically enumerated services are subject to sales tax, unless a statutory exemption applies. Sales and use tax exemptions may generally be divided into three categories: entity-based exemptions, product-based exemptions, and use-based exemptions. However, some exemptions can be entity-based and use-based, such as the agricultural exemption.

To read more information about sales and use tax exemptions and credits:  

  • Sales and Use Tax Information:  An overview of the tax that includes information about tax due dates, tax rates, registration, tax filing and payment, tax exemptions and more.  
  • Sales and Use Tax Manual:  The tax manual provides more comprehensive tax guidance and is a resource to help taxpayers better understand the collection and remittance of sales and use tax.  See Chapter 18 for information on sales tax exemptions.  

Important note: Resale Certificates are automatically issued when retailers register for Tennessee sales and use tax account.

The two most common exemptions are outlined below:

Agricultural – this exemption type is available to farmers, timber harvesters, nursery operators, and dealers. To qualify for the exemption, applicants must meet the following criteria:

  • The owner or lessee of agricultural land from which $1,500 or more of agricultural products were produced and sold during the year, including payments from government sources,
  • In the business of providing for-hire custom agricultural services for the plowing, planting, harvesting, growing, raising, or processing of agricultural products or for the maintenance of agricultural land,
  • The owner of land that qualifies for taxation under the provisions of the Agricultural Forest and Open Space Land Act of 1976,
  • Has federal income tax return that contains business activity on IRS Schedule F, farm rental activity on IRS Form 4835, and/or farm rental activity on IRS Schedule E
  • Can otherwise establish to the satisfaction of the Commissioner that he/she is actively engaged in the business of raising, harvesting or otherwise producing agricultural commodities as defined in Tenn. Code Ann. § 67-6-301(c)(2).

Required Documentation

See Farm Business Plan Worksheet for a reference on what should be included in a farm plan.

Exempt Organizations or Institutions (Commonly referred to as non-profit)- this exemption is available to organizations under T.C.A. § 67-6-322(a), 26 U.S.C. § 501(c), federally or Tennessee chartered credit union, and Tennessee Historic Property Preservation or Rehabilitation entity.

To qualify for this exemption, you must indicate what type of exempt entity it qualifies as:

  •  Organization listed under Tenn. Code Ann. § 67-6-322(a)
  •  501(c)(3) (if located in Tennessee)
  •  501(c)(5) – Labor Organization
  •  501(c)(8) – Fraternal Benefit Organization
  •  501(c)(13) – Non-for-Profit Cemetery Company
  •  501(c)(19) – Veterans Organization
  •  501(c)(4) – War-Time Veterans Organization
  •  Federally Chartered Credit Union
  •  Tennessee Chartered Credit Union
  •  Tennessee Historic Property Preservation or Rehabilitation Entity

Required Documentation


For information on all other exemptions, visit Sales and Use Tax Manual.

There are 17 types of franchise & excise tax exemptions available to entities.  Filing requirements differ based on the exemption type.

Two of the most common exemptions are Family-Owned Non-Corporate Entities (FONCE) and Obligated Member Entities (OME). 

More information about franchise & excise tax exemptions and credits is available on our website:  

  • Franchise & Excise Tax Information:  An overview of the taxes that includes information about tax due dates, tax rates, registration, tax filing & payment, tax exemptions and more.  
  • Franchise & Excise Tax Manual:  The tax manual provides more comprehensive tax guidance and is a resource to help taxpayers better understand the collection and remittance of franchise & excise taxes.  See Chapter 2 for information on franchise & excise tax exemptions.