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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Were natural-gas transportation charges taxable, and how could the municipal gas system recover tax paid on nontaxable transportation?
Transportation was taxable when the utility sold and delivered its own gas because delivery was part of the gas sale. Transporting gas already owned by the customer was a nontaxable transportation…
Which entities in this banking group were financial institutions, which filed a combined return, and how was the REIT's income treated?
The bank holding company, bank, first sub-tier subsidiary, and—subject to an important loan-origination caveat—the mortgage REIT were financial institutions and filed together if unitary. The second…
Which direct-mail, database, printing, and data-processing charges were taxable, and how did itemized billing affect the result?
Direct-mail, database-use, data-processing, mail-shop, addressing, and barcode services were not taxable under the stated facts. Photocopying and substitute laser printing were taxable property…
Were out-of-state subsidiary banks doing business in Tennessee for franchise and excise tax purposes?
Yes. The banks made and serviced loans to Tennessee residents, sent loan officers into Tennessee, and had Tennessee-based officers authorized to manage their investment portfolios. Those activities…
How did Tennessee sales and use tax apply to this business's sod sales, landscape installations, and related services?
Sod sold without installation was taxable on the full price, including delivery. Installed sod and shrubbery were real-property contracts, with contractor use tax depending on whether the original…
Who owed Tennessee sales or use tax when a contractor installed glass windows that became part of commercial buildings?
The contractor owed sales tax when buying the materials or use tax if the vendor did not collect enough Tennessee tax. Because the installed windows became real property, the contractor could not…
Was a company that bought accounts receivable at a discount and collected the debts subject to Tennessee business tax?
No. Tennessee classified the company's accounts-receivable purchasing and collection activity under SIC Industry 6153 as extending credit, an excluded service, and the company was not in the…
Did Tennessee's local-option single-article tax cap apply to combined software-upgrade and phone-support maintenance agreements?
No. Tennessee treated the combined software upgrades and phone support as a taxable maintenance service, and the local-option single-article cap applied only to single articles of tangible personal…
Were returnable crates used to deliver packaged milk products exempt packaging, or did a Tennessee dairy owe tax on the crates?
The crates were taxable. Tennessee found they were reusable secondary containers mainly used to expedite delivery, not packaging that held the milk sold to the consumer or remained with the product…
Did the 1999 franchise-and-excise-tax changes apply to this limited partnership's tax years ending after June 30, 1999 or beginning after July 1, 1999?
They applied to tax years beginning on or after July 1, 1999. The special earlier rule for years ending on or after June 30, 1999 did not apply because no corporation still subject to Tennessee's…
Were fees for producing original commercials, television programs, training videos, and other master videotapes subject to Tennessee sales tax?
No. Tennessee treated fees for producing original commercials, television programs, employee-training videos, and other master videotapes as nontaxable personal services. The producer still owed…
Was a Tennessee limited partnership doing business in Tennessee when an out-of-state broker held and managed its investment portfolio?
Yes. The partnership was doing business in Tennessee because it was organized in Tennessee, all partners were Tennessee domiciliaries, and it used the broker's monthly statements to conduct and…
Does Tennessee allow the same vehicle trade-in sales-tax credit when the traded vehicle is titled and registered in another state?
Yes. The location where the trade-in vehicle was titled and registered did not affect the Tennessee trade-in rule. For a qualifying like-kind vehicle trade-in, sales tax was computed on the new or…
How did Tennessee sales and use tax treat a QSSS and a federally disregarded single-member LLC?
Tennessee reached different results. A QSSS remained a separate sales-and-use-tax filer, so related motor-vehicle transfers were taxable and manufacturer status did not transfer or combine. A…
Did a Tennessee municipality owe sales tax on fees from its family recreation center, meeting rooms, and fitness counseling?
No. Tennessee found none of the described receipts taxable: municipal recreation and amusement fees were expressly exempt, meeting-room rentals were not transient lodging, and fitness or nutrition…
Were contractors exempt from Tennessee use tax on materials used to build student housing for a private nonprofit university?
