When it comes to sign taxation in Tennessee, the distinction between tangible personal property (TPP) and real property can significantly impact how signs are taxed. Over the years, the Tennessee Department of Revenue has issued rulings to clarify how different types of signs should be classified, and in 2024, a new ruling provided further insight—especially regarding wall-mounted signs attached to raceways.
This ruling builds upon a prior interpretation, shaping the tax treatment of signage in two important ways:
- Wall signs that become real property upon installation—Not subject to sales tax on installation, but materials are subject to use tax.
- Wall signs that remain tangible personal property (TPP)—Fully subject to sales and use tax, including installation.
Ruling #1: The Precedent on Sign Taxation in Tennessee
A prior ruling established that permanently affixed signs—especially those embedded into a building’s structure—are considered real property once installed. This means that while materials used in fabrication are subject to use tax, the installation itself is not taxable because the sign becomes part of the building.
This ruling has long been the guiding principle for sign companies, manufacturers, and customers who install signs directly onto buildings.
Ruling #2 (2024): A Key Update on Raceway-Mounted Signs
The 2024 ruling clarified a crucial exception: when a wall-mounted sign is attached via a raceway, it remains tangible personal property (TPP) after installation. Because the raceway allows for easy removal without damaging the building, the entire sign—including installation—is subject to full sales and use tax.
This means that under Tennessee law:
- Signs directly mounted to a building and intended to be permanent → real property → use tax on materials only.
- Signs mounted to a raceway and removable without building damage → tangible personal property (TPP) → full sales tax on sign and installation.
How These Two Rulings Work Together
Rather than overturning the earlier ruling, the 2024 decision clarifies a distinction that was previously less defined: the importance of removability and method of attachment.
- If a sign is truly permanent and integrated into a structure, it follows the real property rule (use tax on materials, installation tax-free).
- If a sign is attached in a way that allows for easy removal without structural damage, it follows the TPP rule (full sales tax on the entire cost).
For sign companies, this means different installation methods can trigger different tax treatments, and customers should be aware of these distinctions when planning signage projects.
What This Means for Your Business
While these rulings help clarify how the Tennessee Department of Revenue currently interprets sign taxation, they are not legally binding precedents in the way a court ruling would be. However, they do serve as guidance for tax compliance and indicate how the state is likely to apply sales and use tax laws in practice. Businesses should be aware that future rulings, legislative changes, or court decisions could further refine or alter these interpretations.
Still if you’re purchasing or installing a sign in Tennessee, it’s critical to understand how these two rulings may affect your tax obligations. A sign that seems like a permanent fixture might still be taxed differently based on how it is attached.
Read the 2024 Tennessee Department of Revenue Ruling on Sign Taxation
For expert signage solutions and guidance on how tax laws affect your project, contact Ortwein Sign today.
(Updated: March 20, 2025)