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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Did Tennessee impose excise tax and business tax on a foreign corporation selling inventory through an independent Tennessee warehouse?
Tennessee could not impose its earnings-based excise tax because doing so created a substantial risk of international double taxation and impaired federal one-voice treatment under the tax treaty.…
Were optional, separately stated consulting, staffing, inventory, reporting, restocking, and parking-area charges subject to Tennessee sales tax?
No. The optional services were not specifically taxable and, because they were separate from merchandise sales, their separately stated charges were not part of taxable sales price. The restocking…
Could Delaware LLCs obtain Tennessee's full-liability franchise and excise tax exemption using foreign formation documents?
Yes. Copies of Delaware certificates of formation filed with the Tennessee applications for authority could serve as the required documentation because they named each member, imposed…
Was an out-of-state operating subsidiary doing business in Tennessee when Tennessee-based parent personnel managed it and its employees trained here?
Yes. Tennessee-based management performed substantial work for the subsidiary, major decisions and records were located here, board members and officers acted here, and the subsidiary's employees…
Were per-unit charges for operating a portable plant at a customer's site nontaxable equipment-with-operator services?
No. Keeping control of the plant and furnishing its operators meant there was no taxable equipment rental, but the taxpayer was still fabricating tangible personal property for the customer from…
Which boilers, compressors, sanitation supplies, and pallets qualified for Tennessee manufacturing sales-tax exemptions?
The boilers and plant air compressors were exempt industrial machinery because they were necessary and primarily used for manufacturing and packaging. Cleaning chemicals and supplies were taxable…
Were automobile appearance-reconditioning charges exempt processing for resale, and which materials used in the work were taxable?
The service charges were taxable. Tennessee treated buffing, cleaning, refinishing, dyeing, painting, and protective treatment as repair or cleaning services, not exempt processing for resale.…
Were fees for remotely hosted web-application functionality taxable, and when did sales to web developers become taxable software transfers?
Generally no. Clients who only used functionality and output from software kept on the company's servers received a nontaxable hosting service, not transferred software. A client that actually…
How did Tennessee apply franchise and excise tax, financial-institution rules, and apportionment to an out-of-state mortgage-banking LLC?
The LLC's stated activities did not establish nexus standing alone if it lacked physical presence under the 2002 analysis, but Tennessee registration still required a return and the $100 minimum…
Were collector-club membership fees taxable when each membership included a club kit containing collectibles and other tangible property?
Yes. Because each membership included a contemporaneous club kit with independently valuable tangible personal property and the charge was not separated, Tennessee taxed the full membership fee. No…
Would Tennessee tax asset transfers to a corporation's federally disregarded single-member LLC, or tax the LLC separately?
No, for the taxes the Revenue Commissioner administered. Tennessee treated the federally disregarded, corporate-owned single-member LLC as a division of its owner. Transfers of aircraft, vehicles,…
Would transferring business aircraft to a wholly owned QSSS or disregarded single-member LLC trigger Tennessee sales or use tax?
It depended on the entity. The aircraft transfer to a qualified subchapter S subsidiary was taxable because Tennessee treated the subsidiary corporation as a separate person. The transfer to a…
Were subscription fees, live market quotes, and commissions of an online agricultural commodity exchange subject to Tennessee sales tax?
No. Subscription access and separately priced live market quotes were neither tangible personal property nor specifically taxable services. Commissions were part of the sales price of agricultural…
How did Tennessee tax materials and carpet for a church sanctuary addition with classrooms, kitchen, and a multipurpose room?
The addition qualified as church construction because it served recognized church functions, had no revenue-generating purpose, and was expected to remain property-tax exempt. Church-purchased…
Were a church and its contractor taxed when the church bought materials for a sanctuary addition and held title to them?
Generally no. A church with a valid exemption certificate could buy materials tax-free, and its contractor could use church-owned materials in qualifying church construction without use tax. But a…
Could an LLC formed by a tax-free corporate merger claim Tennessee's family-owned noncorporate franchise and excise tax exemption?
