Are remote-desktop and IT-support web services taxable in Tennessee the same way online meeting and training/webinar platforms are?

Plain-English summary

A company offers four different remote-access "Web Services" through its own proprietary system (software and servers it controls, none located in Tennessee). To use any of them, customers download a small, free Java "applet" — code with no function on its own, useful only to securely connect to the Taxpayer's system. The company isn't an internet provider and doesn't sell internet access; customers get their own connection separately. The four services:

• Web Service #1 — lets a customer's own tech-support staff remotely access an employee's or customer's computer to fix problems.
• Web Service #2 — lets a subscriber remotely access their own computer (e.g., office computer from home).
• Web Service #3 — lets subscribers hold online meetings/webinars, sharing a screen with up to a set number of participants, with optional recording.
• Web Service #4 — lets subscribers run synchronous online training sessions, distribute course materials, and give tests, building on the same technology as #3.

The Department's answer: Web Services #1 and #2 are not taxable; Web Services #3 and #4 are taxable.

Why #1 and #2 aren't taxable. Three possible tax hooks, all ruled out:

1. Software transfer. Downloading the applet is technically a transfer of "prewritten computer software" (taxable TPP), but Tennessee courts look to the "true object" of a transaction (Qualcomm Inc. v. Chumley), not every incidental transfer within it. Customers buy Web Service #1 to get remote IT support, and Web Service #2 to access their own computer remotely — not to obtain the applet itself, which is useless on its own and irrelevant without the underlying service.
2. Telecommunications service. A taxable telecom service requires transmitting data "to a point, or between or among points" (§ 67-6-102(92)(A)). With #1 and #2, all the data stays on a single computer (the employee's or the subscriber's own machine) the entire time — the service just lets a remote person view/control that one computer, "akin to attaching a second monitor to the subscriber's hard drive." There's no point-to-point data conveyance, so it's not telecom.
3. Ancillary service. "Ancillary services" cover things incidental to telecom service, including "conference bridging" that links multiple participants in an audio/video call (§ 67-6-102(7), (7)(A)). Neither #1 nor #2 involves a conference call or multiple linked participants — it's one person viewing/controlling one computer.

With none of those three hooks applying, and nothing taxable to bundle a nontaxable piece into, Web Services #1 and #2 are simply not taxable.

Why #3 and #4 are taxable. Both services link multiple participants together in a combined audio-and-visual session — meetings, webinars, or training sessions where a presenter's screen and voice reach many attendees at once. That's exactly what Tennessee's "conference bridging service" definition covers: a service that "links two or more participants of an audio or video conference call" (§ 67-6-102(7)(A)). Conference bridging services are a taxable category of "ancillary services" (§ 67-6-205(c)(9)). It doesn't matter that the company itself doesn't provide the underlying internet connection — the bridging/linking function itself is what's taxed.

What this means for you

SaaS / remote-access software providers

If your service connects ONE user to ONE computer or system (remote support, remote desktop, single-device monitoring), and any software you distribute is incidental and non-functional on its own, you have a real argument that the service is not taxable in Tennessee under the true-object and single-point-of-data tests applied here.

Web conferencing, webinar, and online training platforms

If your service links multiple people together in a real-time audio or video session, expect Tennessee to tax it as a "conference bridging" ancillary service — regardless of whether you also provide the underlying internet access, and regardless of whether the session is a meeting, webinar, or training class.

Accountants and tax professionals

This ruling draws a clean, reusable line for cloud/SaaS analysis: single-point remote access/control = not taxable (true-object test defeats the incidental software transfer; no point-to-point telecom; no conference bridging); multi-participant real-time audio/video = taxable as a conference-bridging ancillary service under § 67-6-205(c)(9)/§ 67-6-102(7)(A). Note this is a Revenue Ruling — advisory only, not binding on the Department for any taxpayer.

Common questions

Q: Is a remote IT-support or remote-desktop service taxable in Tennessee?
A: Not under these facts. The Department found no taxable software sale (true-object test), no taxable telecom service (data stays at one point), and no ancillary/conference-bridging service (no multi-participant call).

