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?

Plain-English summary

The company (its identity and the type of documents are redacted) provides web-based document-management and compliance solutions. It sells a cloud-based "Basic Product" — a storage database where clients upload, store, manage, and view digital copies of their documents and generate reports — plus an optional "Add-On Component" that adds review, markup, and reporting features. Both run on the company's proprietary software, which is hosted on third-party servers; the company does not license that software to clients. Clients reach the system over the internet, including from Tennessee, through a web-based portal, and pay a flat fee based on how much storage capacity they buy (with overage fees for extra files). The company asked whether its charges for the Basic Product and the Add-On Component are subject to Tennessee sales and use tax.

The Department said no. Both products run on software, and since 2015 Tennessee taxes remotely accessed software. But the Department applied the true-object test: when a deal mixes taxable and nontaxable pieces, you tax it according to what the customer is really buying. Here the true object is nontaxable data-storage services. Clients don't buy the Basic Product to access the portal; they buy it to store, manage, and report on their documents, and the portal is just the tool to view the end result — "merely incidental" to the storage service. The Add-On Component is inseparable from the Basic Product, adds no separate software charge, and is really enhanced storage — so it follows the same result.

Two features of Tennessee's software law reinforce this. The 2015 remotely-accessed-software statute (§ 67-6-231(a)(2)) expressly does not make otherwise-nontaxable services taxable, and it specifically lists "the storage of data" and "information or data processing services" as remaining nontaxable. And Tennessee taxes only specifically enumerated services (§ 67-6-205) — data storage isn't one. So the charges escape tax.

The takeaway: a cloud product that clients reach through a software portal can still be nontaxable when what they're really buying is data storage (or another non-enumerated service), and the portal is just the means of using it.

What this means for you

Cloud storage and document-management providers

If clients pay you to store, manage, and retrieve their data or documents, and they reach it through a web portal, your charges can be nontaxable in Tennessee — because the true object is data storage, which the remotely-accessed-software law expressly leaves untaxed and which isn't an enumerated taxable service. The portal being software doesn't change that, as long as customers aren't really paying for the software itself.

SaaS and platform businesses generally

The deciding question is what the customer is buying. If it's the use of your software, the charge is taxable as remotely accessed software. If the software is just the way customers reach a non-enumerated service (storage, data processing, and the like), the charge can stay nontaxable. Look at why customers sign up, not at how the product is delivered.

Add-ons and bundled features

An optional add-on that has no value apart from the underlying nontaxable service — and carries no separate charge for software access — generally follows the tax treatment of the core service. Here the Add-On Component was "enhanced storage," so it stayed nontaxable too. Separately stated charges for software a customer is truly buying could come out differently.

Accountants and tax professionals

This is the true-object/primary-purpose test (Thomas Nelson; AT&T; Rivergate; Ltr. Rul. 14-10) applied to a remotely-accessed-software fact pattern. The two statutory anchors are § 67-6-231(a)(2) (which lists "the storage of data" and "information or data processing services" as nontaxable and disclaims any effect on otherwise-nontaxable services) and the enumerated-services rule (§ 67-6-205; Covington Pike Toyota; Ryder Truck Rental). Companion software-incidental rulings: LR 16-02, LR 16-04, and LR 16-07; contrast LR 16-01 and LR 17-15, where the software itself was the true object and the charge was taxable.

Common questions

Q: I run a cloud storage or document-management service. Are my charges taxable in Tennessee?
A: Generally no, if the true object is data storage (or another service Tennessee doesn't enumerate) and the software portal is just how customers use it. Tennessee's remotely-accessed-software law expressly leaves "the storage of data" nontaxable.

Q: My customers log into a web portal. Doesn't that make it taxable remotely accessed software?
A: Not by itself. The portal is software, but if customers aren't buying it for its own sake — they're buying storage or another non-enumerated service it supports — the portal is "merely incidental" and the charge isn't taxable.

Q: What about an optional add-on feature?
A: An add-on that has no value apart from the nontaxable core service and carries no separate charge for software access generally follows the core service's treatment. Here the add-on was treated as enhanced storage and stayed nontaxable.

Q: When would a product like this be taxable?
A: When the true object is the use of the software itself rather than a non-enumerated service it supports — for example, where customers are really paying to use the software as such.

Q: Can I rely on this letter ruling?
A: No. A Tennessee letter ruling binds the Department only as to the specific taxpayer and facts it was issued to, and it can be revoked or modified. Confirm your own facts with a tax professional.

