Tennessee Personal Property Tax Schedules Due in March Recent Decision Holds that “Acquisition Cost” Does Not Include Intangible Costs

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With Tennessee personal property tax filings due in March, Tennessee taxpayers should take note of a recent administrative judge decision holding that intangible costs (such as freight, installation, engineering and transactional taxes) incurred by a manufacturer to place equipment and machinery into service—costs traditionally capitalized for federal depreciation purposes—should be excluded from the tax base in determining fair market value for Tennessee personal property tax purposes. See In re Signal Mountain Cement Company, Hamilton County, Appeal Nos. 62119, 62120, 64218, 7114 (Oct. 7, 2011), appeal pending.

The taxpayer in this case is a cement manufacturer located in Tennessee. The local assessor audited the taxpayer’s tangible personal property schedules and issued a back assessment that increased the "fair market value" of the taxpayer's equipment and machinery by intangible costs such as freight, installation, engineering and transactional taxes. The assessor's valuations were based on the taxpayer's depreciation schedules from its federal income tax returns.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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