Tennessee State Tax Rulings
Free plain-English summaries of state tax letter rulings and advisory opinions issued in Tennessee, with full citations and the original source on every page.
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Does Tennessee charge sales or use tax on cloud-computing services — remote online data storage, virtual computing capacity, and the usage fees for moving data — when the provider's servers are all located outside Tennessee?
No, not on these facts. The Department ruled that none of this out-of-state provider's cloud-computing offerings are subject to Tennessee sales or use tax: (1) its Remote Storage Service (online data …
When an auto dealer gets a factory-to-dealer incentive payment from the manufacturer to discount a car for an eligible buyer, is that payment part of the taxable sales price — and does the buyer end up paying sales tax on it?
Both: the incentive payment is included in the taxable sales price, but a special credit cancels the tax on it, so the buyer effectively pays no sales tax on the incentive amount. When a dealer discou…
At an FDA-regulated manufacturing plant, which process items — water-treatment, HVAC, boiler, pigging, RF guns, antifoam, labels, printers — are exempt as industrial machinery, and which are taxable?
It varies item by item. At this FDA-regulated manufacturing plant, the Water Treatment System, HVAC System, Boiler System, Pigging System, RF Guns, and Antifoam Treatment are all EXEMPT from Tennessee…
A company leases equipment to contractors and bundles in services (training, bookkeeping, advertising) and a trade-name license under one contract. Are the services and license taxable, or only the equipment lease?
Yes — the services and the license are taxable, because they are bundled into a single, indivisible lease of taxable equipment. Tennessee taxes the full 'sales price' of a lease or rental of tangible …
An IC-DISC exporter's shareholder-officers take their pay as dividends rather than salary, as the federal rules require. Can the company deduct those dividends from its Tennessee excise-tax net earnings?
No. Dividends an Interest Charge Domestic International Sales Corporation (IC-DISC) pays to its shareholders — even when those dividends stand in for the shareholders' compensation, as the federal IC-…
When a company contracts for blocks of hotel rooms for its employees, how does Tennessee's 90-day continuous-occupancy exemption work — does it matter which employees or which rooms, and how does the hotel get the tax back?
Tennessee sales tax does not apply to hotel rooms supplied to the same person for 90 or more continuous days (Tenn. Code Ann. § 67-6-205(c)(1)), and the Department explained how that works for a compa…
When a contractor builds and runs a city-owned landfill in Tennessee, can it claim the sales-tax pollution-control credit, and which of its purchases qualify for the industrial-machinery exemption?
It splits. The landfill operator gets NO pollution-control credit, but SOME of its purchases qualify for the industrial-machinery exemption. (1) The pollution-control credit (Tenn. Code Ann. § 67-6-34…
Can a company that runs its operations through several affiliated partnerships, LLCs, and corporations at one location combine all of their employees to meet the 250-employee threshold for Tennessee's call-center telecommunications exemption?
No. A company cannot combine its own employees with those of its affiliated entities to qualify for Tennessee's call-center exemption from sales tax on telecommunication services (Tenn. Code Ann. § 67…
Does Tennessee sales and use tax apply to an out-of-state company's online banner ads, database advertising subscriptions, separately stated photography and set-up fees, hosted (ASP) database access, and wholesale reseller receipts?
No to all five — none of the company's charges are subject to Tennessee sales and use tax on these facts. Tennessee taxes retail sales of tangible personal property (including prewritten software) and…
A Tennessee food producer bolted storage racks into its freezer to freeze and hold its own packaged food before shipping. Are the freezer racks exempt from sales and use tax as 'industrial machinery'?
Yes. The freezer racks a food producer bolted into its freezer qualify as exempt 'industrial machinery' (Tenn. Code Ann. § 67-6-206(a)), so no Tennessee sales or use tax is due on them. The exemption …
When a Tennessee advertising agency develops a brochure through consultation, research, design, and production phases, which of those phases and charges are taxable, and which are exempt under Tennessee's 2009 advertising-materials law?
It's an 8-part split ruling that draws a line between three categories created by Tennessee's 2009 advertising-materials law: PRELIMINARY artwork and pure advertising services (the consultation, resea…
When a company sells its trade accounts receivable to an affiliated company at a discount to maintain loan collateral, is that discount an 'intangible expense' that has to be added back when calculating Tennessee franchise and excise tax — and pre-approved to be deducted again?