Citations and references

Tennessee statutes (Tenn. Code Ann.):

• § 67-6-231(a)(1) (sale, lease, licensing, or use of computer software taxable regardless of how delivered); § 67-6-231(a)(2) (remotely accessed software; expressly leaves "information or data processing services" and "the storage of data" nontaxable) — 2015 Tenn. Pub. Acts Ch. 514, § 22 (eff. July 1, 2015)
• § 67-6-205 (sales tax applies only to specifically enumerated services)
• § 67-6-102(76) ("retail sale"); § 67-6-102(78)(A), (C), (K) ("sale"); § 67-6-102(68) ("prewritten computer software"); § 67-6-102(89)(A) ("tangible personal property")
• § 67-6-102(18) ("computer software"); § 67-6-102(24) ("delivered electronically")

Case law:

• Creasy Sys. Consultants, Inc. v. Olsen, 716 S.W.2d 35 (Tenn. 1986) (fabrication/customization of software = taxable sale of software)
• Univ. Computing Co. v. Olsen, 677 S.W.2d 445 (Tenn. 1984); Commerce Union Bank v. Tidwell, 538 S.W.2d 405, 408 (Tenn. 1976) (software treated as tangible personal property after the 1977 amendment)
• True object / bundling: Thomas Nelson, Inc. v. Olsen, 723 S.W.2d 621 (Tenn. 1987); AT&T Corp. v. Johnson, 2002 WL 31247083 (Tenn. Ct. App. 2002); Rivergate Toyota, Inc. v. Huddleston, 1998 WL 83720 (Tenn. Ct. App. 1998); Tenn. Dep't of Revenue Ltr. Rul. 14-10 (Oct. 14, 2014)
• Enumerated-services rule: Covington Pike Toyota, Inc. v. Cardwell, 829 S.W.2d 132 (Tenn. 1992); Ryder Truck Rental, Inc. v. Huddleston, 1994 WL 420911 (Tenn. Ct. App. 1994)

Source

• Landing page: https://www.tn.gov/revenue/tax-resources/legal-resources/tax-rulings.html
• Original PDF: https://www.tn.gov/content/dam/tn/revenue/documents/rulings/sales/16-12.pdf

Original ruling text

TENNESSEE DEPARTMENT OF REVENUE
LETTER RULING # 16-12
Letter rulings are binding on the Department only with respect to the individual taxpayer
being addressed in the ruling. This ruling is based on the particular facts and circumstances
presented, and is an interpretation of the law at a specific point in time. The law may have
changed since this ruling was issued, possibly rendering it obsolete. The presentation of this
ruling in a redacted form is provided solely for informational purposes, and is not intended as
a statement of Departmental policy. Taxpayers should consult with a tax professional before
relying on any aspect of this ruling.
SUBJECT
The application of the Tennessee sales and use tax to remotely accessed software.
SCOPE
This letter ruling is an interpretation and application of the tax law as it relates to a specific set of
existing facts furnished to the Department by the taxpayer. The rulings herein are binding upon the
Department, and are applicable only to the individual taxpayer being addressed.
This letter ruling may be revoked or modified by the Commissioner at any time. Such revocation or
modification shall be effective retroactively unless the following conditions are met, in which case
the revocation shall be prospective only:
(A)

The taxpayer must not have misstated or omitted material facts involved in the
transaction;

(B)

Facts that develop later must not be materially different from the facts upon
which the ruling was based;

(C)

The applicable law must not have been changed or amended;

(D)

The ruling must have been issued originally with respect to a prospective or
proposed transaction; and

(E)

The taxpayer directly involved must have acted in good faith in relying upon the
ruling; and a retroactive revocation of the ruling must inure to the taxpayer’s
detriment.
FACTS

