Sales Tax State Activity Update November 2005

Tennessee Talks Telephone Equipment Exemptions

Telephone central office machinery and equipment did not qualify for the industrial machinery equipment exemption under the Tennessee sales and use tax.

The case in question was identical to a prior case that was litigated by the same parties covering the same type of equipment (AT&T Corp. v. Ruth Johnson, Commissioner of Revenue, State of Tennessee, No. M2000-01407-COA-R3-CV, 2002 WL 31247083). In this case, the Tennessee Court of Appeals held that telephone central office machinery and equipment did not qualify as industrial machinery and was not exempt from sales and use tax.

The Chancery Court held that the earlier decision applied to the facts in this case. Upon appeal to the Court of Appeals, they affirmed the Chancery Court’s decision that the earlier AT&T case was controlling. The equipment did not qualify for the industrial machinery exemption.

AT&T Corporation, Network Systems Division v. Loren Chumley, Commissioner of Revenue, State of Tennessee , Tennessee Court of Appeals, Appeal from the Chancery Court for Davidson County, No. M2004-01514-COA-R3-CV, 10/21/05