Tennessee’s largest companies secure sales tax exemptions for everything from jet fuel to water

By Adam Friedman

Tennessee Lookout

They’re scattered across the rural Tennessee landscape: blue-sided barns stretching the length of five U.S. football fields, clustered together in groups numbering as few as three to as many as 20.

Each of Tennessee’s nearly 2,200 industrial chicken barns produce about 200,000 six-pound birds each year, a process that collectively consumes more than one billion gallons of water across all the barns annually.

The typical Tennessean uses around 30,000 gallons of water per year , costing between $300 to $600 annually depending on where one lives. Everyone pays a local sales tax of at least 2%, and a state rate of 7%, on the water.

But the tax bill on water for chicken barns, which in Tennessee are typically controlled by subcontractors for food giants like Tyson Foods, is zero.

“During our peaks, we would often pull 10,000 gallons of water in a single day,” said Craig Watts, a former contract chicken farmer in North Carolina who now works as a director for the Socially Responsible Agriculture Project, which organizes against industrial farming. “It’s a lot of water, and those new barns in West Tennessee are bigger than what I ran.”

Tennessee lawmakers have touted the state as one of the lowest-taxed in America, with its lack of income tax and relatively low property and business taxes.

But the reality is more complicated, according to Amy Gore, a policy and research director with the Nashville-based think tank ThinkTennessee and author of a recently published report on how Tennessee’s working families are “paying more than their fair share.”

“Tennessee’s reliance on sales taxes makes its system regressive,” Gore said.

Additionally, Gore noted high sales taxes on basic household necessities, like gas, water and groceries, mean lower-income families are paying more of their income in taxes compared to wealthy families or large corporations.

Tennessee is one of only 13 states with a grocery sales tax, and residents pay about 15% more in gas taxes today than they did in 2017.

Each tax exemption approved by the state can seem small and inconsequential but adds up over time, costing the state billions of dollars and local governments with smaller budgets even more.

“A lot of local governments are losing out on potential revenue,” Gore said.

Tyson is one of many businesses exempted from paying taxes on necessities

The Tennessee Department of Revenue classifies nearly two dozen items as “major tax exemptions” costing the state government an estimated $5.5 billion in fiscal year 2025 and local governments $1.5 billion. Officials deems these as “exemptions” because at one time companies or people paid the full tax, or paid it at a higher rate.

Not all these exemptions are tailored to a single company or industry.

About $2.5 billion of the uncollected tax revenue is because the state doesn’t charge sales taxes on items like prescription drugs, and the state counts a reduction in the food sales tax rate from 5% to 4% seven years ago as lost revenue.

At the same time, state lawmakers often exempt or significantly reduce a company’s tax rate for business necessities, such as fuel to fly planes or water to raise chickens.

But no company has likely benefited more from sales tax exemptions in Tennessee than FedEx. The company has saved $186 million on jet fuel taxes since 2016 after lawmakers capped its tax bill, gradually lowering the money it paid year after year from $32 million that year to $1 million today.

Lawmakers also created specific exemptions to allow the Memphis-based transport company to avoid paying sales tax on construction materials for its multibillion dollar headquarters expansion, saving it an estimated $21.3 million. This year state lawmakers allowed the company to reclassify its data center for a tax exemption, saving the company an additional approximately $3.3 million annually.

“FedEx has long advocated for tax policies that power economic growth in Tennessee,” said FedEx spokesperson Clare Stevens in an email to the Lookout. “Lowering the aviation fuel tax structure enables Tennessee to become competitive with surrounding states that have similar caps.”

FedEx is one of the top political spenders in Tennessee, donating $1.9 million to state lawmakers since 2009, according to a Lookout analysis of campaign finance data . Over the same period, the company posted a positive net income for all but one year, netting almost $4 billion in profits in 2023.

The Lookout provided FedEx-related facts to the company for review prior to publishing. FedEx declined a request for an interview.

More exemptions

Other sales tax exemptions have saved internet providers AT&T – the state’s second largest political spender since 2009 – Comcast, and other internet service providers more than $204 million by removing fiber optic cables from the state’s tax rolls, as the state and federal governments gave those same companies $650 million for new broadband investment in 2022.

For decades, Manufacturers like Bridgestone, Nissan, Volkswagen and Eastman Chemical pay reduced rates, or often nothing at all, for gas, water and equipment they purchase due to an industrial and machinery sales tax exemption estimated to cost $647 million next year. Each company has spent at least $1 million to influence state politicians over the past 15 years.