[TAXPAYER], [REDACTED] (the “Taxpayer”) is a [REDACTED] corporation that provides web-based
[REDACTED – DOCUMENT] management and compliance solutions for [REDACTED – CLIENTS] (the
“Clients”). The Taxpayer’s revenue comes from two sources: its [BASIC PRODUCT] and its [ADD-ON
COMPONENT]. Both products are supported and enabled by the Taxpayer’s proprietary software
that is hosted on third-party servers. The Taxpayer does not directly license its proprietary software

to its Clients. The Clients have access to all functionality of [BASIC PRODUCT] and [ADD-ON
COMPONENT] over the Internet from locations throughout the United States, including Tennessee.
[BASIC PRODUCT]
The Taxpayer’s basic product is its [BASIC PRODUCT]. [BASIC PRODUCT] consists of a cloud-based
storage database for its Clients’ [REDACTED – DOCUMENTS] [REDACTED]. Through [BASIC
PRODUCT], Clients have the ability to upload, store, manage, and view digital copies of [REDACTED –
DOCUMENTS], as well as create informational reports from the uploaded [REDACTED – DOCUMENTS].
The Taxpayer trains its Clients to use [BASIC PRODUCT].
To implement [BASIC PRODUCT], the Taxpayer prepares the storage databases to meet each Client’s
1
specific needs. The Taxpayer provides its Clients with digital scanning equipment, allowing the
Clients to create digital copies of [REDACTED – DOCUMENTS] for uploading to [BASIC PRODUCT’S]
database. Taxpayer initially collects and uploads its Clients’ [REDACTED – DOCUMENTS] into the
storage database and converts these digital copies into [REDACTED] through [REDACTED]. The
Taxpayer’s employees input certain critical information into [BASIC PRODUCT] for each uploaded
[REDACTED – DOCUMENT] for use in generating reports and setting automated alerts.
Once the initial upload of all existing [REDACTED – DOCUMENTS] is complete, the Clients have access
to the database with the ability to upload [REDACTED – DOCUMENTS] and input critical information
themselves on an ongoing basis. After implementation, the Taxpayer maintains and updates the
storage databases to ensure continued functionality, provides ongoing technical support, and
consults with the Clients on [REDACTED], such as [REDACTED].
The uploaded [REDACTED – DOCUMENTS] are housed on servers located outside of Tennessee.
Clients access [BASIC PRODUCT’S] storage database remotely through a web-based portal. Access to
[BASIC PRODUCT] allows Clients to view stored [REDACTED – DOCUMENTS], create automated
reports, and schedule alerts. The report feature allows Clients to group [REDACTED – DOCUMENTS]
by categories, such as [REDACTED]. The alert feature allows Clients to schedule automated
notifications of [REDACTED].
The Taxpayer charges a flat fee based on the storage capacity that a Client purchases. If a Client
exceeds the number of files that it is authorized to upload to the [BASIC PRODUCT], the Taxpayer
charges the Client additional fees based on the number of files uploaded.
[ADD-ON COMPONENT]
[ADD-ON COMPONENT] is an optional, add-on component to [BASIC PRODUCT] that provides
additional functionality to Clients, including the ability to track and mark-up [REDACTED
DOCUMENTS] throughout [REDACTED], to review and edit [REDACTED DOCUMENTS] and other
documentation, and to [REDACTED]. It allows a Client’s [REDACTED] to access a [REDACTED
DOCUMENT] [REDACTED]. [ADD-ON COMPONENT] also provides reports that give visibility into
[REDACTED]. [REDACTED].
The Taxpayer charges its Clients a flat fee for [ADD-ON COMPONENT].
1

Ownership of the digital scanning equipment remains with the Taxpayer.

RULING
Are the Taxpayer’s charges for [BASIC PRODUCT] and [ADD-ON COMPONENT] subject to Tennessee
sales and use tax?
Ruling: No, the Taxpayer’s charges for [BASIC PRODUCT] and [ADD-ON COMPONENT] are not
subject to the Tennessee sales and use tax. Although both [BASIC PRODUCT] and [ADD-ON
COMPONENT] involve the use of software, the true object of both products is the provision
of nontaxable data storage services.

ANALYSIS
LEGAL BACKGROUND
2

Under the Retailers’ Sales Tax Act, the retail sale in Tennessee of tangible personal property and
specifically enumerated services are subject to the sales and use tax, unless an exemption applies.
“Retail sale” is defined as “any sale, lease, or rental for any purpose other than for resale, sublease,
3
or subrent.”
TENN. CODE ANN. § 67-6-102(78)(A) (Supp. 2016) defines “sale,” in pertinent part, to mean “any transfer
of title or possession, or both, exchange, barter, lease or rental, conditional or otherwise, in any
manner or by any means whatsoever of tangible personal property for a consideration.” “Tangible
personal property” includes “property that can be seen, weighed, measured, felt, or touched, or that
4
is in any other manner perceptible to the senses.” Tangible personal property also includes
“prewritten computer software,” which is defined in TENN. CODE ANN. § 67-6-102(68) in pertinent part
as “computer software, including prewritten upgrades, that is not designed and developed by the
5
author or other creator to the specifications of a specific purchaser.”
In addition to the transfer of tangible personal property, the term “sale” also includes “the furnishing
6
of any of the things or services” taxable under the Retailers’ Sales Tax Act. One of the “things”
specifically taxable is:

2

Tennessee Retailers’ Sales Tax Act, Ch. 3, §§ 1-18, 1947 Tenn. Pub. Acts Ch. 22, §§ 22-54 (codified as amended at TENN. CODE
ANN. §§ 67-6-101 to -907 (2013 & Supp. 2016)).
3

TENN. CODE ANN. § 67-6-102(76) (Supp. 2016).

4

TENN. CODE ANN. § 67-6-102(89)(A).

5
TENN. CODE ANN. § 67-6-102(68) further provides that “‘[p]rewritten computer software’ or a prewritten portion of the
computer software that is modified or enhanced to any degree, where the modification or enhancement is designed and
developed to the specifications of a specific purchaser, remains prewritten computer software.” Note, however, that “where
there is a reasonable, separately stated charge or an invoice or other statement of the price given to the purchaser for the
modification or enhancement, the modification or enhancement shall not constitute prewritten computer software.” Id.
6

TENN. CODE ANN. § 67-6-102(78)(C).

[t]he retail sale, lease, licensing or use of computer software in this state, including
prewritten and custom computer software . . . regardless of whether the software is
delivered electronically, delivered by use of tangible storage media, loaded or
programmed into a computer, created on the premises of the consumer or
7
otherwise provided.
“Computer software” is “a set of coded instructions designed to cause a computer . . . to perform a
8
task.” Computer software is “delivered electronically” if delivered “by means other than tangible
9
storage media.” The Tennessee Supreme Court has stated that the fabrication of, or customized
modification or enhancement to, computer software is considered a taxable sale of computer
10
software.
Additionally, the term “sale” specifically includes the transfer of computer software, including the
creation of computer software on the premises of the consumer and any programming,
11
transferring, or loading of computer software onto a computer.
In response to advances in technology that allow the remote access and use of software over the
Internet, the Tennessee General Assembly adopted into law 2015 Tenn. Pub. Acts Ch. 514, § 22. This
new law effectively treats all uses of computer software in this state equally, regardless of how a
person accesses the software. It amends TENN. CODE ANN. § 67-6-231(a) to include a new subdivision
(2), which states in pertinent part that
[f]or purposes of subdivision (a)(1), “use of computer software” includes the access
and use of software that remains in the possession of the dealer who provides the
software or in the possession of a third party on behalf of such dealer. If the
customer accesses the software from a location in this state as indicated by the
residential street address or the primary business address of the customer, such
access shall be deemed equivalent to the sale of licensing of the software and
electronic delivery of the software for use in the state.

12

As a result, effective for all billing periods beginning on or after July 1, 2015, the access and use of
computer software in this state, which has generally been subject to tax since 1977,
subject to sales and use tax regardless of a customer’s chosen method of use.

13

remains

7

TENN. CODE ANN. § 67-6-231(a) (2013). The term “sale” specifically includes the transfer of computer software, including the
creation of computer software on the premises of the consumer and any programming, transferring, or loading of computer
software onto a computer. TENN. CODE ANN. § 67-6-102(78)(K).
8

TENN. CODE ANN. § 67-6-102(18).

9

TENN. CODE ANN. § 67-6-102(24).

10

See Creasy Sys. Consultants, Inc. v. Olsen, 716 S.W.2d 35, 36 (Tenn. 1986).

11

TENN. CODE ANN. § 67-6-102(78)(K).

12

2015 Tenn. Pub. Acts Ch. 514, § 22 (codified at TENN. CODE ANN. § 67-6-231(a)(2) (Supp. 2016)).

13

The General Assembly amended the definition of “tangible personal property” in 1977 to specifically include computer
software in response to the Tennessee Supreme Court’s holding to the contrary in Commerce Union Bank, 538 S.W.2d at 408.
1977 Tenn. Pub. Acts Ch. 42 (defining “tangible personal property” to include computer software); see also Univ. Computing Co.