No. The contractors owed Tennessee use tax because a separate foundation—not the private nonprofit university—held title to the materials when they were used. The foundation's exemption certificate…
Is software taxable when an out-of-state vendor delivers it to a Tennessee customer that later installs it at branches outside Tennessee?
Yes. Tennessee sales tax applied because the vendor transferred possession, obtained acceptance, and provided installation training in Tennessee. The customer's later distribution of the software to…
Could a photography company's sales to students or parents qualify as one of a school's two tax-exempt fundraisers?
No. The photographer—not the school—sold the pictures to students or parents, so the school's limited fundraiser exemption did not apply. Exemption required a genuine sale to the school for resale…
Were postoperative autotransfusion and chest-drainage systems exempt medical devices under Tennessee sales-tax law?
No exemption applied. Both systems were taxable because they collected or removed blood, fluid, or air after surgery but did not replace a body part, augment a natural function, or brace, support,…
Did Tennessee's temporary reduced sales-tax rate for aircraft apply to aircraft leases?
No. The reduced aircraft rate applied to sales price, while Tennessee taxed leases on gross proceeds. Aircraft leases remained subject to the full rate, so the lease's start date did not affect…
Did custom commercial kitchen exhaust hoods remain tangible personal property after installation?
Yes. The hoods remained tangible personal property because they were easily detachable, served movable kitchen equipment rather than the building, could be relocated without damage, and were not…
Did a treaty-protected foreign seller owe Tennessee excise and business tax when inventory was sold through a warehouse in a foreign trade zone?
The seller did not owe Tennessee excise tax under the ruling's treaty and foreign-commerce analysis, but it did owe business tax on sales completed in the Tennessee warehouse. Foreign-trade-zone…
Which cardiac-surgery perfusion supplies qualified as exempt prosthetic devices, and did heat bonding change each item's tax treatment?
Items that temporarily replaced or assisted heart and lung functions were exempt prosthetic devices, including membrane tubing packs, oxygenators, arterial filters, pumps, IABP sets, and double-line…
Was a corporation's contribution of manufacturing assets to a new limited partnership subject to Tennessee sales and use tax?
Mostly no. The manufacturing-operation contribution was an exempt occasional and isolated sale, but any aircraft, vessels, or motor vehicles transferred were taxable. Qualifying industrial machinery…
Did Tennessee tax software and related consulting created from Tennessee but saved directly onto a customer's out-of-state computers?
No. Although software was treated as tangible personal property, each line was sent directly to and saved only on the customer's out-of-state computers, so title and possession passed outside…
Was a manufacturer-funded credit taxable when the dealer passed the exact amount to a particular customer after the sale?
Yes. The manufacturer credit was part of the taxable sales price because it was tied to the particular customer's purchase and reimbursed the dealer for the exact credit passed to that customer.
How did Tennessee business tax apply to nightly vacation-rental owners and the third-party companies managing their properties?
Property owners owed business tax on the full amount charged guests, with no deduction for the management company's fee. Management companies separately owed business tax on their commissions or…
Were aircraft bought or leased by an FAA-certified charter company exempt when at least 90% of their use was interstate or international?
Yes. The FAA-certified charter operator was a commercial interstate or international air carrier, and at least 90% of aircraft use was outside Tennessee. Purchases and leases for that charter…
Did tanks temporarily holding intermediate material between two manufacturing stages qualify as exempt industrial machinery?
Yes. The tanks were necessary to the integrated reactor-and-blending process, held only intermediate material for short periods, maintained needed condition, and were used exclusively within…
Were document cataloging, storage, and CD-ROM production taxable in Tennessee, and was separate computer consulting taxable?
The document service was taxable because its crucial result was a CD-ROM containing the medical records. Separate computer consulting was not taxable when it only advised on hardware and software…
Did Tennessee's temporary reduced aircraft tax rate override the full exemption for aircraft used principally by commercial interstate or international air carriers?
No. Aircraft owned or leased by a commercial interstate or international air carrier and used principally in interstate or international commerce remained fully exempt. The temporary reduced-rate…
Was a Tennessee sale created when an out-of-state printer delivered publications to a Tennessee warehouse or shipping point and then handed them to the customer's carrier?
