Charges for online banner advertising and access to online database for shopping purposes are not taxable because the transactions do not involve a transfer of tangible personal property or taxable services.
The following services by an online marketing agency located outside the state of Tennessee are not subject to Tennessee state sales tax:
Under the Retailers’ Sales Tax Act, (TN CODE ANN. §§ 67-6-101 to -907), if no sale or transfer of tangible personal property or computer software occurs the service is not subject to sales tax unless it is part of the sale of a taxable good or service.
The following services by an application service provider (ASP) are not subject to Tennessee state tax:
“No taxable sale or use of tangible personal property or computer software occurs in Tennessee when the Customer accesses the online database applications via the Internet, because the Taxpayer does not transfer title, possession, or control of the applications to the Customer at any time. Furthermore, the applications are never delivered to, transferred to, or installed on, the customer’s computers.” “Data processing and information services ‘that allow data to be generated, acquired, stored, processed’”, are excluded from the definition of telecommunication services and, therefore, are not taxable.
Tennessee Department of Revenue Letter Ruling No. 13-03 ¶401-517
RULING DATE: Jan 13, 2013
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