Brown-Forman, the owner of Jack Daniel’s, received a property tax exemption from lawmakers in 2018 for its whiskey barrels, saving it almost $18 million since then. The company has spent $3 million to influence state lawmakers since 2009.

“It’s representative of where the industry muscle is,” said Rep. Afytn Behn, a Nashville Democrat. “If you have the resources to hire lobbyists who can pass legislation that exempts your industry from paying taxes, then of course you’re going to do that.”

Behn sponsored a bill in 2024 to completely eliminate the sales tax on grocery, but it failed to make it out of a House subcommittee.

Farm Bureau secures tax break for Tyson right before expansion

The Tennessee Farm Bureau has spent $3.4 million lobbying lawmakers since 2009, or around $225,000 annually, through its two lobbying groups.

The Farm Bureau splits itself into a group with its traditional name, dealing with advocacy, and an entity called Tennessee Rural Health, its insurance business. Both operate out of the same Columbia address.

“Our headquarters are in the same building in Columbia, TN. Even though we are in the same building; our staff, corporate structures, and corporate leadership are all different and independent,” said Lee Maddox, a spokesperson for the Tennessee Farm Bureau

During the 2018 legislative session, the Farm Bureau began clearing the path for Tyson’s extensive expansion into West Tennessee.

Tyson announced in the fall of 2017 rather than building a new chicken processing plant in northeastern Kansas, where residents adamantly opposed the project, it would open the facility in Humboldt, a town of about 8,500 people 100 miles northwest of Memphis.

Tyson already had a significant footprint in Tennessee by that point, running processing plants in Goodlettsville, Shelbyville, Newbern and Union City. But the Humboldt factory and an expansion in Union City meant the company needed 600 new chicken barns .

James Lavel, a Lexington resident about 40 miles from Tyson’s new chicken processing plant in Humboldt, said the state’s Farm Bureau is powerful, especially when it seems like it’s the voice for Tennessee’s 690,000 farmers, even though it doesn’t always represent all of them.

“[The Farm Bureau] looks more at mid to high-tier farmers,” Lavel said. “They don’t care as much about the small 20- to 40-acre farmer because they aren’t pumping as much money into the system.”

Tyson Foods doesn’t lobby or run a political action committee in Tennessee. Instead, the Farm Bureau lobbies for laws benefiting the company. Tyson uses hundreds of subcontracted chicken farmers and grain producers to support its processing plants, making it one of the largest agriculture businesses in Tennessee and a significant customer for the Farm Bureau’s insurance business. The Lookout made multiple attempts to reach out to Tyson through its media contact, and never received a response.

The state Farm Bureau successfully lobbied on the company’s behalf to remove clean water and air permit requirements for chicken barns in 2018, legally referred to as Concentrated Animal Feeding Operations, or CAFOs. This ensured the production of 421 million chickens each year became classified under the much more lax regulatory regime for agricultural products.

As construction continued on the Tyson plant and new chicken barns started popping up across West Tennessee counties, the bureau pushed lawmakers to strip local county commissions and health boards of any oversight authority over the facilities.

The regulatory changes helped protect Tyson legally from public criticism over air and water pollution, tying the hands of local politicians from doing anything, even when public complaints and ‘No Tyson’ groups arose.

Classifying factory-sized chicken barns as traditional agriculture had another benefit when paired with a sales tax exemption.

With Tyson’s Humboldt factory construction under way in 2019, Tennessee lawmakers unanimously approved an exemption for agriculture producers from paying any sales tax on water and transportation trailers they used in their production process.

“We depend on agriculture in this country like nobody knows about,” Maddox said.

He added the exemption for agriculture mirrored the one provided to factories.

But chicken barns are different than factories, as they don’t have to follow the same air and water regulations because of agriculture Concentrated Animal Feeding Operations exemptions granted to them in 2018.

“There’s no doubt it takes a lot of water to feed our animals,” Maddox said.

The exact dollar benefit of exemptions for water, trailers and other agriculture exemptions is impossible to know because the state stopped reporting a specific breakdown of agriculture sales breaks in 2010, lumping them together as part of a larger group of industrial and machinery tax breaks.

The argument at the time for the tax breaks was that the deal “benefitted smaller farmers” in Tennessee.

Sen. Frank Niceley, a Strawberry Plains Republican and farmer, said there aren’t many small farmers left, and he’s all for helping them whenever he can.

Niceley says he’s “especially willing” to support sales tax breaks when Tennessee runs a budget surplus.

“You have to remember, the Farm Bureau represents everybody,” he said. “Sometimes, the stuff you do for the big boys helps the little guys, and sometimes it doesn’t.”

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