Are subscription fees for an online freight-posting (advertising) platform and an aggregated freight-rate data service subject to Tennessee sales and use tax?

Plain-English summary

The taxpayer runs a cloud-based platform that freight brokers and carriers use to arrange the transportation of freight. It has two pieces:
- An online posting board (advertising platform): brokers post freight-hauling opportunities and carriers search them. Any actual contact between a broker and a carrier happens off the platform, over the subscribers' own phones or email — the platform has no messaging system.
- An aggregated rate-data service: subscribers voluntarily contribute the rates from their confirmed jobs; the platform anonymizes and synthesizes that data into a prevailing market rate for routes, which subscribers can view.

Subscribers pay a monthly subscription or a one-time access fee and download no software (an optional free mobile app aside). The taxpayer asked whether either piece is subject to Tennessee sales and use tax. The Department ruled no to both.

Tennessee taxes tangible personal property (including prewritten software), custom software, and a closed list of enumerated services. For these fees to be taxable, the offerings would have to be software the customer uses, or a taxable enumerated service (here, a telecommunications service). They are neither.

The posting board is nontaxable advertising — not software, not telecom. Its true purpose is to let subscribers post and view freight opportunities; the software is just the medium. The Department was blunt: "Ad placement is a nontaxable service regardless of the medium." And although Tennessee taxes remotely accessed software (since 2015), the same statute says applying that tax to remote software does not turn an otherwise-nontaxable service into a taxable one. Subscribers aren't buying access to the company's software — they're buying the ability to view and exchange information.

The rate-data service is a nontaxable data processing and information service. Subscribers' primary purpose is the processed rate data, not software use. Telecommunications service expressly excludes data processing and information services when the buyer's primary purpose is the processed data or information, and § 67-6-231(b) states outright that "information or data processing services" and "the storage of data" remain nontaxable. The taxpayer may run software to crunch the numbers, but the subscriber is simply viewing the result.

What this means for you

Online listing, marketplace, and advertising platforms

If your platform's true purpose is to let users post and view information — classified-style listings, a job board, a freight or load board — that's nontaxable advertising or an information service in Tennessee, even though it's delivered as software over the web. "Ad placement is a nontaxable service regardless of the medium." The fact that customers reach it by remote access doesn't convert it into taxable software.

Data, analytics, and benchmarking services

Aggregating customers' data and giving back a processed result (a market rate, a benchmark, an analytic) is a nontaxable data processing and information service when the customer's primary purpose is the processed data, not operating your software. Compare Letter Rulings 22-08 and 21-01, the same conclusion for compliance data-matching and data analytics.

Where the line is (don't assume every "platform" is exempt)

The result turns on the true object. Here subscribers don't operate the software to do their own work — they post or read information, and any deal-making happens off-platform. Contrast Letter Ruling 22-07, where customers used the platform's software as a tool to build and deploy their own advertising, and the charge was taxable remotely accessed software. Selling software the customer operates is taxable; selling access to advertising or information is not.

Accountants and tax professionals

The telecommunications-service definition and its carve-outs are § 67-6-102(96)(A)–(B) (advertising, data processing, and information services excluded; (B)(i) keys data/information services to the buyer's primary purpose); the taxable telecom enumerated service is § 67-6-205(c)(3). The remote-software tax — and its rule that it doesn't tax otherwise-nontaxable services, data/information services, or data storage — is § 67-6-231(b) (effective 2015); the software definition is § 67-6-102(18).

Common questions

Q: I run an online listing or "load board" where users post and search opportunities. Is the subscription taxable in Tennessee?
A: Under this ruling, no. A platform whose true purpose is posting and viewing advertising or information is a nontaxable service — "ad placement is a nontaxable service regardless of the medium" — and remote access to it isn't taxable software use.

Q: We sell access to aggregated market or benchmark data. Is that taxable?
A: No, when the customer's primary purpose is the processed data or information. That's a nontaxable data processing and information service, expressly excluded from taxable telecommunications and from the remote-software tax.