No — the discount isn't an 'intangible expense' at all, so the affiliate add-back rule doesn't apply to it. The Department ruled that when a company sells its trade accounts receivable (arising from o…
If a company has advertising materials printed out of state and ships them to its own Tennessee distribution center before sending them on to retail locations across the country, does it owe Tennessee use tax on all of them, just the ones that end up in Tennessee, or none at all?
Only the materials that end up distributed within Tennessee are taxed. The Department ruled that printed advertising materials manufactured out of state and shipped to the Taxpayer's Tennessee distrib…
For a wireless carrier's points-based loyalty program, does issuing loyalty points reduce the taxable sales price of the monthly service fee, and how is tax calculated when points are redeemed for discounted phones, accessories, or other rewards?
Issuing points doesn't reduce tax, but redeeming them does — and only standalone redemptions for nontaxable items avoid tax entirely. The Department issued five rulings on a wireless carrier's points-…
When a wireless carrier replaces a customer's lost, stolen, or broken phone under a bundled replacement program, does the carrier owe Tennessee sales tax on the replacement phone — and does it matter whether the claim is handled as a warranty repair or as an insurance claim?
It depends on which half of the program covers the claim. The Department ruled that a wireless carrier's Phone Replacement Program is really two different arrangements bundled together: a warranty/ser…
Are surgical bone-graft and bone-void-filler products that get implanted in a patient's body exempt from Tennessee sales tax as prosthetic devices?
Yes — both products are exempt from Tennessee sales and use tax as prosthetic devices. The Department ruled that Product #1, a synthetic bone-graft scaffold placed in gaps between bones to promote fus…
If an out-of-state company only licenses patents to an affiliate, and the affiliate's downstream sales eventually reach Tennessee, does the patent licensor owe Tennessee franchise and excise tax?
No — the patent licensor isn't subject to Tennessee franchise and excise tax under these facts. The Department ruled that Company A, which licenses patents to an affiliate (Company B) that arranges ma…
If a chain of disregarded single-member LLCs is ultimately owned by a tax-exempt governmental pension plan, is the bottom-tier LLC subject to Tennessee franchise and excise tax?
It's a not-for-profit, generally exempt — but not completely. The Department ruled that an LLC at the bottom of a chain of single-member LLCs, all disregarded for federal income tax purposes up to a t…
Are remote-desktop and IT-support web services taxable in Tennessee the same way online meeting and training/webinar platforms are?
It splits along a clean line: services that let someone view/control a SINGLE computer remotely aren't taxable, but services that LINK MULTIPLE PEOPLE in an audio/video session ARE. The Department rul…
When a manufacturer expands a factory, which of the new machinery, structural components, electrical systems, and pollution-control equipment qualify for Tennessee's industrial machinery sales tax exemption -- and which count as part of the building instead?
Mostly exempt, but the BUILDING itself is taxable. The Department ruled that nearly everything a manufacturer bought for a plant expansion — machinery, electrical distribution equipment, transport equ…
Which equipment a produce-packing facility buys -- wash lines, chillers, sanitizers, ice machines, racking, office equipment -- qualifies for Tennessee's qualified-farmer sales tax exemption?
It splits by whether the equipment is part of actually PRODUCING the agricultural product, or just handling it afterward. The Department ruled that a produce packer/grower's Stainless Steel Wash Lines…
Is a computer software maintenance contract sold to a Tennessee customer taxable, and does it matter where the vendor and customer are located or where repairs are performed?
Yes, sourced by computer location, not contract-signing location. The Department ruled that whether a computer software maintenance contract is subject to Tennessee sales tax depends entirely on WHERE…
Do FDA-licensed blood-testing reagents used by hospitals qualify for Tennessee's prescription drug sales tax exemption when ordered by a physician?
No, they're taxable. The Department ruled that FDA-licensed in-vitro diagnostic reagents — used to test blood compatibility before transfusions — do NOT qualify for Tennessee's prescription drug exemp…
Are IT staffing/contract-employee services subject to Tennessee sales tax — including software development, help desk support, repairs, and reimbursed travel expenses?