The merger itself did not prevent the LLC from qualifying in the next year, and a federally tax-free asset transfer was also tax-free for Tennessee excise tax. But an LLC electing C-corporation or…
Were Tennessee cleaning, recoating, restoring, and repair services taxable for equipment owned by in-state and out-of-state businesses?
Generally yes. Services performed in Tennessee were taxable on the full charge even when customers and return destinations were outside the state. Repair of qualifying industrial machinery could be…
Did Tennessee sales tax continue on vehicle lease payments after the lessee moved the vehicle to Illinois?
Yes. Tennessee sales tax continued on all remaining lease payments because delivery of the leased vehicle to the lessee in Tennessee was the taxable transaction. Later relocation and use in Illinois…
Did Tennessee tax software-license fees, downloads, support, contract changes, and late fees charged by an out-of-state developer?
Generally yes. The ruling treated licensed software delivered by disk, CD, or download as a taxable lease or rental when used in Tennessee, and treated contract-change and late fees as taxable gross…
Did a family real-estate LLC and its tiered entities qualify for Tennessee's family-owned noncorporate franchise and excise tax exemption?
The parent LLC qualified while the stated requirements remained satisfied: at least 95% of ownership units were family-owned and more than 90% of receipts were rental income. But its subsidiary LLCs…
Could a manufacturer buy pallets tax-free when they shipped with finished products but some were first used to store raw materials?
Only pallets used solely as necessary packaging for shipped products were exempt. Pallets first used to store raw materials were subject to sales or use tax because that temporary storage was a…
Was a forfeited deposit taxable when a customer canceled after fabrication, and was use tax due on the discarded materials?
The retained deposit was not subject to sales tax because the customer never received title or possession, so no taxable sale occurred. But use tax applied to the cost price of materials bought…
Were nonreturnable cardboard cartons exempt when they shipped products for resale and could later be folded into retail displays?
Yes. The cartons qualified for the packaging exemption because they contained goods sold for resale, accompanied those goods through delivery, were necessary for practical shipment, and carried no…
Could a manufacturer keep its Tennessee industrial-machinery authorization after converting a sales subsidiary into a disregarded single-member LLC?
Yes, if operations at the authorized manufacturing location did not change. Treating the converted single-member LLC as disregarded did not change that location's manufacturing status, which…
Did a federal-facility contractor have to collect Tennessee tax when it regularly sold surplus federal property as the government's disclosed agent?
The sales were too regular to qualify as casual and isolated. But the contractor did not have to collect or remit tax when it sold as the federal government's disclosed agent. Buyers taking title or…
Which mobility and daily-living products, repairs, rentals, and installations were exempt from Tennessee sales tax?
Many specified mobility and corrective devices, their qualifying repairs, and wheelchair, scooter, and walker rentals were exempt. Convenience items and fixed ramps were not exempt, stair-lift…
Would Tennessee follow federal liquidation treatment for a subsidiary asset distribution made with a Section 338(h)(10) stock-sale election?
Yes, subject to the stated assumptions. Because Tennessee excise-tax net earnings began with federal taxable income and supplied no contrary adjustment, Tennessee would follow federal treatment if…
When could a Tennessee trailer dealer treat a farm trailer as exempt, omit the tire fee, or sell tax-free to an out-of-state buyer?
A dealer needed a valid farm-equipment certificate for a qualifying production-use trailer. The $1 tire fee did not apply to a tire that was part of the trailer, but applied to a separate optional…
Did Tennessee sales tax apply when customers redeemed purchase-based reward points, with or without cash, for merchandise delivered outside Tennessee?
No, under the stated delivery terms. Merchandise obtained with reward points—or points plus cash—was a retail sale, but Tennessee sales tax did not apply because both title and possession passed to…
Did Tennessee tax billboard vinyls produced, delivered, and installed outside the state for a Tennessee advertising agency?
