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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If a company has advertising materials printed out of state and ships them to its own Tennessee distribution center before sending them on to retail locations across the country, does it owe Tennessee use tax on all of them, just the ones that end up in Tennessee, or none at all?
Only the materials that end up distributed within Tennessee are taxed. The Department ruled that printed advertising materials manufactured out of state and shipped to the Taxpayer's Tennessee distrib…
For a wireless carrier's points-based loyalty program, does issuing loyalty points reduce the taxable sales price of the monthly service fee, and how is tax calculated when points are redeemed for discounted phones, accessories, or other rewards?
Issuing points doesn't reduce tax, but redeeming them does — and only standalone redemptions for nontaxable items avoid tax entirely. The Department issued five rulings on a wireless carrier's points-…
When a wireless carrier replaces a customer's lost, stolen, or broken phone under a bundled replacement program, does the carrier owe Tennessee sales tax on the replacement phone — and does it matter whether the claim is handled as a warranty repair or as an insurance claim?
It depends on which half of the program covers the claim. The Department ruled that a wireless carrier's Phone Replacement Program is really two different arrangements bundled together: a warranty/ser…
Are surgical bone-graft and bone-void-filler products that get implanted in a patient's body exempt from Tennessee sales tax as prosthetic devices?
Yes — both products are exempt from Tennessee sales and use tax as prosthetic devices. The Department ruled that Product #1, a synthetic bone-graft scaffold placed in gaps between bones to promote fus…
Are remote-desktop and IT-support web services taxable in Tennessee the same way online meeting and training/webinar platforms are?
It splits along a clean line: services that let someone view/control a SINGLE computer remotely aren't taxable, but services that LINK MULTIPLE PEOPLE in an audio/video session ARE. The Department rul…
When a manufacturer expands a factory, which of the new machinery, structural components, electrical systems, and pollution-control equipment qualify for Tennessee's industrial machinery sales tax exemption -- and which count as part of the building instead?
Mostly exempt, but the BUILDING itself is taxable. The Department ruled that nearly everything a manufacturer bought for a plant expansion — machinery, electrical distribution equipment, transport equ…
Which equipment a produce-packing facility buys -- wash lines, chillers, sanitizers, ice machines, racking, office equipment -- qualifies for Tennessee's qualified-farmer sales tax exemption?
It splits by whether the equipment is part of actually PRODUCING the agricultural product, or just handling it afterward. The Department ruled that a produce packer/grower's Stainless Steel Wash Lines…
Is a computer software maintenance contract sold to a Tennessee customer taxable, and does it matter where the vendor and customer are located or where repairs are performed?
Yes, sourced by computer location, not contract-signing location. The Department ruled that whether a computer software maintenance contract is subject to Tennessee sales tax depends entirely on WHERE…
Do FDA-licensed blood-testing reagents used by hospitals qualify for Tennessee's prescription drug sales tax exemption when ordered by a physician?
No, they're taxable. The Department ruled that FDA-licensed in-vitro diagnostic reagents — used to test blood compatibility before transfusions — do NOT qualify for Tennessee's prescription drug exemp…
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…
Do reusable, part-specific protective containers that move components from storage to a factory's assembly line qualify for Tennessee's industrial machinery sales tax exemption?
Yes. The Department ruled that a manufacturer's reusable, part-specific protective containers — used to move components from a parts-storage area to the production and assembly line, then returned to …
Does Tennessee's sales tax exemption for energy fuels used directly in manufacturing apply to natural gas burned in a factory's ovens — and does it matter whether each oven is separately metered?
Yes, but only for the metered ovens. The Department ruled that natural gas a food manufacturer burns in its direct-fired processing ovens qualifies for Tennessee's FULL energy-fuel exemption (Tenn. Co…
Are fees a company charges to manage clients' cooperative advertising funds — tracking balances, processing reimbursement claims, and reporting — subject to Tennessee sales tax?
No. The Department ruled that fees for managing a client's cooperative advertising fund — maintaining the Co-op database and balances, fielding customer calls about fund usage and claims, processing a…
Is a flat subscription fee for online access to reference materials, library databases, and simulation programs subject to Tennessee sales tax — and did the answer change when Tennessee started taxing 'specified digital products' in 2009?
It depends on the period. The Department ruled that a flat subscription fee giving customers online access to reference databases, dictionaries/encyclopedias, library content, and computer simulation …
Are charges from a third-party contractor for fabricating, installing, reworking, or repairing parts and inventory during a Tennessee manufacturer's production process subject to sales and use tax?
Mostly exempt, with one exception. The Department ruled that a manufacturer's third-party contractor charges for (1) fabricating parts of the product, (2) installing parts on the product, and (3) rewo…
Does Tennessee sales tax apply to a single-use vein-ablation catheter and its bundled treatment supply packs sold to treat venous reflux disease (varicose veins)?