It depends on the task. The Department ruled that when an IT staffing company's contract employees work on-site for a client, creating or programming COMPUTER SOFTWARE on the client's premises is a ta…
If a company generates a Tennessee job tax credit through a disregarded single-member LLC and then sells that LLC, can the parent company still use the leftover credit carryforward on its own future tax returns?
Yes. The Department ruled that a corporation may continue using a Tennessee job tax credit carryforward on its own franchise and excise tax returns even after selling the single-member LLC whose busin…
Do reusable, part-specific protective containers that move components from storage to a factory's assembly line qualify for Tennessee's industrial machinery sales tax exemption?
Yes. The Department ruled that a manufacturer's reusable, part-specific protective containers — used to move components from a parts-storage area to the production and assembly line, then returned to …
Does Tennessee's sales tax exemption for energy fuels used directly in manufacturing apply to natural gas burned in a factory's ovens — and does it matter whether each oven is separately metered?
Yes, but only for the metered ovens. The Department ruled that natural gas a food manufacturer burns in its direct-fired processing ovens qualifies for Tennessee's FULL energy-fuel exemption (Tenn. Co…
Are fees a company charges to manage clients' cooperative advertising funds — tracking balances, processing reimbursement claims, and reporting — subject to Tennessee sales tax?
No. The Department ruled that fees for managing a client's cooperative advertising fund — maintaining the Co-op database and balances, fielding customer calls about fund usage and claims, processing a…
Is a flat subscription fee for online access to reference materials, library databases, and simulation programs subject to Tennessee sales tax — and did the answer change when Tennessee started taxing 'specified digital products' in 2009?
It depends on the period. The Department ruled that a flat subscription fee giving customers online access to reference databases, dictionaries/encyclopedias, library content, and computer simulation …
Are charges from a third-party contractor for fabricating, installing, reworking, or repairing parts and inventory during a Tennessee manufacturer's production process subject to sales and use tax?
Mostly exempt, with one exception. The Department ruled that a manufacturer's third-party contractor charges for (1) fabricating parts of the product, (2) installing parts on the product, and (3) rewo…
Does Tennessee sales tax apply to a single-use vein-ablation catheter and its bundled treatment supply packs sold to treat venous reflux disease (varicose veins)?
Mostly yes, taxable. The Department ruled that the single-use catheter — inserted into a diseased vein to seal it shut with heat, then removed during the same procedure — is subject to Tennessee sales…
Is the fee a Tennessee car dealer charges to ship a vehicle between its own stores — so a customer can see and test-drive it before buying — subject to sales tax?
No. The Department ruled that a fee a Tennessee car dealer charges to ship a vehicle from one of its business locations to another — so that a prospective customer can see and test-drive it before dec…
When a customer buys several vehicles from a Tennessee car dealer and trades in several others in one transaction, is the sales tax figured on the total purchase price minus the total value of all the trade-ins?
Yes. The Department ruled that when a customer buys more than one vehicle from a Tennessee car dealer in a single transaction, the taxable sales price is figured by ADDING UP the price of all the vehi…
Is a call-tracking service — toll-free numbers that route and record sales calls so a retailer can measure its advertising and capture customer data — taxable in Tennessee as a telecommunications service?
No. The Department ruled that 'Call Tracking Services' are NOT subject to Tennessee sales and use tax. The provider sells retailers a package built around custom toll-free 'vanity' numbers (supplied t…
Which items and services bought to expand a Tennessee manufacturing plant qualify for the industrial-machinery sales-and-use-tax exemption — and can the manufacturer's contractors buy them tax-free?
Most of it is exempt, but not all. The Department (in an advisory revenue ruling) applied Tennessee's INDUSTRIAL MACHINERY exemption (Tenn. Code Ann. § 67-6-206(a)) to a long list of items a manufactu…
In a points-based rewards program, is the 'per point' fee the operator charges its client companies taxable, and does Tennessee sales tax apply to the reward merchandise shipped to participants — and on what amount?
It splits two ways: the program fee is NOT taxable, but the reward merchandise IS. The Department ruled on a points-based incentive/rewards program run for client companies — participants earn 'Points…
If a Tennessee LLC taxed as a partnership makes a federal IRC Section 754 election, do the resulting basis step-ups under Sections 743(b) and 734(b) also affect the LLC's Tennessee excise tax net earnings?
