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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Is a digital auction platform a 'marketplace facilitator' that must collect Tennessee sales tax on auctions run by its customers?
No. A company that only provides the auction software and hosting and never collects or transmits payment is not a 'marketplace facilitator' under Tennessee law, so it does not have to collect or remi…
Which med-spa treatments, products, and memberships are subject to Tennessee sales and use tax?
It splits three ways. Prescription drugs for human use are exempt: IV nutrition therapy, injectable neurotoxins (Botox), dermal fillers, the chemical solution in medium-to-deep skin peels, and hyperba…
If a Tennessee lessor delivers leased trucks in Tennessee but they are used only out of state, must it charge Tennessee sales tax on every monthly lease payment?
Mostly no—only the first payment. When a Tennessee lessor delivers leased vehicles in Tennessee but the lessee drives them out and uses them only out of state, Tennessee taxes the first lease payment;…
Is a flat subscription fee for a mobile health-tracking app, bundled with a blood-pressure monitor and support, subject to Tennessee sales tax?
Yes — it's taxable. A flat annual subscription to a mobile heart-health program is subject to Tennessee sales tax because, applying the true-object test, what the customer is really buying is remotely…
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…
Which quality-assurance testing machines and supplies used by a Tennessee food manufacturer qualify for the industrial machinery exemption?
It depends on when the testing happens. For a manufacturer, equipment and supplies used to test the product during manufacturing are exempt: in-process testing equipment (metal detectors, fat analyzer…
Is the equipment and supplies a Tennessee manufacturer uses to treat its incoming process water and its wastewater exempt from sales tax as pollution control facilities?
It depends on which side of the process the item is on. For a manufacturer, the equipment that treats the wastewater the plant discharges — equalization tanks, pumps, circulators, feed pumps, instrume…
Which parts of a healthcare practice-management software suite are subject to Tennessee sales tax, and what happens when they are bundled into one price?
It depends on the product. Tennessee taxes remotely accessed software, so the 'Manager' electronic-health-record product is taxable. But 'Billing and Claims' (a billing-and-collection service the vend…
Which freezing-plant machinery, equipment, and supplies qualify for Tennessee's industrial machinery exemption for a frozen-food manufacturer?
Mostly yes. For a frozen-food manufacturer, Tennessee's industrial machinery exemption covers the freezing system (freezers, compressors, evaporators, refrigerant/ammonia, chillers, piping/controls/va…
Does a Tennessee private dining club have to charge sales tax on the membership dues and initiation fees it collects?
Yes. Dues and initiation fees paid to a members-only private dining club are subject to Tennessee sales tax. Because the club offers live entertainment, games, and activities, admission to that entert…
For Tennessee franchise and excise tax, where does a manufacturer source drop-shipment sales — to the third-party merchant it bills, or to the end customer who receives the goods?
To the end user. The Department advised that an out-of-state manufacturer selling through third-party merchants sources its sales to where the end customer is located for Tennessee franchise and excis…
When a sign company makes and bolts an illuminated storefront sign to a building, is the sale and installation subject to Tennessee sales tax, or does the sign become real property?
No — the sign does not become real property. The Department ruled that an illuminated channel-letter sign bolted to a storefront remains tangible personal property, so the sign company's charge to mak…
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…
After a corporate 'F reorganization,' can the new successor company use the predecessor's Tennessee net operating losses and tax credits against its future franchise and excise tax?
Yes. The Department ruled that after an IRC § 368(a)(1)(F) 'F reorganization' — a mere change in a corporation's identity or form — the newly formed successor company may carry over and use the predec…
When a bank's subsidiary sells assets and is then moved from a first-tier to a second-tier position, are its sale transactions still included in the bank group's combined Tennessee franchise and excise return?
Yes — for the sales made while it was still in the group. The Department ruled that a bank-owned subsidiary's sale of two investments must be included in the bank group's combined Tennessee franchise …
Can a contractor expanding a municipal water-treatment plant buy the treatment piping exempt from Tennessee sales and use tax as industrial machinery?
Yes — the process piping is exempt. A municipal water utility that draws river water and treats it into drinking water sold to customers is a 'manufacturer' for Tennessee tax purposes (water is tangib…
When a manufacturer sells goods to wholesale distributors that later resell them to end customers, does it source those sales to the distributors or to the final buyers for the Tennessee franchise and excise tax receipts factor?