Mostly yes, taxable. The Department ruled that the single-use catheter — inserted into a diseased vein to seal it shut with heat, then removed during the same procedure — is subject to Tennessee sales…
Is the fee a Tennessee car dealer charges to ship a vehicle between its own stores — so a customer can see and test-drive it before buying — subject to sales tax?
No. The Department ruled that a fee a Tennessee car dealer charges to ship a vehicle from one of its business locations to another — so that a prospective customer can see and test-drive it before dec…
When a customer buys several vehicles from a Tennessee car dealer and trades in several others in one transaction, is the sales tax figured on the total purchase price minus the total value of all the trade-ins?
Yes. The Department ruled that when a customer buys more than one vehicle from a Tennessee car dealer in a single transaction, the taxable sales price is figured by ADDING UP the price of all the vehi…
Is a call-tracking service — toll-free numbers that route and record sales calls so a retailer can measure its advertising and capture customer data — taxable in Tennessee as a telecommunications service?
No. The Department ruled that 'Call Tracking Services' are NOT subject to Tennessee sales and use tax. The provider sells retailers a package built around custom toll-free 'vanity' numbers (supplied t…
Which items and services bought to expand a Tennessee manufacturing plant qualify for the industrial-machinery sales-and-use-tax exemption — and can the manufacturer's contractors buy them tax-free?
Most of it is exempt, but not all. The Department (in an advisory revenue ruling) applied Tennessee's INDUSTRIAL MACHINERY exemption (Tenn. Code Ann. § 67-6-206(a)) to a long list of items a manufactu…
In a points-based rewards program, is the 'per point' fee the operator charges its client companies taxable, and does Tennessee sales tax apply to the reward merchandise shipped to participants — and on what amount?
It splits two ways: the program fee is NOT taxable, but the reward merchandise IS. The Department ruled on a points-based incentive/rewards program run for client companies — participants earn 'Points…
Is renting out a banquet/meeting room (not a hotel room) for weddings, business meetings, or temporary merchandise sales subject to Tennessee sales tax?
It depends entirely on WHY the room is rented, not who rents it. Renting the meeting/banquet room for a meeting, seminar, wedding reception, or similar event is NOT subject to Tennessee sales tax, reg…
If a company sells compressed air (not the compressor itself) to a manufacturer under a long-term service contract, does the sale qualify for Tennessee's industrial machinery sales tax exemption?
No. Selling compressed air under a "compressed air as a service" contract does NOT qualify for Tennessee's industrial machinery exemption, for two independent reasons: (1) the customer never buys, lea…
Is a document-management/e-discovery service -- collecting, processing, hosting, and storing client data, plus consulting and file delivery -- taxable in Tennessee, and does it matter whether the finished files are delivered electronically or on a hard drive?
Mostly not taxable, with one key exception. The provider's data collection ("Data Service"), hosting, storage, and hourly project-management consulting are all NOT subject to Tennessee sales and use t…
Is firewood sold over the counter at a retail store exempt from Tennessee sales tax as residential heating fuel?
No. Even though Tennessee exempts "gas, electricity, fuel oil, coal and other energy fuels sold directly to the consumer for residential use" under Tenn. Code Ann. § 67-6-334(a), that exemption specif…
When an event-staging company both rents out its own tables/chairs AND handles a customer's own equipment for a one-day event, which of those charges owe Tennessee sales tax?
It depends on WHOSE property is involved. When the company rents its OWN tables, chairs, or other equipment to a customer, ALL of the associated transportation and handling charges are taxable as part…
Is an SEC EDGAR filing service -- converting company financials into SEC format and transmitting them electronically -- a taxable telecommunications service in Tennessee, and does it matter that the provider's servers are out of state?
The EDGAR filing service IS a taxable "telecommunications service" under Tennessee law (Tenn. Code Ann. § 67-6-205(c)(3)), because converting customer files into SEC-compliant format and electronicall…
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…
If a Tennessee equipment-rental company charges for cartage, assembly, and disassembly along with the lease, are those service charges taxed along with the equipment rental, even if billed separately?
Yes to both. The equipment lease itself is subject to Tennessee sales and use tax under Tenn. Code Ann. § 67-6-204 because it's a rental of tangible personal property that's part of the company's regu…
Is calibrating a fuel meter a taxable repair service in Tennessee, and does it matter whether the meter is permanently attached to real property?
It depends on whether the fuel meter is affixed to real property. Calibrating a fuel meter is a taxable REPAIR SERVICE under Tenn. Code Ann. § 67-6-205(c)(4) when the meter is NOT affixed to realty, b…
Is a home-use physical therapy machine exempt from Tennessee sales tax when a doctor prescribes it, and does it matter whether insurance, Medicaid, or the government pays for it?