It depends on which kind of Section 754 basis adjustment is involved. An IRC Section 743(b) adjustment (triggered when a member's interest is SOLD) only steps up the PURCHASING MEMBER's own personal/i…
When a corporate group emerges from Chapter 11 bankruptcy with discharged debt, does Tennessee follow the federal rules that exclude cancellation-of-debt income but also shrink the group's net operating losses, basis, and loss carryforwards after an ownership change?
Tennessee's excise tax excludes discharge-of-indebtedness income from net earnings the same way federal law does (Tenn. Code Ann. § 67-4-2006(b)(1) doesn't require adding it back), but Tennessee does …
Is an LLC that's wholly owned by an individual's IRA (through a custodian) exempt from Tennessee franchise and excise tax as a family-owned entity, if its only income is residential rent?
Yes, conditionally. An LLC wholly owned (through a custodial IRA) by one individual qualifies as a "family-owned noncorporate entity" exempt from Tennessee franchise and excise tax under Tenn. Code An…
Can a Tennessee series LLC with dozens of individual series file one combined franchise and excise tax return, or does every series have to file its own separate return?
No, a single combined return isn't allowed. Each individual series of the series LLC -- potentially up to thirty of them -- must file its OWN separate Tennessee franchise and excise tax return, and so…
Is renting out a banquet/meeting room (not a hotel room) for weddings, business meetings, or temporary merchandise sales subject to Tennessee sales tax?
It depends entirely on WHY the room is rented, not who rents it. Renting the meeting/banquet room for a meeting, seminar, wedding reception, or similar event is NOT subject to Tennessee sales tax, reg…
If a company sells compressed air (not the compressor itself) to a manufacturer under a long-term service contract, does the sale qualify for Tennessee's industrial machinery sales tax exemption?
No. Selling compressed air under a "compressed air as a service" contract does NOT qualify for Tennessee's industrial machinery exemption, for two independent reasons: (1) the customer never buys, lea…
Is a document-management/e-discovery service -- collecting, processing, hosting, and storing client data, plus consulting and file delivery -- taxable in Tennessee, and does it matter whether the finished files are delivered electronically or on a hard drive?
Mostly not taxable, with one key exception. The provider's data collection ("Data Service"), hosting, storage, and hourly project-management consulting are all NOT subject to Tennessee sales and use t…
Is firewood sold over the counter at a retail store exempt from Tennessee sales tax as residential heating fuel?
No. Even though Tennessee exempts "gas, electricity, fuel oil, coal and other energy fuels sold directly to the consumer for residential use" under Tenn. Code Ann. § 67-6-334(a), that exemption specif…
When an event-staging company both rents out its own tables/chairs AND handles a customer's own equipment for a one-day event, which of those charges owe Tennessee sales tax?
It depends on WHOSE property is involved. When the company rents its OWN tables, chairs, or other equipment to a customer, ALL of the associated transportation and handling charges are taxable as part…
Is an SEC EDGAR filing service -- converting company financials into SEC format and transmitting them electronically -- a taxable telecommunications service in Tennessee, and does it matter that the provider's servers are out of state?
The EDGAR filing service IS a taxable "telecommunications service" under Tennessee law (Tenn. Code Ann. § 67-6-205(c)(3)), because converting customer files into SEC-compliant format and electronicall…
When a software company licenses core products, optional add-ons, and maintenance together for one lump-sum, non-itemized price, does Tennessee's $1,600 'single article' local-tax cap limit the tax on that sale?
No. Because the software company bundles its core products, optional components, and maintenance together and charges one non-itemized lump-sum price, none of it qualifies for Tennessee's local-option…
If a Tennessee equipment-rental company charges for cartage, assembly, and disassembly along with the lease, are those service charges taxed along with the equipment rental, even if billed separately?
Yes to both. The equipment lease itself is subject to Tennessee sales and use tax under Tenn. Code Ann. § 67-6-204 because it's a rental of tangible personal property that's part of the company's regu…
Is calibrating a fuel meter a taxable repair service in Tennessee, and does it matter whether the meter is permanently attached to real property?