The sales and use tax also applies to retail sales of services specifically enumerated in the Retailers’
14
Sales Tax Act. Notably, the application of the sales tax to retail sales of services in Tennessee
remains unaffected by the enactment of 2015 Tenn. Pub. Acts Ch. 514, § 22. The sales tax remains
15
applicable only to those services specifically enumerated in the Retailers’ Sales Tax Act. As
reassurance of this fact, the General Assembly included language in Section 22 stating that nothing
in the new subdivision (a)(2) of TENN. CODE ANN. § 67-6-231
shall be construed to impose a tax on any services that are not currently subject to
tax under this chapter, such as, but not limited to, information or data processing
services, including the capability of the customer to analyze such information or data
provided by the dealer; payment or transaction processing services; payroll
processing services; billing and collection services; Internet access; the storage of
data, digital codes, or computer software; or the service of converting, managing,
and distributing digital products.

16

Therefore, while the new TENN. CODE ANN. § 67-6-231(a)(2) modernizes taxation on the use of
computer software in this state, it has no effect on the taxation of services.
Additionally, whenever two or more items are sold for a single sales price and at least one of the
items is subject to sales tax, the entire sales price is subject to the sales tax as a bundled
17
transaction. Finally, when a transaction involves taxable and nontaxable components and the
18
19
20
21
22
transaction’s true object or a “crucial,” “essential,” “necessary,” “consequential,” or “integral”

v. Olsen, 677 S.W.2d 445, 447 (Tenn. 1984) (detailing the General Assembly’s actions taken to subject computer software to
sales and use tax).
14

The Retailers’ Sales Tax Act imposes the sales tax only on services specifically enumerated in the Act. See, e.g., TENN. CODE
ANN. § 67-6-205 (2013); Covington Pike Toyota, Inc. v. Cardwell, 829 S.W.2d 132, 135 (Tenn. 1992); Ryder Truck Rental, Inc. v.
Huddleston, No. 91-3382-III, 1994 WL 420911, at *3 (Tenn. Ct. App. Aug. 12, 1994) (sales tax does not apply to all services;
rather, it only applies to retail sales of services specifically enumerated by the statute).
15

The Retailers’ Sales Tax Act imposes the sales tax only on services specifically enumerated in the Act. See, e.g., TENN. CODE
ANN. § 67-6-205 (2013); Covington Pike Toyota, Inc. v. Cardwell, 829 S.W.2d 132, 135 (Tenn. 1992); Ryder Truck Rental, Inc. v.
Huddleston, No. 91-3382-III, 1994 WL 420911, at *3 (Tenn. Ct. App. Aug. 12, 1994) (sales tax does not apply to all services;
rather, it only applies to retail sales of services specifically enumerated by the statute).
16

2015 Tenn. Pub. Acts Ch. 514, § 22 (codified at TENN. CODE ANN. § 67-6-231(a)(2) (Supp. 2016)).

17

See generally Tenn. Dept. of Rev. Ltr. Rul. 14-10 (Oct. 14, 2014) [hereinafter “Ltr. Rul. 14-10”] (discussing Tennessee law
regarding bundling and the “true object” test), available at http://www.tennessee.gov/assets/entities/revenue/attachments/1410.pdf.
18

See, e.g., Thomas Nelson, Inc. v. Olsen, 723 S.W.2d 621, 624 (Tenn. 1987) (holding that a transaction involving the sale of nontaxable intangible advertising concepts was nevertheless subject to sales tax on the entire amount of the transaction because
advertising models, which were tangible personal property, were an “essential,” “crucial,” and “necessary” element of the
transaction).
19
Id.; see also AT&T Corp. v. Johnson, No. M2000-01407-COA-R3-CV, 2002 WL 31247083, at *8 (Tenn. Ct. App. Oct. 8, 2002)
(holding that a transaction involving the sale of engineering services along with separately itemized tangible
telecommunications systems was subject to sales tax on the entire amount of the contract because “equipment, engineering,
and installation combine in this instance to produce BellSouth's desired result: a functioning item of tangible personal