Not on the stated out-of-state installation or the agency's client invoice. The agency was the vinyls' user and consumer, so its vendor purchase was taxable only if title passed to the agency in…
Did a Tennessee pool contractor collect sales tax on permanent above-ground and in-ground pool or spa installations?
No, when the installed pool or spa became real property. The contractor did not collect tax on the customer price, labor, profit, or installation, but owed sales or use tax on pool kits, spas,…
Could restaurants buy disposable napkins, straws, utensils, and similar meal accompaniments for resale without Tennessee sales tax?
Yes. A restaurant could buy disposable paper and plastic items on a valid resale certificate when it furnished them to customers as part of taxable food orders. The exemption did not cover items the…
Did Tennessee's reduced manufactured-home tax rate apply to modular homes installed as real property?
No. The reduced manufactured-home rate did not apply because the units were modular homes rather than federally labeled manufactured homes. The installer was a contractor and owed sales or use tax…
Did handling equipment used to move work between separate manufacturing plants qualify for Tennessee's industrial-machinery exemption?
No. Tennessee treated each manufacturing location separately. At a qualifying plant, the exemption reached equipment moving raw material from storage to production and finished goods from production…
How did Tennessee tax custom fabrication and installation when the finished property became realty or remained personalty?
It depended on the finished property's status and where title or possession passed. When installation made the item part of realty, the fabricator generally owed tax on materials and did not collect…
Could a distributor buy inventory for resale tax-free and temporarily store it in Tennessee before shipment?
Yes. A legitimate dealer could buy the products on a resale certificate, and temporary Tennessee storage for later shipment outside the state was not taxable use. But products withdrawn for the…
Did a Tennessee printer owe sales tax on coupons and newsletters mailed nationwide for an out-of-state customer?
Yes. With no agreement changing the place where title or delivery passed, the sale occurred in Tennessee when the printer mailed the materials. Tennessee tax applied to the full printing, sorting,…
Did a Tennessee manufacturer owe sales or use tax on returnable shipping devices used to deliver its products?
No. The returnable shipping devices qualified as exempt containers because they held the product until delivery to the customer and were incidental to the product sale. Reuse by the manufacturer and…
Which remote computer consulting, maintenance, software, telecommunications, and information services were taxable in Tennessee?
Separately billed oral telephone consulting was not taxable. Hardware and software maintenance, software changes loaded onto Tennessee computers, information delivered on diskettes, and separately…
Could a Tennessee warehouse operator offset customer charges as subrent against the rent included in its franchise-tax minimum measure?
No. Customer payments were not subrent because the storage contracts gave customers no right to possess the warehouse premises. The warehouse operator retained exclusive possession and control, so…
Were irrigation solutions, IV solutions, and sterile water used by a Tennessee healthcare provider exempt as prescribed drugs?
They were taxable tangible personal property unless a drug exemption applied. A specific solution qualified under the ruling when it was listed as a drug in the FDA Electronic Orange Book,…
How did Tennessee's $150 recreation-club dues exemption apply to annual contracts, monthly payments, renewals, and family memberships?
The first $150 per member applied to annual membership dues, including a separate $150 for each family member on the annual contract. The exemption could not be prorated across monthly installments,…
Could Tennessee impose excise tax on a foreign corporation whose goods were stored and shipped from an independent Tennessee warehouse?
No, under the stated foreign-commerce and treaty facts. Although the warehouse activity created Tennessee nexus and the ordinary excise tax passed the interstate-commerce tests, the Department found…
Were tickets to an athletic tournament hosted by a Tennessee 501(c)(6) nonprofit exempt from sales tax?
No exemption applied. The tournament tickets were taxable because the nonprofit host did not produce or control the entire event. The athletic group selected participants, pairings, times,…
Could both a Tennessee county and a municipality impose the full business tax on the same business location?