Q: Doesn't taxing "remotely accessed software" sweep in any web platform?
A: No. Tennessee taxes remotely accessed software, but § 67-6-231(b) says that doesn't make otherwise-nontaxable services taxable. If subscribers are buying advertising or information rather than the use of your software, the fee stays nontaxable.

Q: When would a platform like this be taxable?
A: When the true object is software the customer operates as a tool. In Letter Ruling 22-07 customers used the platform to create and deploy their own ads, so the charge was taxable. Here the platform only hosts postings and serves data, so it isn't.

Q: Can I rely on this ruling?
A: Not directly. A Tennessee letter ruling binds the Department only as to the taxpayer and exact facts it addressed and cannot be relied on by anyone else. Confirm your own facts with a tax professional.

Citations and references

Tennessee statutes:
- Tenn. Code Ann. § 67-6-205(c)(3) (furnishing telecommunications service is a taxable enumerated service)
- Tenn. Code Ann. § 67-6-102(96)(A) (definition of "telecommunications service")
- Tenn. Code Ann. § 67-6-102(96)(B) (telecommunications service excludes advertising, directory advertising, ancillary services, data processing, and information services; (B)(i) keys data and information services to the buyer's primary purpose)
- Tenn. Code Ann. § 67-6-231(b) (remotely accessed software is taxable, but this does not make otherwise-nontaxable services taxable; information and data processing services and data storage remain nontaxable; effective 2015)
- Tenn. Code Ann. § 67-6-231(a) (tax on custom and prewritten computer software)
- Tenn. Code Ann. § 67-6-102(18) (definition of computer software)

Related rulings:
- Tenn. Dep't of Revenue Letter Ruling 22-08; Letter Ruling 21-01 (nontaxable data processing and information services)
- Tenn. Dep't of Revenue Letter Ruling 22-07 (contrast: user-operated platform software to build advertising = taxable remotely accessed software)

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/21-08.pdf

Original ruling text

TENNESSEE DEPARTMENT OF REVENUE
LETTER RULING # 21-08
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 an online advertising platform and a data
processing service.
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] (the “Taxpayer”), operates an online cloud-based platform (the “Platform”) for use by
[REDACTED] brokers (the “Brokers”) and [CARRIERS] (the “Carriers”) engaged in the business of
commercial freight transportation (collectively, the “Subscribers”) to arrange for transportation of
freight. The Platform consists of two offerings: (1) [OFFERING 1] and (2) [OFFERING 2] (collectively, the
“Offerings”). The Taxpayer provides access to the Offerings exclusively through the Platform, which

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enables Brokers to post information related to freight hauling opportunities and assists Carriers in
procuring hauling engagements. Subscribers either pay a monthly subscription fee or a one-time
access fee to access the Platform, depending on their desired level of access.
[OFFERING 1]
[OFFERING 1] is utilized by both Brokers and Carriers engaged in the business of commercial freight
transportation. Brokers upload postings to the Platform that provide [INFORMATION]. 1 The Platform
enables Carrier Subscribers seeking hauling opportunities to search Broker postings using various
criteria, [REDACTED]. When a Carrier identifies a posting for a desired job, the Carrier uses the contact
information provided in the posting to contact the Broker. The Carrier uses its own
telecommunications services to confirm the transaction, which occurs outside of the Platform. For
example, postings frequently include a telephone number for the Broker. The Platform does not
provide any sort of messaging system or other means of facilitating communications between Brokers
and Carriers.
Most Subscribers pay a [FEE] for remote access to [OFFERING 1]. Use of the Platform does not require
Subscribers to download any software to their own computers. However, Subscribers may choose to
download a complimentary mobile application to access the web portal on the Subscriber’s mobile
device. The Taxpayer does not charge a fee for providing the mobile application to Subscribers. The
contractual arrangement between the Taxpayer and its Subscribers is described as a “service
agreement,” the terms and conditions of which characterize the agreement as a [REDACTED]
subscription service.
[OFFERING 2]
[OFFERING 2] compiles and synthesizes the aggregate data collected from Subscribers to assist
Brokers and Carriers in determining the fair market value of a particular route or hauling engagement.
Subscribers contribute rate data from confirmed engagements on a voluntary basis by sending the
information to the Taxpayer once a rate agreement is in place. The Platform processes the Subscriber
data based on key market areas and includes only confirmed transactions. The data is anonymized,
weighted, and otherwise protected to ensure that [OFFERING 2] cannot be used to identify any
particular Subscriber that contributed data, or any particular items of rate information. [OFFERING 2]
presents the aggregate data as a prevailing market rate for postings on [OFFERING 1], with options to
view the data organized by temporal market trends.
The [OFFERING 2] data may only be viewed via remote access to the Platform. As with [OFFERING 1],
[OFFERING 2] does not require Subscribers to download any software to their own computers to
remotely access the Platform. Subscribers may either purchase [OFFERING 2] on a subscription basis
or by paying a one-time access fee, depending on the terms of the agreement between the parties.