Q: Why does downloading a free applet not make the service taxable?
A: Because the applet isn't the "true object" of the purchase — customers buy the underlying remote-access functionality, not the applet itself, which has no use on its own (Qualcomm Inc. v. Chumley).

Q: Why are online meeting and webinar platforms taxable when remote-desktop tools aren't?
A: Because they link multiple participants together in a real-time audio/video session, which Tennessee specifically taxes as a "conference bridging service" (§ 67-6-102(7)(A); § 67-6-205(c)(9)).

Q: Does it matter that the company doesn't provide the actual internet connection used to access the service?
A: No — the Department said that's immaterial to whether the conference-bridging function itself is taxable.

Q: Can I rely on this ruling?
A: No. It's a Revenue Ruling, which is advisory only and not binding on the Department for any taxpayer, including the one who requested it.

Citations and references

Tennessee statutes (Tenn. Code Ann.; 2011 codification):

• §§ 67-6-101 to -907 (Retailers' Sales Tax Act)
• § 67-6-102(80)(A) (definition of "sale"); § 67-6-102(91)(A) (tangible personal property includes prewritten computer software); § 67-6-102(80)(C) (sale includes furnishing of taxable things/services); § 67-6-231(a) (retail sale of computer software taxable); § 67-6-102(20) (computer software definition); § 67-6-102(70) (prewritten computer software definition)
• § 67-6-205(c)(3) (telecommunications services taxable); § 67-6-102(92)(A) (definition of "telecommunications service" — transmission/conveyance/routing to a point or between points)
• § 67-6-205(c)(9) (ancillary services taxable); § 67-6-102(7) (definition of "ancillary services"); § 67-6-102(7)(A) (definition of "conference bridging service" — links two or more participants of an audio or video conference call; excludes the telecom service used to reach the bridge)
• § 67-6-102(81)(A) (sales price/bundling rule, general framework)

Cases cited by the ruling:

• 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. Aug. 12, 1994) (only enumerated services taxable)
• Crescent Amusement Co. v. Carson, 213 S.W.2d 27 (Tenn. 1948); Commerce Union Bank v. Tidwell, 538 S.W.2d 405 (Tenn. 1976) (intangible property on tangible media)
• Qualcomm Inc. v. Chumley, 2007 WL 2827513 (Tenn. Ct. App. Sept. 26, 2007) (the "true object"/"primary purpose" test for mixed software-and-service transactions)
• TomKats Catering, Inc. v. Johnson, 2001 WL 1090516 (Tenn. Ct. App. Sept. 19, 2001) (bundled taxable + nontaxable charges, general framework)

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/12-25.pdf

Original ruling text

TENNESSEE DEPARTMENT OF REVENUE
REVENUE RULING #12-25
WARNING
Revenue rulings are not binding on the Department. 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 various Internet-based services.
SCOPE
Revenue Rulings are statements regarding the substantive application of law and statements of
procedure that affect the rights and duties of taxpayers and other members of the public. Revenue
Rulings are advisory in nature and are not binding on the Department.
FACTS
The Taxpayer provides the various Internet-based services via remote computer access described
in detail below (the “Web Services”). The Web Services are purchased or used by subscribers,
participants invited by subscribers, and trial users. The Taxpayer does not sell, transfer, or
license software or tangible personal property to its customers, although the customer must
download the applet described below to access the Web Services. There is no charge for
downloading the applet.
Customers may not access the Taxpayer’s software code or manipulate it in any way. Instead, the
Taxpayer utilizes its proprietary system (comprised of hardware and software) to provide the
Web Services and charges for these services on a per-user subscription basis. The Taxpayer’s
proprietary software is maintained on the Taxpayer’s own equipment; the software and
equipment remain at all times under the control of the Taxpayer. The Taxpayer’s Web Services
infrastructure includes multiple data centers [REDACTED]; no data centers are located in
Tennessee.
Customers access the Web Services via the Taxpayer’s websites by downloading an applet.
These users are unable to alter or manipulate the applet at any time. Unless connected to the Web
Services, the applet has no functionality; the applet is of no use to a person who does not
subscribe to the Taxpayer’s services. There is no charge for the download or use of the applet.
The applet is a piece of Java script or code that is necessary for access to the Web Services; the
main purpose of the applet is to enable a secure connection over the Internet. More specifically,
the applet works with the Taxpayer’s proprietary system to navigate through computer firewalls
and facilitate secure connections between the user and the user’s computer, when the user is at a