Yes, the machine is exempt from Tennessee sales and use tax as durable medical equipment when it is sold for HOME USE pursuant to a physician's prescription -- and that exemption does NOT depend on wh…
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…
If a Tennessee municipality hires a construction management firm on an AIA B801 agency-CM contract, does that contract cause the municipality's own construction purchases to become taxable, or do they stay exempt as government purchases?
No. A Tennessee municipality's construction-related purchases stay exempt from sales and use tax under Tenn. Code Ann. § 67-6-329(a)(4) even when the municipality hires a construction management firm …
Is a prescription dermal filler injected by a doctor to treat facial wrinkles exempt from Tennessee sales and use tax, and does the seller need exemption certificates from the buying physicians?
Yes. The dermal filler is exempt from Tennessee sales and use tax as a prescription drug for human use under Tenn. Code Ann. § 67-6-320(a), because it meets the statutory definition of a 'drug' (it's …
Does a Tennessee country club have to charge sales tax on the separate fees it bills members for locker rentals and golf bag storage?
Yes. Both the locker rental fees and the golf bag storage fees a Tennessee country club charges its members are subject to Tennessee sales tax, because the club is a "membership sports and recreation …
Are an online vendor-referral website's charges -- for sales-lead referrals, used-product advertising space, phone-call tracking reports, and hosted vendor websites -- subject to Tennessee sales and use tax?
None of it is taxable. An online business runs a website where customers find vendors and submit purchase requests; it charges vendors for (1) new-product sales-lead referrals, (2) space to advertise …
For an online database and a long menu of related Internet services accessed remotely over the web, which charges are subject to Tennessee sales and use tax?
Most of it is NOT taxable -- only the items the customer actually receives as tangible personal property are. The company sells an online database (with software tools, reports, and photos) plus a lon…
When a company expands and remodels its existing Tennessee headquarters, what counts toward the minimum investment threshold for the sales/use tax credit, when does the investment period start and end, and do aesthetic-only renovations like paint and carpet qualify?
A 7-part ruling clarifying the mechanics of Tennessee's qualified headquarters facility sales/use tax credit (Tenn. Code Ann. Section 67-6-224) as applied to an existing-headquarters expansion and rem…
Is the sale of customized shop drawings used by contractors to fabricate items taxable in Tennessee, and does it matter whether they're delivered as a printed booklet versus purely electronically?
It depends entirely on the delivery medium. The Department ruled that the Taxpayer's customized shop drawings are subject to Tennessee sales and use tax when transferred to the customer in a TANGIBLE …
When a custom millwork company sells and installs cabinetry and similar products, is the sale and installation taxable -- and does it matter whether the finished product stays movable personal property or becomes permanently attached to the building?
It depends entirely on whether the finished product stays personal property or becomes part of the building -- with a separate rule for lump-sum jobs mixing both. The Department ruled: (1) when the Ta…
When a company operating a Tennessee qualified data center expands its facilities with a new round of investment, does it qualify again for the headquarters-facility sales/use tax credit, and can it keep using its existing industrial machinery exemption certificate for the expansion?
Yes to all four questions, assuming statutory requirements are met. The Department ruled that the Taxpayer's planned facility expansion will be treated as a new 'qualified headquarters facility' under…
Are external fixators used to stabilize open bone fractures exempt from Tennessee sales tax, and does a patient prescription have to be on file for the exemption to apply?
Yes, external fixators sold individually are exempt from Tennessee sales and use tax -- through 2007 as orthotics, and from January 1, 2008 onward as prosthetic devices, PROVIDED that as of that 2008 …
Is a wearable continuous glucose monitoring system for diabetics exempt from Tennessee sales tax as a prosthetic device or durable medical equipment?
No, the glucose monitoring system is fully taxable under both the old and new versions of Tennessee's medical-device exemption. It's NOT a "prosthetic" under either the pre-2008 or post-2008 definitio…
Does an Internet service provider owe Tennessee sales tax on the DSL lines, circuits, and other telecom services it buys wholesale to deliver Internet access to its customers?
No. An Internet service provider's purchases of telecommunications services (DSL, T1/DS3 lines, circuits) used to provide Internet access to its customers are NOT subject to Tennessee sales and use ta…
Are Kirschner Wires (K-Wires), temporary bone-fracture implants, exempt from Tennessee sales tax, and did a 2008 law change affect the answer?
Yes, K-Wires sold individually are exempt from Tennessee sales and use tax -- but the LEGAL BASIS for the exemption changed with a January 1, 2008 statutory amendment, and the exemption is now conditi…
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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.