Uploading of information can be done by the Brokers themselves whereby the Broker goes into the Taxpayer’s website and
manually types the information into [OFFERING 1]. The Taxpayer then posts the information. Larger Broker customers may use
an API integration to take data from their internal systems and feed it into [OFFERING 1].

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RULINGS
1.

Do [OFFERING 1] and [OFFERING 2] constitute telecommunications services such that they are
subject to Tennessee sales and use tax?
Ruling: No. Pursuant to TENN. CODE ANN. § 67-6-102(96)(B) (Supp. 2020), telecommunications
services do not include the type of online advertising platform or the data processing and
information services the Taxpayer provides.

2.

Do [OFFERING 1] and [OFFERING 2] constitute use of computer software such that they are
subject to Tennessee sales and use tax?
Ruling: No. [OFFERING 1] is a nontaxable online advertising platform and [OFFERING 2] is a
nontaxable data processing and information service.
ANALYSIS

Under the Retailers’ Sales Tax Act (the “Act”), 2 retail sales of tangible personal property, which includes
prewritten software, and custom computer software are subject to sales and use tax unless an
exemption applies. Tennessee also imposes sales tax on services; however, the tax only applies to
those services specifically enumerated as taxable. 3 Consequently, for the [OFFERING 1] and
[OFFERING 2] fees to be subject to sales and/or use tax, the Offerings would have to be properly
characterized as tangible personal property, custom computer software, or an enumerated taxable
service.
1. [OFFERING 1]
For the [OFFERING 1] fees to be subject to taxation, [OFFERING 1] would have to be properly
characterized as the furnishing of one of the following: 1) a telecommunications service; or 2) access
and use of computer software by a customer from a location within Tennessee. As discussed below,
[OFFERING 1] is not properly characterized as either.
The Taxpayer provides an online advertising platform for Brokers and Carriers to post and search
freight transportation opportunities. The Taxpayer compiles the advertising data, processes the data
to the extent necessary to make it searchable, and enables Subscribers to view the data using their
own internet service via remote access to the Taxpayer’s online platform. Any direct contact between
Brokers and Carriers regarding a particular posting occurs entirely outside the Taxpayer’s Platform,
using the Subscribers’ own means of communication. Consistent with the facts, the primary purpose
of [OFFERING 1] is to provide the advertising to Subscribers.
Taxable services include the service of “furnishing, for a consideration, of intrastate, interstate or
international telecommunication services.” 4 “Telecommunications service” is defined as “the
Tennessee Retailers’ Sales Tax Act, Ch. 3, §§ 1-18, 1947 Tenn. Pub. Acts Ch. 22, §§ 2254 (codified as amended at TENN. CODE
ANN. §§ 67-6-101 to -907 (2018 & Supp. 2020)).
2

3

Id.

4

TENN. CODE ANN. § 67-6-205(c)(3) (Supp. 2020).