Yes. Tennessee ruled that both the county and the municipality could levy the business tax at the maximum statutory rate, and the business had to pay the full tax to each. The Business Tax Act…
Must a systems company collect Tennessee sales tax on a lump-sum price when it sells equipment to a contractor and may install part of the system?
Yes, when title or possession passed to the contractor in Tennessee. The entire lump-sum bid was taxable, including programming, testing, certification, and any otherwise nontaxable installation…
Did family-controlled rental-real-estate entities qualify for Tennessee's family-owned passive-investment franchise and excise tax exemption?
No. An S corporation owned 12 percent of the parent LLC, so individual family members owned only 88 percent—below the 95 percent statutory threshold. That defect also disqualified entities owned…
Could equipment drop-shipped to a Tennessee end user be sold tax-free through an out-of-state dealer and a Tennessee leasing company?
Yes. The manufacturer could treat the sale to the out-of-state dealer as a resale because the dealer resold the equipment to a Tennessee-registered lessor, not directly to the end user. The…
Did a Tennessee business owe sales tax on installing and maintaining commercial lighting and signs treated as real property?
No sales tax applied to installation and maintenance if the signs were real property and the business made no tangible-property sales. The business instead owed sales or use tax on materials and…
How did Tennessee tax property installations when the installed item remained personal property versus becoming part of realty?
If the item remained tangible personal property, both the item and installation were taxable retail sales. If it became part of realty, the customer-facing transfer and installation were not retail…
Did a Tennessee home-office employee create nexus, and were qualifying cooperative direct-mail sales and distributions exempt?
Yes, the Tennessee employee and employer-provided home-office equipment created sales-tax nexus. But the described multi-advertiser coupon and leaflet packages qualified for the cooperative…
Were prescribed low-vision devices and daily-living aids exempt from Tennessee sales tax as prosthetics or ophthalmic materials?
Mostly no. The listed low-vision devices and daily-living aids were not exempt prosthetics. Most were taxable when sold to patients, but spectacles, lenses, and prisms qualifying as ophthalmic…
How did Tennessee business tax apply to a company coordinating dairy farmers' raw-milk deliveries and payments?
The farm-products exemption did not apply because the company sold coordination and bookkeeping services, not milk. If its office performed the services in Tennessee, business tax applied to its…
Were separately billed software training and consulting services subject to Tennessee sales tax?
No, under the stated facts. Separately arranged, hourly training that only taught employees to use already installed software was not taxable. It would become taxable if it created, upgraded,…
Did investment partnerships holding interests in private limited partnerships qualify for Tennessee's venture-capital franchise and excise tax exemption?
Yes. The investment partnerships qualified as venture capital funds because they exclusively invested on their own behalf in securities of nonpublic limited partnerships, and more than 99% of their…
Were electronically downloaded software and free advertisements or trial software sent to Tennessee customers taxable?
Yes. Tennessee taxed canned software whether delivered on physical media or downloaded electronically. The seller also owed use tax on free printed advertisements and trial-offer software…
Were bond forms sold to a paying agent for a Tennessee local government exempt from sales tax?
Yes, under the stated contract and facts. The buyer acted as the local government's agent, so the bond-form sale was treated as a sale to the exempt government itself. The agent still had to present…
Did Tennessee tax mail-order goods shipped from a Tennessee seller to out-of-state customers when title passed upon mailing?
Yes. Under the seller's terms, title passed when it deposited the goods in the mail in Tennessee, so the sales occurred in Tennessee even when customers lived and used the goods elsewhere.…
Were prescription glucometers and their test strips, lancets, batteries, and calibration solution exempt from Tennessee sales tax?
No. Tennessee ruled that glucometers and related diabetic-testing supplies were taxable. They measured or monitored blood-glucose levels but did not replace a missing body part or substitute for a…
When did Tennessee sales tax apply to goods shipped by a Tennessee seller to destinations inside or outside the state?
Tennessee sales tax applied if either title or possession passed in Tennessee. It did not apply when both title and possession passed outside Tennessee, even though the seller was located in…
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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.