Yes. The customer's carrier accepted title and possession in Tennessee, so a Tennessee sale occurred even though the goods then left the state. Goods actually purchased for resale were exempt with a…
Did correcting a foreign corporation's Tennessee certificate from for-profit to nonprofit retroactively exempt it from franchise and excise taxes?
The original ruling said yes: the corrected nonprofit certificate related back to the original filing and made the corporation exempt retroactively. But the official source says Public Chapter 406…
Did installed carpet, tile, vinyl, terrazzo, marble, hardwood, and cove base become Tennessee real-property improvements, and how were church projects treated?
Generally yes. When the parties intended the flooring to remain for its useful life, it became an improvement to realty: the installer owed tax on material cost but did not collect tax on…
Which petroleum-storage and leak-control items qualified for Tennessee's pollution-control sales and use tax benefit?
Most legally required tanks, piping, containment, vapor-recovery, leak-detection, cathodic-protection, and emergency shutoff equipment qualified. Stage II vapor recovery, environmental cleanup…
How did Tennessee historically tax plants converting natural gas into electricity and a marketer selling that electricity wholesale?
Historically, the ruling imposed gross-receipts tax on specified Tennessee electricity receipts, treated electricity production and wholesale sales as taxable sales potentially exempt for resale,…
After an out-of-state retailer closed its Tennessee store, would keeping and subleasing the store lease preserve sales/use and franchise/excise tax nexus?
Yes, if the retailer kept and subleased the store. The Tennessee leasehold remained a sufficient physical presence for sales/use and franchise/excise tax nexus. If it terminated the lease and…
Could a computer consultant avoid Tennessee sales tax on planning and advisory work by separately invoicing it from taxable database design and software coding?
No. The database design and software coding created taxable software, and the planning, consulting, data-modeling, and conversion advice were integrated steps toward that result. Separate invoices…
Did a seasonal retailer with one permanent Tennessee location have to register for business tax at every temporary sales site?
No. The retailer registered in the county and municipality of its permanent location, then reported all statewide receipts at that location's applicable rate. Its two-week seasonal sites were not…
Were assets transferred in a corporate liquidation and merger subject to Tennessee sales tax?
It depended on the asset. Used business assets were exempt as an isolated transfer if tax had been paid when acquired, and rental or resale inventory was exempt with a resale certificate. Motor…
Which medical supplies sold to a for-profit Tennessee hospital were exempt from sales tax as prosthetics, orthotics, drugs, or ostomy products?
The result depended on each item's function. Foley catheters, isoflurane, qualifying stockinette, Salem sumps, nonreloadable staplers or clip appliers, and skin closures were exempt; many trays,…
Were electrical components used to renovate one federal building exempt as part of an electric distribution system?
No. A renovated electrical system serving one federal building was not an electric generating plant or distribution system. The contractor therefore owed use tax on the cost of the materials used in…
Was a fixed-fee contract to manage and pay for hospital equipment repairs subject to Tennessee sales tax?
Yes. The fixed-fee arrangement was a taxable warranty or service agreement even though the manager did not make the repairs itself. The manager could buy the covered repair services tax-free for…
Were tickets to a nonprofit-produced post-season college football bowl game subject to Tennessee sales tax?
No. The nonprofit organization's bowl-game ticket revenue was exempt because it promoted, produced, and controlled the entire event, and the game was not held or sponsored by a college or university.
Was an affiliate lending LLC taxed as a Tennessee financial institution, allowed to apportion, and permitted to source unsecured-loan income by tracing where borrowers used the proceeds?
Yes on all four questions. Because the LLC elected corporate federal treatment and earned more than half its income from loans, Tennessee classified it as a corporate financial institution. It could…
Could a Tennessee taxpayer put prior use-tax or vendor-collected sales-tax overpayments directly on its current return as credits without filing a formal refund claim?