remote location. Once a connection is established, an encrypted data stream is passed through
communication servers located in the Taxpayer’s data centers. There are two points of
encryption: 1) link security, which enables each endpoint to have a secure connection to the data
center; and 2) end-to-end encryption, which allows encryption of the data stream between the
endpoints.
The Taxpayer generally makes a [REDACTED] free trial of its Web Services available to
potential customers. The free trial provides the same functionality as the paid subscription, and
includes the applet. If the customer decides to cancel the trial without purchasing a subscription,
the non-functional, unusable applet remains on the customer’s computer. There is no charge for
downloading the applet as part of the free trial, and the customer is not required to remove the
applet at any time. To subscribe to the Web Services, a customer creates an account either by
entering into a contract with the Taxpayer or by registering online and creating a username and
password.
The Taxpayer is not an Internet service provider, nor does it provide or charge for
telecommunications services to its customers. In order to utilize the Taxpayer’s services,
customers must independently obtain an Internet connection and/or telecommunications services
from a third party.
The following is a description of each type of Web Service provided by the Taxpayer.
Web Service #1
Web Service #1 allows a customer’s designated customer service technicians and/or internal help
desk to remotely assist and provide support to the customer’s employees and/or own customers.
This service provides subscribers with a functionality that allows the subscriber’s own
technicians to gain remote access to the employee or customer’s computer in order to fix
problems.
Customers subscribing to Web Service #1 download the applet. Web Service #1 works by
allowing a customer’s employee to access an Internet support portal and type in a URL to allow
access to the employee’s computer. The support request is then queued for the customer’s next
available technical support representative. With the employee’s permission, the representative
accesses the employee’s computer through the Internet. The representative then begins a remote
support session with the employee.
Alternatively, the employee can move directly from a phone call to a remote support session. To
do so, the representative provides the employee with the web portal URL and a unique
connection code to begin the remote support session. By utilizing this web-based service, the
representative can immediately diagnose, troubleshoot, and resolve issues remotely. The
Taxpayer charges its subscribers for this service on a per user basis. Subscribers may also
purchase one or more “day passes” that allow usage over a 24-hour period.
Subscribers to Web Service #1 may also purchase a complimentary service that allows the
subscriber to monitor its information technology networks, devices, and servers, maintain
inventory management of such items, and perform associated analysis and reporting.

Web Service #2
Web Service #2 deploys a technology similar to that of Web Service #1, except that it allows a
subscriber to access his or her own computer remotely. Customers subscribing to Web Service

2 download the applet. Web Service #2 allows a user to access his or her own computer

remotely from any other Internet-connected computer through a private, secure connection. To
facilitate this ability, the service navigates through the user’s firewalls to enable communication
without compromising security. This service is predominantly used for home and office
applications. It is sold primarily to individuals who wish to access an office computer from
home, and vice-versa.
Web Service #2 encompasses four components: a remote (or client) computer, communication
servers/brokers, firewalls, and permitted host computers. A subscriber can register and access up
to a set number of host computers, depending upon the level of service purchased.
When a user attempts to access a host computer remotely from a client computer, the user visits
the service website, enters a username and password, and clicks on a “connect” button for the
desired host computer. The user is then authenticated through the web-based broker operated
separately from the user’s computer. This broker, located at Taxpayer’s server site and part of
the Taxpayer’s proprietary system, acts as an authorizer/traffic controller and grants permission
for the users to access the service/host computers. For network address and firewall
independence, the remote user initiates all communication with the broker via a URL. All
transmissions are encrypted and only those subscriber computers previously configured will be
displayed and accessed remotely.
Web Service #3
Web Service #3 utilizes a similar technical infrastructure to allow multiple users to view a
presenter’s computer screen. Customers subscribing to Web Service #3 download the applet,
which runs on the customer’s computer to initiate a secure transmission control protocol
[hereinafter “TCP”] connection using ports open in most firewalls. The applet is used to create
the quickest, most secure compatibility with existing network security. Once a connection is
made, the service is provided by the Taxpayer through one of its data centers, none of which are
located in Tennessee.
Web Service #3 enables subscribers to meet with others and present information securely online.
Subscribers are able to conduct an unlimited number of Internet meetings for a flat monthly or
annual fee. Up to [NUMBER of] meeting participants may attend and view the meeting materials
displayed during the meeting. This service also enables subscribers to securely display
information online to a broader audience. Subscribers may hold unlimited online seminars
(“webinars”) on the Internet with up to [NUMBER of] attendees. There is no charge to the
meeting or webinar participants, who do not have to be registered users. The meeting or webinar
organizer sends participants a URL, which enables the participants to download an applet to
support the connection that allows them to view the organizer’s computer.

