Tennessee Industrial Machinery Tax Credit

Tennessee Industrial Machinery Tax Credit

Supports Tennessee manufacturers with state tax incentives for qualifying industrial machinery upgrades and manufacturing competitiveness.

Eligibility · United States · US-TN

Tennessee's Industrial Machinery Tax Credit is a franchise and excise (F&E) tax credit administered by the Tennessee Department of Revenue (TN DOR). The base credit rate is 1% of the purchase price, third-party installation cost, or repair cost of qualifying industrial machinery placed into service in Tennessee. Enhanced credit rates — up to 10% — apply to machinery investments in Tier 2, Tier 3, or Tier 4 enhancement counties, which are designated by Tennessee's economic-distress classification system. The credit is claimed on the annual F&E tax return and offsets Tennessee franchise and excise tax liability.

Eligible sectors are defined by statute and include manufacturing, warehousing and distribution, qualified research and development facilities, qualified corporate headquarters, and call centers. The credit is available exclusively to for-profit entities that are subject to the Tennessee F&E tax; nonprofits, universities, and individuals do not qualify. There is no published per-project cap, and the credit amount scales directly with the capital invested in qualifying equipment.

A parallel but distinct benefit — a sales and use tax exemption on industrial machinery — also applies to qualifying manufacturing facilities in Tennessee and is administered by the same TN DOR. Businesses planning capital investment in Tennessee machinery should calculate both the F&E credit and the sales-tax exemption to determine the combined effective incentive. Applications are handled through TN DOR's standard annual tax-filing process; no pre-approval or competitive RFP is required.