We’ve recently had a very interesting seminar as relates to Tennessee Tax on Signs. An employee of the Tennessee Department of Revenue shared with us recently that free standing signage is taxed differently than wall signage.  We’ll utilize this forum to try and explain the differences and the implications for sign manufacturers in and outside Tennessee and customers in Tennessee.

Tax On Wall Signs

The state of Tennessee recognizes wall signage as being attached to a building permanently.  This means that the banner would generally not be considered a wall sign, because it is easily relocated.  Regardless of whether a banner or a wall sign are to be installed, both are tangible personal property or TPP prior to installation in the eyes of the State of Tennessee tax law.  Upon installation a Wall sign becomes real property, attached permanently to the wall.  A banner on the other hand, the State sees as movable and intended to be moved.  The banner is therefore thought of as TPP after installation. This is an important distinction.  As you might imagine there is a difference in taxation for both of these items. The wall sign manufacturer is required to pay TN use tax on the parts used to manufacture the sign.  And there is no TN tax on the installation of the wall sign. A banner on the other hand, which remains tangible personal property after installation, requires the buyer to pay a sales tax on the entire purchase of a banner including materials, manufacturing labor, markup, and installation.  A pretty sizable difference compared to the TN use tax on parts only for the wall sign, which becomes real property on installation. I hope that makes sense……If not, re-read….its important.

You may be asking why we’re discussing banners at all. The reason is quite surprising.  What we’ve learned recently is that freestanding signs are taxed very similarly to banners, and they are not TPP when installed, they become real property.  how can real property be taxed differently for a freestanding sign as compared to a wall sign????  Keep reading…

Tax on Freestanding Signs

For a freestanding sign, which the TN law of personalty does not recognize as a building but does recognize this as real property, use tax is owed to the state for the value of the material used to build the sign, for the manufacturing labor, and for the markup associated with the purchase of the sign.  Our understanding is that the installation is taxed differently than a banner, in that installation of a freestanding sign is not taxable, but the sign itself is treated very similarly to a banner or tangible personal property…..even thought it becomes real property when installed.

Tennessee Tax Ruling on Sign Companies

For sign companies interested in making sure that they’re handling their State of TN sales and use tax properly, the Tennessee Department of Revenue has a very good case ruling that should be read by any accountant, bookkeeper, or owner, associated with paying taxes to the State of Tennessee. This document will be shared in the following. It is a very valuable read!  In fact, we encourage the TN Dept of Revenue to send it to any Sign company seeking information from the State.

Click here to read the Tennessee Department of Revenue Ruling on Sign Companies and refer to your own CPA for tax advice.  This document is intended to share information provided by the State of TN Dept of Revenue, not provide Tax Advice of any kind.

TN Dept of Revenue Letter Ruling