The online presentation is viewed by the participant from the participant’s computer. The
content, and the application used to display the content, remain on the organizer’s computer at all
times. The Taxpayer does not provide or transmit any application software used by the organizer.
This service has a recording feature by which the organizer has sole authority to initiate
recordings. The recording is saved to the organizer’s computer desktop; the Taxpayer does not
have access to recordings. The organizer can post the recording to a web server for viewing by
participants.
Web Service #4
Web Service #4 enables subscribers to conduct online training sessions with their attendees. This
service allows synchronous online training sessions, distribution of course materials, testing and
assessments, publication of upcoming courses to a catalogue, and maintenance of a reusable
content library. Customers subscribing to Web Service #4 download the applet.
All content is generated by the subscriber to the service. The subscriber may upload its materials
to the Taxpayer’s server; in that case, the data is maintained in the Taxpayer’s data centers. The
trainee will download the subscriber’s training content for use during the session. Alternatively,
the subscriber can maintain the content elsewhere and distribute a URL to access the materials.
Subscribers to this service may also access and use the Web Service #3 online meeting
application to conduct online meetings. The primary difference between Web Service #3 and
Web Service #4 is that Web Service #3 allows the subscriber to hold a webinar with up to
[NUMBER of] participants, while Web Service #4 allows the subscriber to hold a training
session with up to [NUMBER of] participants. Additionally, Web Service #4 allows the
subscriber to make training materials and tests available online in advance of the training
session.
RULINGS
Are the Taxpayer’s Web Services subject to the Tennessee sales and use tax?
Rulings:

1. Web Service #1. No. The provision of Web Service #1 is not subject to the Tennessee
   sales and use tax.
2. Web Service #2. No. The provision of Web Service #2 is not subject to the Tennessee
   sales and use tax.
3. Web Service #3. Yes. The provision of Web Service #3 is subject to the Tennessee
   sales and use tax.
4. Web Service #4. Yes. The provision of Web Service #4 is subject to the Tennessee
   sales and use tax.

ANALYSIS
Under the Retailers’ Sales Tax Act, TENN. CODE ANN. §§ 67-6-101 to -907 (2011), the retail sale
in Tennessee of tangible personal property and specifically enumerated items and services is
subject to the sales and use tax, unless otherwise exempted.
TENN. CODE ANN. § 67-6-102(80)(A) (2011) defines the term “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, as defined in the Retailers’ Sales Tax Act, means “personal property
that can be seen, weighed, measured, felt, or touched, or that is in any other manner perceptible
to the senses.” TENN. CODE ANN. § 67-6-102(91)(A). Tangible personal property also includes
“prewritten computer software.”1 TENN. CODE ANN. § 67-6-102(91)(A). Conversely, the sale or
use of intangible intellectual property is generally not subject to Tennessee sales and use tax.2
In addition to the transfer of tangible personal property, the term “sale” also includes “the
furnishing of any of the things or services taxable” under the Retailers’ Sales Tax Act. See TENN.
CODE ANN. § 67-6-102(80)(C). One of the “things” the Retailers’ Sales Tax Act specifically
imposes sales and use taxation on is
[t]he retail sale, lease, licensing or use of computer software in this state,
including prewritten and custom computer software3 . . . 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 otherwise provided.
TENN. CODE ANN. § 67-6-231(a) (2011) (footnote added). Computer software is defined as “a set
of coded instructions designed to cause a computer . . . to perform a task.” TENN. CODE ANN.
§ 67-6-102(20).