It depends on whether the fuel meter is affixed to real property. Calibrating a fuel meter is a taxable REPAIR SERVICE under Tenn. Code Ann. § 67-6-205(c)(4) when the meter is NOT affixed to realty, b…
Is a home-use physical therapy machine exempt from Tennessee sales tax when a doctor prescribes it, and does it matter whether insurance, Medicaid, or the government pays for it?
Yes, the machine is exempt from Tennessee sales and use tax as durable medical equipment when it is sold for HOME USE pursuant to a physician's prescription -- and that exemption does NOT depend on wh…
A Tennessee manufacturer buys design software with a bundled maintenance plan, plus a long list of welding gases, gear, and shop supplies -- which of these qualify for the sales tax industrial machinery or industrial materials exemptions?
It's a mixed bag by item. The design software (and its bundled maintenance contract) is FULLY TAXABLE -- because it's used before raw materials reach the manufacturing process, it doesn't count as "ne…
Are software 'configuration' consulting services -- setting toggles and building tables within already-installed software, without writing new code -- taxable in Tennessee, and can a vendor bill them tax-free separately from software development work?
No, software configuration services are NOT subject to Tennessee sales and use tax, as long as the consultants only set predefined toggles/switches and build tables within existing software -- without…
If a Tennessee municipality hires a construction management firm on an AIA B801 agency-CM contract, does that contract cause the municipality's own construction purchases to become taxable, or do they stay exempt as government purchases?
No. A Tennessee municipality's construction-related purchases stay exempt from sales and use tax under Tenn. Code Ann. § 67-6-329(a)(4) even when the municipality hires a construction management firm …
Is a prescription dermal filler injected by a doctor to treat facial wrinkles exempt from Tennessee sales and use tax, and does the seller need exemption certificates from the buying physicians?
Yes. The dermal filler is exempt from Tennessee sales and use tax as a prescription drug for human use under Tenn. Code Ann. § 67-6-320(a), because it meets the statutory definition of a 'drug' (it's …
If a Tennessee limited partnership keeps doing business after the fixed termination date in its partnership certificate, does it become subject to franchise and excise tax as a general partnership, or does it stay exempt?
Once a Tennessee limited partnership formed before 1988 (still governed by the old Uniform Limited Partnership Act) passes the fixed termination date stated in its certificate, it automatically dissol…
Does a Tennessee country club have to charge sales tax on the separate fees it bills members for locker rentals and golf bag storage?
Yes. Both the locker rental fees and the golf bag storage fees a Tennessee country club charges its members are subject to Tennessee sales tax, because the club is a "membership sports and recreation …
Are an online vendor-referral website's charges -- for sales-lead referrals, used-product advertising space, phone-call tracking reports, and hosted vendor websites -- subject to Tennessee sales and use tax?
None of it is taxable. An online business runs a website where customers find vendors and submit purchase requests; it charges vendors for (1) new-product sales-lead referrals, (2) space to advertise …
For an online database and a long menu of related Internet services accessed remotely over the web, which charges are subject to Tennessee sales and use tax?
Most of it is NOT taxable -- only the items the customer actually receives as tangible personal property are. The company sells an online database (with software tools, reports, and photos) plus a lon…
When a direct-selling company runs a party plan with hostess discounts and advisor award certificates, is Tennessee sales tax charged on the full price or only on the discounted price actually paid?
Genuine discounts reduce the taxable amount, but a separate fee paid to unlock a discount you must use right away is itself taxable. For a direct-selling company's party plan: (1) when a Hostess buys …
Are the membership dues and related fees (photo-ID activation, guest passes, towel/locker/equipment rentals, facility rentals) charged by a qualifying sports and fitness center exempt from Tennessee sales tax?
Yes. A sports and fitness center that meets the five statutory tests in Tenn. Code Ann. Section 67-6-330(a)(17) has its membership dues -- which would otherwise be taxed as recreation-club/health-spa …
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These are official tax letter rulings and advisory opinions issued by Tennessee's revenue authority in response to questions from specific taxpayers about how the tax law applies to their facts. A ruling is binding on the department only for the taxpayer who requested it and cannot be relied on by anyone else, but it is strong evidence of how the state reads the law. Every ruling above has a plain-English question and short answer, plus a link to the full original source.