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electronic transmission, conveyance, or routing of voice, data, audio, video, or any other information
or signals to a point, or between or among points.” 5 However, “telecommunications service” does not
include advertising, directory advertising, or ancillary services, such as directory assistance. 6
Additionally, “telecommunications service” does not include data processing and information services
or internet access services. 7 As it is described above, [OFFERING 1] does not come within the definition
of a “telecommunications service” nor is it otherwise included in Tennessee’s enumerated taxable
services. It, therefore, is not a taxable service in Tennessee.
[OFFERING 1] also cannot be properly characterized as taxable remotely accessed software. 8 Under
TENN. CODE ANN. § 67-6-231(b), the access and use of the computer software by a customer from a
location within Tennessee would constitute a taxable use of the software. 9 However, TENN. CODE ANN.
§ 67-6-231(b) clarifies that the application of the sales and use tax to remotely accessed software does
not make otherwise nontaxable services subject to tax. Ad placement is a nontaxable service
regardless of the medium.
Here, as part of [OFFERING 1], the Taxpayer provides Subscribers with web-based access to its
Platform. Although the Platform is electronic and may be accessed from locations within Tennessee,
this access to information does not equate to the taxable use of remotely accessed software. 10
Subscribers do not purchase [OFFERING 1] to gain access to the Taxpayer’s software; rather,
Subscribers to [OFFERING 1] do business with the Taxpayer in order to view and exchange
information. More specifically, Brokers post freight hauling opportunities and Carriers search for
freight hauling opportunities in an effort to procure hauling engagements.
Because the Taxpayer does not sell or license software to its Subscribers in connection with the
[OFFERING 1] offering, nor does it provide a taxable telecommunications service, the monthly
subscription fees for [OFFERING 1] are not subject to Tennessee sales and use tax.
2.

[OFFERING 2]

Similarly, for [OFFERING 2] to be subject to tax, the Offering would have to be properly characterized
as the furnishing of one of the following: 1) a telecommunications service; or 2) access and use of
computer software by a customer from a location within Tennessee. As discussed below, [OFFERING
2] cannot be properly characterized as either.
[OFFERING 2] assists Brokers and Carriers in determining the fair market value of freight hauling for
a particular route by compiling and processing aggregate rate data contributed by Subscribers.
[OFFERING 2] is provided to Subscribers via remote access to the Platform using the Subscriber’s
5

TENN. CODE ANN. § 67-6-102(96)(A).

TENN. CODE ANN. § 67-6-102(96)(B)(iv)-(viii). See also TENN. CODE ANN. § 67-6-102(7)(C) (defining directory assistance as “an
ancillary service of providing telephone number information and address information”).
6

7

TENN. CODE ANN. § 67-6-102(96)(B).

Tennessee began taxing the use of remotely accessed software in 2015. 2015 Tenn. Pub. Acts Ch. 514, § 22 (codified at TENN.
CODE ANN. § 67-6-231(b) (2018)).
8

This statute, TENN. CODE ANN. § 67-6-231(a), imposes tax on both custom and prewritten software; however, prewritten
computer software is included in the definition of tangible personal property while custom computer software is not.
9

10

See TENN. CODE ANN. § 67-6-102(18).

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internet connection. The primary purpose of [OFFERING 2] is to provide the aggregate rate data to
Subscribers. Under TENN. CODE ANN. § 67-6-102(96)(B)(i), data processing and information services are
not considered to be taxable telecommunications services when the “purchaser’s primary purpose for
the underlying transaction is the processed data or information.” [OFFERING 2], therefore, is not a
taxable telecommunications service.
[OFFERING 2], like [OFFERING 1], involves remote access to the Platform from Subscriber locations
within Tennessee. Although a Subscriber is remotely accessing the Taxpayer’s Platform, that access is
for the purpose of viewing processed rate data. The Taxpayer may use software to compile and
synthesize the data, but the Subscriber is merely viewing the resulting data and information. TENN.
CODE ANN. § 67-6-231(b) specifically states that “information or data processing services” and “the
storage of data” remain nontaxable for Tennessee sales and use tax purposes. 11
As the Taxpayer does not sell software to Subscribers or provide a taxable telecommunications service
enabling Subscribers to access its Platform, the monthly subscription fees and one-time access fees
for use of [OFFERING 2] are not subject to Tennessee sales and use tax.

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APPROVED:

David Gerregano
Commissioner of Revenue

DATE:

8/26/2021

TENN. CODE ANN. § 67-6-231(b) (2018).

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