No. A prior use-tax overpayment generally required a formal refund claim because a credit was treated like a refund. Sales tax paid to vendors generally had to be recovered from the vendors, which…
Were lunches sold by a caterer to students at a private parochial K-12 school exempt when parents paid the caterer directly rather than the school buying the meals?
Yes. The meals were exempt school lunches because they were furnished to students at a private school serving K-12 grades. Direct payment by parents to the caterer did not defeat the statutory…
Did Tennessee disregard a Delaware business trust for franchise and excise tax merely because federal check-the-box rules treated it as a division of its sole corporate certificate holder?
No. Tennessee treated each Delaware business trust as a separate legal taxpayer even though federal check-the-box rules disregarded it. Its franchise tax base was the greater of GAAP net worth or…
Could a Tennessee automobile dealer separately charge customers for its business tax, and did that separately stated amount remain taxable for business tax and sales tax?
Yes. The dealer could pass its Tennessee business-tax expense to customers and separately state it on vehicle invoices. But the charge remained part of the vehicle's sales price. It therefore had to…
Could a Tennessee automobile dealer separately charge customers for its business tax, and did that separately stated amount remain taxable for business tax and sales tax?
Yes. The dealer could pass its Tennessee business-tax expense to customers and separately state it on vehicle invoices. But the charge remained part of the vehicle's sales price. It therefore had to…
Did a proposed Tennessee product service center qualify for the $2,000-per-job franchise tax credit because it repaired and reconditioned broken consumer equipment?
No. Although the center planned more than $500,000 of investment and more than 25 new full-time jobs, its primary activity was repairing or reconditioning products that had previously been…
Were a bank's first-tier holding subsidiary and that subsidiary's second-tier investment company both financial institutions included in the Tennessee combined franchise and excise tax return?
No. Corporation Y was a financial institution because it was the bank's direct first-tier subsidiary, so it belonged in the holding company's combined Tennessee return. Corporation Z was only Y's…
Which cardiac-surgery supplies and Foley catheter items were exempt as prosthetic devices, and were dressings, bandages, and hospital-record microfilming taxable?
The treatment was item-specific. Heart-lung bypass tubing, an oxygenator, arterial filter, pump/flow probe, IABP set, double-line set, and Foley catheter were exempt as prosthetic devices. A venous…
Could authorized Rule 68 taxpayers claim current-return credits for tax paid on qualifying pollution-control items and buy new items without paying tax upfront?
Yes, with proof. The taxpayers could credit current returns for Tennessee sales or use tax actually paid on qualifying pollution-control items, or apply for a refund instead. They had to show that…
Could a Tennessee multi-level marketing company collect tax from unregistered distributors using suggested retail price for resale goods, while taxing personal-use goods at member price?
Yes, under the proposed arrangement. The company could collect tax based on suggested retail price for goods an unregistered distributor said were for resale, but it had to remit every dollar…
Did a separately operated Tennessee distribution subsidiary create sales-tax nexus for its out-of-state parent before their merger?
No. Before the merger, the subsidiary bought goods for resale at arm's length and did not solicit sales or otherwise act for the parent. With no Tennessee office, employees, agents, inventory, or…
Did Tennessee treat a kit of component parts for constructing a building as one article under the local sales-tax cap?
No. The kit was a collection of component parts, not one article of personal property. Before assembly, no single building article existed; after assembly, the components became real property. The…
When were an IT consultant's analysis, implementation contracts, and hourly personnel taxable in Tennessee?
Standalone analysis and recommendations were nontaxable. A flat-price implementation contract bundling software or hardware installation, tuning, custom programming, and related work was taxable.…
How did Tennessee tax chassis-built expandable homes used as seasonal or year-round dwellings?
The units qualified as manufactured homes. Tennessee taxed the full bundled sales price—including qualifying accessories, furniture, appliances, delivery, and installation—at one-half the general…
Did Tennessee tax an out-of-state company's bundled billing, printing, mailing, data-processing, and customer-support services?
No. The company performed its billing service entirely outside Tennessee, and the statements and envelopes were incidental materials consumed in providing that service. Data transmission and a…
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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.