Source to the distributors. The Department ruled that an out-of-state manufacturer must source its sales to the location of the wholesale distributors it sells to — not to the location of the end cust…
Are repair services performed in Tennessee on equipment that is then shipped to an out-of-state customer subject to Tennessee sales tax?
It changed on July 1, 2024. Before then, repairing tangible personal property in Tennessee was a taxable service even if the repaired item was shipped back to an out-of-state customer, and the shippin…
Are streetlights, photocells, smart nodes, and poles a contractor installs for a public power authority subject to Tennessee sales and use tax?
No — they're exempt. When a contractor buys and installs streetlights, photocells, smart nodes, and poles as part of an electric distribution system owned or operated by a Tennessee government body (a…
Does a company that sells automotive window information labels to car dealers have to charge Tennessee sales tax on them?
No — the labels are exempt. A company that sells auto-window information labels (warranty, fuel-economy, and similar vehicle data) to car dealers does not have to charge Tennessee sales tax on them. T…
Are limited partnerships and the captive REIT groups they own — whose only Tennessee tie is mortgage loans secured by Tennessee property — subject to Tennessee franchise and excise taxes?
No. The Department ruled that three limited partnerships and the captive REIT groups they own are not subject to Tennessee franchise and excise (F&E) taxes, because they are not 'doing business in Ten…
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…
After a parent company absorbs its wholly owned, disregarded single-member LLC by merger, can it keep using the Tennessee franchise and excise tax credits the LLC earned?
Yes. The Department ruled that a corporate parent that earned Tennessee franchise and excise (F&E) tax credits — industrial-machinery, job, and 'super' job tax credits — through its wholly owned singl…
If a contractor moves its fabrication work into a single-member LLC that elects to be taxed as a corporation, does the new entity qualify as a manufacturer for Tennessee's industrial-machinery and business tax exemptions?
It depends on the entity election. The Department ruled that a single-member LLC (SMLLC) that a contractor sets up to do only fabrication for resale — and that elects to be treated as a corporation — …
Are self-paced online training courses, downloadable course textbooks, and live-instruction courses subject to Tennessee sales tax?
It depends on the format. The Department ruled that self-paced online courses — a real-estate licensing course and an exam-guide course delivered through the school's learning-management system — are …
Are the fees a staffing app charges to connect businesses with short-term workers and process their pay subject to Tennessee sales tax?
No. The Department ruled that the fees an online platform charges to match businesses with short-term workers (staff augmentation) and to process the workers' pay are NOT subject to Tennessee sales an…
Do a city's contractors owe Tennessee use tax on the equipment and materials they buy to build a municipal wastewater pilot-treatment plant and reclaimed-water pump station?
No. The Department ruled that the materials and equipment a Tennessee city's contractors buy to build a wastewater pilot-treatment facility and a reclaimed-water booster pump station are exempt from T…
Are membership fees for streaming live and on-demand fitness classes subject to Tennessee sales tax?
Yes. Membership fees for streaming fitness classes are subject to Tennessee sales and use tax. The pre-recorded, on-demand classes are taxable 'specified digital products' (digital audio-visual works,…
Are subscription compliance-monitoring services that match a customer's data against a proprietary database taxable in Tennessee, or are they nontaxable information and data processing services?
Not taxable. The Department ruled that a data company's four compliance-monitoring offerings — which take a customer's uploaded employee or vendor data, continuously compare it against the company's p…
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 subscriptions to print and electronic magazines, sales of advertising space in them, and access to other online publications and databases subject to Tennessee sales and use tax?
No to all three. The Department ruled that (1) subscriptions to this nonprofit's print and electronic magazines are exempt — print magazines mailed into Tennessee from out of state qualify for the pub…
Are a contract manufacturer's fees and products for clinical-trial drugs subject to Tennessee sales tax, and does its equipment qualify for the manufacturing and R&D exemptions?
Mostly exempt. The Department ruled that the drugs a contract manufacturer makes for FDA-authorized clinical trials are exempt from Tennessee sales and use tax as prescription drugs for human use, bec…
Does a company have to add a short-term intercompany trade payable back into its net worth when figuring Tennessee franchise tax?
