2023 Tennessee Code › Title 67 - TAXES AND LICENSES (§§ 67-1-101 — 67-10-107) › Chapter 3 - PETROLEUM PRODUCTS AND ALTERNATIVE FUELS TAX LAW (§§ 67-3-101 — 67-3-1407) › Part 4 - EXEMPTIONS AND REFUNDS (§§ 67-3-401 — 67-3-422) › Section 67-3-401 - Governmental agency exemption

(a)
There shall be exempted from the taxes and fees imposed in part 2 of this chapter any governmental agency that holds an active exemption permit issued by the department.
(b)
Each governmental agency making purchases of petroleum products shall, prior to the purchase of such products, acquire a valid exemption permit issued by the commissioner. The exemption permit shall be numbered and shall entitle such governmental agency to purchase petroleum products tax exempt for a period of four (4) years from the date of issuance. The permittee shall make application for renewal prior to the expiration of the permit.
(c)
If any governmental agency, to which an exemption permit has been issued, loses its status as a governmental agency during the effective period of any such permit, the permit shall be void and shall be immediately surrendered to the department.
(d)
In order to be entitled to the exemption, the governmental agency shall receive, store, handle and use the petroleum products strictly in the following manner:
(1)
Purchase only from a licensed importer, supplier, or wholesaler;
(2)
Store in a storage facility either owned or leased by such agency. In the event the facility is leased, it shall be separate and apart from the commercial storage facilities of any motor fuel vendor, and the storage facility must be kept under the exclusive control of the governmental agency at all times. In order for the leased facility to comply with this subsection (d), a copy of the lease must be filed with and approved by the commissioner;
(3)
Remove from the storage facility in equipment either owned or leased by the governmental agency; and
(4)
Use exclusively for governmental purposes, in equipment either owned or leased by the governmental agency and operated by governmental employees.
(e)
It is unlawful for any person to use petroleum products sold to a governmental agency for any purpose other than governmental.
(f)
For the purposes of this part only, a motor vehicle used exclusively in a driver education program approved by the state board of education shall be considered to have met the requirements of subdivision (d)(4).
(g)
For the purposes of this part only:
(1)
A motor vehicle used exclusively for the purpose of providing mass transportation services, paratransit service to or for the benefit of persons who are elderly or have a disability, or other specialized mass transportation services of a public transportation system or transit authority organized and existing under and by virtue of title 7, chapter 56, and operated by nongovernmental employees, shall be considered to have met the requirements of subdivision (d)(4); and
(2)
Petroleum products stored by the governmental agency in a storage facility or tank leased by the governmental agency on the premises of a person providing the transportation services referred to in subdivision (g)(1), pursuant to contract with such public transportation system or transit authority, shall be considered to have met the requirements of subdivision (d)(2); provided, that such leased storage facility or tank shall be separate and apart from the other commercial storage facilities and tanks on the premises, and the leased storage facility or tank must be kept and maintained for the exclusive use and storage of petroleum products stored by the governmental agency for operation of such mass transportation services, paratransit service to or for the benefit of persons who are elderly or have a disability, or other specialized mass transportation services at all times, and for no other purpose.
(h)
An independent contractor operating a local transit company and providing local transit services is exempt from the petroleum products taxes and fees imposed in part 2 of this chapter, subject to the same restrictions imposed on governmental agencies under this part.
(i)
In lieu of the provisions set out in subdivision (d)(2), petroleum products may be delivered to a governmental agency through a customer-controlled pump. A licensed wholesaler may locate such pump or pumps at a location other than the wholesaler's primary storage location. A customer-controlled pump shall not be located on any retail station island. Such pump or pumps must be connected to a storage tank whose inventory is owned by the licensed wholesaler. Any licensed wholesaler found violating any statute or any rule promulgated by the commissioner relating to a customer-controlled pump shall lose the right to sell from a customer-controlled pump for a period of not less than two (2) years, and shall be subject to all other penalties set forth in the law. A person associated with a retail station shall neither take part in the dispensing or sale of petroleum products from such pumps, nor shall such person possess any key that will activate any meter that may be used for dispensing such products. A customer-controlled pump shall have the ability to identify each customer separately and only that customer shall be allowed to purchase petroleum products through that identity at the pump. One (1) invoice exclusively for sales from a customer-controlled pump shall be issued on the last day of any month in which a tax refund on sales to governmental agencies is claimed. Such invoice shall clearly identify itself as an invoice solely for sales through a customer-controlled pump.
(j)
Notwithstanding any other provision of this part to the contrary, a governmental agency may purchase petroleum products from retail stations free of the taxes imposed in §§
67-3-201
- 67-3-203, and free of the fee imposed in §
67-3-204
. Such purchases may only be made through a fleet credit card or an oil company credit card which has been issued by the oil company to a governmental agency which holds an exemption permit issued by the commissioner pursuant to this part.
(k)
Any governmental agency using, storing, distributing or selling petroleum products in any manner except strictly in accordance with this part:
(1)
Shall be liable for the state petroleum products taxes and fees imposed in part 2 of this chapter. In the event of such liability, the taxes and fees shall be collected in the manner otherwise provided by law; and
(2)
Shall be subject to revocation of its governmental agency exemption permit.
Amended by 2016 Tenn. Acts, ch. 646,Secs.s2, s3 eff. 3/23/2016.
Acts 1997, ch. 316, § 1; T.C.A., § 67-3-1501; Acts 2003, ch. 418, § 5; 2011, ch. 47, § 73.