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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Are the computers, software, and related equipment a Tennessee manufacturer uses to run its production lines exempt from sales tax as industrial machinery?
Mostly yes for the systems that actually run the production lines. For a manufacturer, the computer hardware and software used to monitor and control production — line-optimization (MLO) and quality/s…
Are the consulting, setup, and website fees a company charges to run an employee-rewards program taxable in Tennessee — and what about the transaction fees, merchandise, and gift cards?
Mostly not. The Department ruled that the consulting, startup, and website-design/configuration fees a company charges to set up and run an employee-recognition rewards program are NOT subject to Tenn…
When a company hires a team to implement and customize a new ERP system, which parts of the project — configuration, custom coding, training, support — are subject to Tennessee sales tax?
Only the custom coding. In a project to implement a new cloud ERP system, the Department ruled that the only taxable piece is the optional custom software development — writing new code or using devel…
Is a subscription rental-property advertising platform and app a taxable software product or a nontaxable advertising service in Tennessee?
Taxable. The Department ruled that a subscription online platform and mobile app that helps property managers create and manage rental-property advertising listings is taxable computer software — not …
Are online training courses subject to Tennessee sales tax — and does it matter whether the course is taught by a live instructor or is self-paced?
It depends on whether the course is live or self-paced. The Department ruled that the company's two live, instructor-led online course formats are NOT subject to Tennessee sales and use tax — the stud…
Is specialized modular farm equipment (and its software, installation, and warranties) subject to Tennessee sales tax when sold and installed for a farmer?
Four answers for a portable, modular farming-equipment 'System' sold and installed by dealers. (1) The equipment is TANGIBLE PERSONAL PROPERTY, not an improvement to real property — it's standardized,…
A company tracks visitors to its customers' websites and apps and gives them analytics reports through a dashboard. Is that data-analytics service subject to Tennessee sales and use tax, even though it relies on software the customers access?
No — the data-analytics service is not taxable. The company collects data about the users of its customers' websites and apps (via tracking code the customer installs or data the customer sends), anal…
A company sells an annual subscription to its cloud-based employee-scheduling platform, which customers access remotely. Is that subscription subject to Tennessee sales and use tax?
Yes — the subscription is taxable because the true object is remotely accessed software. The company develops and hosts a cloud-based employee-scheduling platform (the 'Interface') and sells customers…
Two companies under a common corporate parent want to move internally developed software — and software-repair services — from one to the other. Is that transfer subject to Tennessee sales and use tax?
No — both are exempt. Tennessee has a specific exemption for intercompany software dealings between affiliated companies. (1) One affiliate's transfer of title to software it developed in-house, to an…
A Tennessee company licenses speech-recognition software to run a transcription service and charges its clients a fee per report. Are the fees it charges clients taxable, and is the software the company itself buys taxable or exempt as a purchase for resale?
Two different answers. (1) The report fees the company charges its CLIENTS are NOT subject to Tennessee sales tax — the true object is a nontaxable transcription and storage service, and the small 'cl…
A company runs a cloud document-storage product and an optional add-on, both accessed through a web portal that is itself software. Are its charges subject to Tennessee sales and use tax, or is the real product a nontaxable data-storage service?
No. The company's charges for its cloud 'Basic Product' and optional 'Add-On Component' are NOT subject to Tennessee sales and use tax. Both run on the company's proprietary software, and the web-base…
A company buys software, hosts it on its own servers outside Tennessee, and has its Tennessee employees access it remotely to do their work and to support its affiliates. Are its software purchases or its affiliate support fees subject to Tennessee sales and use tax?
No to both questions. (1) The fees the company charges its Affiliates for support services are NOT taxable, because those services aren't specifically enumerated under Tennessee law — and it is the co…
A company delivers electronically generated products for its clients and gives them a web-based interface (with a layout-design tool) to manage orders and view reports. Are its 'Basic Package' charges subject to Tennessee sales tax when the whole service runs on the company's software?
No. The company's 'Basic Package' charges are NOT subject to Tennessee sales tax. The package runs on the company's software — including a web-based interface clients access from Tennessee — and softw…
A Tennessee company gives customers free web access to their account information, separately sells access to a rebranded third-party online platform, and uses remotely accessed software to run its own operations. Which of these are subject to Tennessee sales tax, and how does it handle software its employees use both inside and outside Tennessee?
It depends on which charge. (1) FREE website access the company bundles with its services is NOT taxable — the website is software, but its true object is the underlying nontaxable service, so the com…
A Tennessee firm rents out IT contract workers by the hour for software projects — business analysts, systems analysts, programmers, QA testers, database administrators, project managers. Which of those hours must it charge Tennessee sales tax on?
It depends on the role. The firm rents out IT staff by the hour, and Tennessee taxes the hours of its Programmers and Database Administrators — because their work is the creation or programming of sof…
A Tennessee firm resells ERP software and separately offers optional consulting services — training, configuration, project management, data conversion, documentation, testing, and report writing. Which of those services must it charge Tennessee sales tax on?
Mostly no. Of the firm's optional consulting services, only Report Writing is taxable on its own — and only when it includes software coding or programming that isn't merely incidental, which makes it…
Is a Tennessee technology consultant's work taxable — setting up a temporary 'virtual lab' to test software, and backing up a customer's data — when no software is sold to the customer?
No, none of these are taxable. A Tennessee technology-consulting firm sets up new software and hardware for customers, and the Department ruled that three parts of its work are NOT subject to Tennesse…
Does Tennessee charge sales tax on online-gaming purchases — downloaded games, codes for games you play on a remote server, and prepaid game, points, or subscription cards?
It depends on the product — downloads are taxable, pure remote access is not, and prepaid cards are taxed only when (and if) they are redeemed for something taxable. This retailer sells five kinds of …
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 …
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…
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…
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…
When a qualified data center makes a large new capital investment in Tennessee, what counts toward the 'required capital investment' for the enhanced industrial machinery franchise and excise tax credit, does custom software qualify, and how much of the company's F&E tax bill can the credit offset?
A 5-part ruling on Tennessee's enhanced industrial machinery franchise and excise (F&E) tax credit (Tenn. Code Ann. Section 67-4-2009(4)(I)), which scales from 3% to 10% of qualifying purchase price d…
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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.