No. The Department ruled that a foreign company was not required to 'add back' a short-term intercompany trade payable — owed by its U.S. branch to an affiliate for inventory bought to fill U.S. custo…
Does a delivery-app marketplace owe Tennessee sales tax on the fees it charges sellers and delivery drivers (as opposed to the sales it facilitates to shoppers)?
No. The Department ruled that the fees a delivery-app marketplace charges to its sellers and delivery drivers are not subject to Tennessee sales and use tax. The true object of those charges is non-ta…
Does a company whose revenue mostly comes from selling renewable-fuel credits (RINs and LCFS credits) still count as a manufacturer eligible for Tennessee's franchise and excise tax industrial-machinery credit?
Yes. The Department ruled that an LLC running a Tennessee industrial-gas plant qualifies for the franchise and excise (F&E) tax industrial-machinery credit on its equipment, even though most of its re…
Can a quarry that mines raw material and ships it to a separate manufacturing plant get its own Tennessee industrial-machinery sales-tax exemption?
Yes — with its own registration and application. The Department concluded (in an advisory Revenue Ruling) that a quarry can qualify for the Tennessee industrial-machinery sales-tax exemption on the eq…
Are airplane repair services and replacement parts exempt from Tennessee sales tax when the aircraft is based out of state and leaves Tennessee soon after the repairs?
It depends on the aircraft's size and the facts. The Department drew three lines. (1) Repair and refurbishment services performed in Tennessee on an aircraft based out of state are exempt if the aircr…
When software is taxable remotely accessed software in Tennessee, are the separately stated implementation, onboarding, and content fees billed with it also taxable?
Taxable. When a company sells remotely accessed software that is taxable in Tennessee, the related implementation and content fees it bills along with the software are taxable too — even when they're …
Does federal ERISA law shield a Tennessee S corporation from franchise and excise tax just because the company is wholly owned by an employee stock ownership plan (ESOP)?
No. The Department ruled that ERISA — the federal law governing employee benefit plans — does not preempt Tennessee franchise and excise (F&E) tax on a Tennessee S corporation, even though the company…
Are subscription fees for an online freight-posting (advertising) platform and an aggregated freight-rate data service subject to Tennessee sales and use tax?
Not taxable. The Department ruled that neither part of this freight-matching platform is subject to Tennessee sales and use tax. The first offering is an online board where freight brokers post haulin…
Does Tennessee sales or use tax apply to an out-of-state seller's goods that pass through a Tennessee transload facility — offloaded and reloaded onto other trucks or railcars — when title passed to the buyer outside Tennessee?
Not taxable. The Department ruled that an out-of-state manufacturer's wholesale sales aren't subject to Tennessee sales or use tax when title and possession pass to the buyer outside Tennessee and the…
When a partnership makes an IRC § 754 election and pushes the basis step-up down to a Tennessee LLC, does it raise the LLC's Tennessee franchise tax and its excise tax?
It splits by tax. The Department ruled that when a partnership makes an IRC § 754 election that steps up the new partners' basis in partnership property, and then 'pushes down' that step-up to a Tenne…
Does the owner of an online ordering platform have to collect and remit Tennessee sales tax as a 'marketplace facilitator' when it lists dealers' inventory but never handles the payments?
No. The Department ruled that the company is not a 'marketplace facilitator' and therefore does not have to collect and remit Tennessee sales tax on sales made through its online platform. The platfor…
When a company bundles devices, streaming, games, cloud storage, and other products into one monthly subscription price, is the whole package subject to Tennessee sales tax, and at what local rate?
Taxable in full. When this technology company bundles its products and services into one non-itemized monthly subscription price and the bundle contains at least one taxable item, Tennessee sales tax …
Are the membership dues a professional association charges subject to Tennessee sales and use tax when the membership comes with some digital perks?
Not taxable. The Department ruled that the annual Individual Membership dues a nonprofit professional association charges are not subject to Tennessee sales and use tax. Professional memberships aren'…
Are web-based data analytics services — reports, dashboards, and analyst consulting — taxable in Tennessee, or a nontaxable service delivered through software?