23

element of the transaction is subject tax, the entire transaction is subject to sales tax. Only if the
true object of the transaction is not independently subject to sales tax and the items that would be
subject to sales tax are “merely incidental” to the true object of the transaction will the transaction
24
not be subject to sales tax.
APPLICATION
The Taxpayer’s charges for [BASIC PRODUCT] and [ADD-ON COMPONENT] are not subject to the
Tennessee sales and use tax. The true object of both [BASIC PRODUCT] and [ADD-ON COMPONENT]
is the Taxpayer’s provision of [REDACTED] data storage services.
As part of [BASIC PRODUCT] and [ADD-ON COMPONENT], the Taxpayer provides the Clients with the
ability to upload, store, and manage [REDACTED – DOCUMENTS]. The Taxpayer also performs various
other services along with [BASIC PRODUCT] and [ADD-ON COMPONENT], including uploading the
[REDACTED – DOCUMENTS] and abstracting [REDACTED] in [BASIC PRODUCT], updating the storage
databases, providing technical support, and consulting with the Clients. Clients may view digital
copies of [REDACTED – DOCUMENTS] over the Internet by accessing a web-based portal. The webbased portal also allows the Clients to create reports based on data taken from the [REDACTED –
DOCUMENTS], as well as view such reports and schedule automated alerts as to important
[REDACTED] dates.
With respect to the taxable use of computer software in this state that remains in possession of the
dealer, TENN. CODE ANN. § 67-6-231(a)(2) requires the access and use of the computer software by a
customer within this state. However, TENN. CODE ANN. § 67-6-231(a)(2) clarifies that the application of
the sales and use tax to remotely accessed software does not make otherwise nontaxable services
subject to tax. TENN. CODE ANN. § 67-6-231(a)(2) specifically states that “information or data
processing services” and “the storage of data” remain nontaxable for Tennessee sales and use tax
purposes. Here, the Clients do not have access to the software that enables [BASIC PRODUCT] and
[ADD-ON COMPONENT] to operate, except for access to the web-based portal. Although the web25
based portal constitutes computer software for Tennessee sales and use tax purposes, and the
Taxpayer’s Clients access the portal from locations within Tennessee, a Client’s use of the portal is
merely incidental to the true object of [BASIC PRODUCT]. Importantly, Clients do not purchase
[BASIC PRODUCT] in order to access the web-based portal. Rather, Clients purchase [BASIC
property assembled on the customer's premises,” and further describing the engineering services as “‘essential’” and
“‘integral’” to the sale of tangible personal property).
20

See supra note 18.

21

See Rivergate Toyota, Inc. v. Huddleston, No. 01A01-9602-CH-00053, 1998 WL 83720, at *4 (Tenn. Ct. App. Feb. 27, 1998)
(holding that a transaction involving the commission and distribution of advertising brochures was subject to sales tax on the
“‘entire cost of the transaction’” because, although the transaction involved a number of services, the brochures themselves
“were not inconsequential elements of the transaction but, in fact, were the sole purpose of the contract”).
22

See AT&T Corp. v. Johnson, 2002 WL 31247083, at *8.

23

See generally Ltr. Rul. No. 14-10, supra note 16.

24

See generally id.

25

See TENN. CODE ANN. § 67-6-102(18).

PRODUCT] for data storage services. The web-based portal is merely a tool to view the end result of
the services that the Clients purchase through [BASIC PRODUCT].
[ADD-ON COMPONENT] is an add-on that complements and adds functionality to [BASIC PRODUCT]
and accumulates additional [REDACTED – DOCUMENT] data for use by the Taxpayer’s Clients. [ADDON COMPONENT] is inseparable from [BASIC PRODUCT] and provides no value apart from the
[BASIC PRODUCT]. Although the Taxpayer’s proprietary software enables the Clients to perform
additional tasks, the Clients do not pay additional charges to access or use the software itself.
Instead, the Clients are purchasing enhanced storage services through [ADD-ON COMPONENT],
which allows for centralized [REDACTED – DOCUMENT] review and the creation of additional reports
to track [REDACTED]. The true object of [ADD-ON COMPONENT] is not the Client’s use of the webbased software, but instead the additional data storage functionality.
With respect to the sale of services in Tennessee, only specifically enumerated services are subject
to tax under the Retailers’ Sales Tax Act. The Taxpayer’s data storage services, which are the true
object of [BASIC PRODUCT] and [ADD-ON COMPONENT], are not specifically enumerated under
TENN. CODE ANN. § 67-6-205.
Accordingly, the Taxpayer’s charges for [BASIC PRODUCT] and [ADD-ON COMPONENT] are not
subject to the Tennessee sales and use tax.

Grant Marshall
Assistant General Counsel

APPROVED:

David Gerregano
Commissioner of Revenue

DATE:

December 16, 2016