1

TENN. CODE ANN. § 67-6-102(70) defines the term “prewritten computer software” in pertinent part as “computer
software, including prewritten upgrades, that is not designed and developed by the author or other creator to the
specifications of a specific purchaser.” TENN. CODE ANN. § 67-6-102(70) 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.” TENN. CODE ANN. § 67-6-102(70).
2

If intangible intellectual property is stored on tangible storage media that is sold or used in Tennessee, however,
then it does become subject to the sales and use tax, see Crescent Amusement Co. v. Carson, 213 S.W.2d 27, 29
(Tenn. 1948) (holding that rental films are tangible personal property), unless the tangible method of data transfer is
“merely incidental” to the underlying transaction. Commerce Union Bank v. Tidwell, 538 S.W.2d 405, 407 (Tenn.
1976).
3

As explained above, “prewritten computer software” is also subject to sales and use taxation as tangible personal
property. See TENN. CODE ANN. § 67-6-102(91)(A).

Services are also taxable under the Retailers’ Sales Tax Act. See TENN. CODE ANN. § 67-6102(80)(C). But the sales tax does not apply to all services; rather, it only applies to retail sales
of those services specifically enumerated by the statute. See Covington Pike Toyota, Inc. v.
Cardwell, 829 S.W.2d 132, 135 (Tenn. 1992); Ryder Truck Rental, Inc. v. Huddleston, No. 913382-III, 1994 WL 420911, at 3 (Tenn. Ct. App. Aug. 12, 1994). One of the services subject to
the sales and use tax is the furnishing of “intrastate, interstate or international telecommunication
services” for consideration, pursuant to TENN. CODE ANN. § 67-6-205(c)(3) (2011). The term
“telecommunications service” is defined under TENN. CODE ANN. § 67-6-102(92)(A) as the
“electronic transmission, conveyance, or routing of voice, data, audio, video, or any other
information or signals to a point, or between or among points.” TENN. CODE ANN. § 67-6102(92)(B)(i) excludes from the definition of “telecommunications service,” however, “[d]ata
processing and information services that allow data to be generated, acquired, stored, processed,
or retrieved and delivered by electronic transmission to a purchaser, where such purchaser’s
primary purpose for the underlying transaction is the processed data or information.”
Another service subject to the sales and use tax is “[t]he furnishing, for a consideration, of
ancillary services.” TENN. CODE ANN. § 67-6-205(c)(9). Ancillary services are “services that are
associated with, or incidental to, the provision of telecommunication services.” TENN. CODE
ANN. § 67-6-102(7). One particular form of ancillary service is a “conference bridging service,”
which “links two (2) or more participants of an audio or video conference call.” TENN. CODE
ANN. § 67-6-102(7)(A). Conference bridging services do not, however, include “the
telecommunications services used to reach the conference bridge.” 4 Id.
Finally, a nontaxable service or item may be subject to taxation when charges for the nontaxable
service or item are included in the sales price of a taxable good or service. Specifically, TENN.
CODE ANN. § 67-6-102(81)(A) provides that the sales price of a good or service equals the “total
amount of consideration . . . for which personal property or services are sold,” with no deduction
for the seller’s costs or charges by the seller for services necessary to complete the sale. Thus, if
taxable goods or services and nontaxable goods or services are sold together for a single charge,
the entire charge is generally subject to taxation. See Tomkats Catering, Inc. v. Johnson, No.
M2000-03107-COA-R3-CV, 2001 WL 1090516, at 2 (Tenn. Ct. App. Sept. 19, 2001).
Accordingly, the Web Services described herein will be subject to the Tennessee sales and use
tax if the charges relate to the 1) the retail sale or use of computer software in Tennessee,
whether prewritten or custom; 2) the furnishing at retail of a telecommunications service; 3) the
furnishing at retail of an ancillary service; and/or 4) the furnishing of an otherwise nontaxable
good or service that is bundled with a taxable good or service.
WEB SERVICES #1 AND 2
The Taxpayer’s Web Services #1 and 2 are not subject to the Tennessee sales and use tax.