Not taxable. The Department ruled that a company's web-based data analytics services — digital reports, an interactive analytics dashboard, and analyst consulting — are not subject to Tennessee sales …
Does an online food-ordering and local-delivery platform have to collect Tennessee sales tax on orders from local restaurants and stores, or does it escape the marketplace-facilitator collection duty as a 'delivery network company'?
It can qualify as a 'delivery network company' and avoid the collection duty. The Department ruled (in an advisory, non-binding revenue ruling) that an online platform connecting Tennessee customers w…
Do a homebuilder's capitalized 'soft costs' — labor, interest, permits, services — count in the Tennessee franchise tax minimum property measure, or just the land and materials?
Yes — the soft costs count. The Department ruled (in an advisory, non-binding revenue ruling) that a homebuilder's capitalized 'soft costs' — labor, interest, permits, architectural/engineering servic…
Is the charge to install a household appliance subject to Tennessee sales tax, and does it matter whether the appliance is free-standing or built-in?
It depends on whether the installed appliance stays tangible personal property or becomes part of the building. The Department ruled (in an advisory, non-binding revenue ruling) that the charge to ins…
When a pre-paid funeral contract's guaranteed merchandise goes up in price by the time of death, does the funeral home owe extra Tennessee sales tax on the increase?
No. The Department ruled that a funeral home selling pre-need (pre-paid) funeral contracts should NOT collect additional Tennessee sales tax from the customer or next of kin when the price of the guar…
When a manufacturer's customers pick up custom goods at its Tennessee facility but register and use them elsewhere, are those sales sourced to Tennessee for franchise and excise apportionment?
By the purchaser's location — not where the goods are registered or merely picked up. The Department ruled (advisory, non-binding) that for Tennessee franchise and excise (F&E) apportionment, a manufa…
Does a foreign corporation that only stores inventory at a Tennessee toll manufacturer, and has no U.S. effectively connected income, owe Tennessee franchise tax?
No. The Department ruled (in an advisory, non-binding revenue ruling) that a foreign corporation — one treated as a corporation for federal tax purposes — that stores inventory at a Tennessee toll man…
If an out-of-state investment fund's only Tennessee connection is owning mortgages secured by Tennessee property, does it owe Tennessee franchise and excise tax?
No. The Department ruled that a non-U.S. limited partnership fund whose only connection to Tennessee is owning mortgages (some secured by Tennessee property, with some borrowers possibly in Tennessee)…
When Tennessee corporations merge, does the surviving company keep the net operating loss carryforwards of the companies that merged into it for franchise and excise tax?
Usually not — the survival exception is narrow. For Tennessee franchise and excise (F&E) tax, a net operating loss (NOL) carryforward can normally be used only by the taxpayer that generated it; in a …
Can the contractors building a municipal wastewater-treatment plant expansion buy the equipment and construction materials free of Tennessee sales and use tax?
Yes — broadly. The Department ruled that the contractors building a Tennessee municipality's wastewater-treatment plant expansion can buy both the processing equipment AND the construction materials f…
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…
Are on-hold telephone messaging, digital video-signage programming, and overhead music services subject to Tennessee sales tax, and does the provider owe use tax on the equipment it hands customers for free?
They're taxable. The Department ruled (in an advisory, non-binding revenue ruling) that a provider's On-Hold Messaging, VideoCast (digital video-signage) Programming, and Overhead Music services are a…
Are a federal contractor's (and its subcontractors') purchases of equipment and construction materials for a new steam-production facility on U.S.-government-owned land in Tennessee exempt from sales and use tax?
Yes — with an important limit. The Department ruled that equipment and materials a federal contractor (or its subcontractors) buy to build and install a new closed-loop steam-production facility on U.…
Is selling and installing a modular cleanroom subject to Tennessee sales tax — and how do you tell whether an installed item stays taxable personal property or becomes a nontaxable fixture?
Yes — selling and installing a modular cleanroom is subject to Tennessee sales and use tax, because the cleanroom REMAINS tangible personal property (TPP) after installation rather than becoming a fix…
When several financial institutions jointly fund a loan to refinance affordable housing in Tennessee, which of them can claim the franchise & excise community investment tax credit, and how is it divided?
It depends on the loan structure. The 'community investment tax credit' (Tenn. Code Ann. § 67-4-2109(h)) lets a financial institution offset its Tennessee franchise & excise tax when it makes a qualif…
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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.