4

The Taxpayer’s services cannot be characterized as any other type of service that is taxable under the Retailers’
Sales Tax Act. This revenue ruling therefore does not discuss any specifically enumerated services other than
telecommunications services and ancillary services.

First, a transfer or use of computer software occurs in Tennessee when the Taxpayer provides
Web Services #1 or 2 to its customers, but the transfer is not the true object of the transaction. To
access Web Services #1 and 2, the subscribers are required to download a Java applet composed
of script or code. The applet functions to establish a secure connection over the Internet to the
Taxpayer’s proprietary system. Consequently, the applet is “computer software” because it is “a
set of coded instructions designed to cause a computer . . . to perform a task.” TENN. CODE ANN.
§ 67-6-102(20). Moreover, the applet is “prewritten computer software” because it is a generic
set of code not designed for any particular customer’s specifications. See TENN. CODE ANN.
§ 67-6-102(70). The applet is thus considered tangible personal property.
Although the applet is tangible personal property, this does not cause the transaction to be
subject to sales and use taxation. Tennessee’s courts “have developed a method whereby judicial
inquiry is made into the ‘primary purpose’ or ‘true object’ of the activity or business at issue.”
Qualcomm Inc. v. Chumley, No. M2006-01398-COA-R3-CV, 2007 WL 2827513, at *4 (Tenn.
Ct. App. Sept. 26, 2007). The applet, while necessary to securely access the Web Services, is not
the “true object” of the transaction. Customers purchase Web Service #1 so that they can allow
technical support agents to access their computer. Likewise, customers purchase Web Service #2
so that they can remotely access their home or office computer. In the absence of such services,
nobody would download or use the applet. Consequently, the applet itself is not the true object of
the Taxpayer’s Web Services, and is not subject to sales and use taxation.
Second, the provision of the Taxpayer’s Web Services #1 and 2 does not constitute a taxable
service for Tennessee sales and use tax purposes because the Web Services are not a
telecommunications service.
As noted above, a “telecommunications service” involves “the electronic transmission,
conveyance, or routing of voice, data, audio, video, or any other information or signals to a point,
or between or among points.” TENN. CODE ANN. § 67-6-102(92)(A). All of the data involved
with the use of Web Services #1 and 2, however, remains on the subscriber’s computer. Web
Services #1 and 2 merely allow the subscriber or a technical support agent to remotely view and
manipulate the data at that single point, akin to attaching a second monitor to the subscriber’s
hard drive. Moreover, the “true object” of purchasing Web Services #1 and #2 is not to convey
data from the subscriber’s hard drive to another point. Rather, the true object of purchasing Web
Services #1 and #2 is to manipulate data at a single point, on the subscriber’s hard drive.
Third, the provision of the Taxpayer’s Web Services #1 and 2 do not involve ancillary services.
The Taxpayer has indicated that it does not provide any Internet access, but rather supplies the
website functionality that allows its subscribers to access their home or office computers. Such
service is not “incidental to . . . the provision of telecommunication services.” See TENN. CODE
ANN. § 67-6-102(7). Nor do Web Services #1 and 2 involve any “audio or video conference
call[ing],” so they cannot be considered a “conference bridging service.” See TENN. CODE ANN.
§ 67-6-102(7)(A). Therefore, providing Web Services #1 and 2 does not constitute a taxable
service for purposes of the Tennessee sales and use tax.
Finally, because providing Web Services #1 and 2 does not implicate the Tennessee sales and
use tax for the sale of computer software or for the sale of a taxable service, there is no way that

the Taxpayer can furnish an otherwise nontaxable good or service that is bundled with a taxable
good or service.
Consequently, the Taxpayer’s Web Services #1 and 2 are not subject to the Tennessee sales and
use tax.
WEB SERVICES #3 AND 4
The Taxpayer’s Web Services #3 and 4 are subject to the Tennessee sales and use tax.
For the reasons discussed above, Web Services #3 and 4 are not subject to taxation as a sale of
computer software.
Web Services #3 and 4 do, however, involve unique functions not offered with Web Services #1
and 2 that are considered “ancillary services.” As discussed above, ancillary services are
“services that are associated with, or incidental to, the provision of telecommunication
services.”5 The Taxpayer’s Web Service #3 allows subscribers to meet with others and present
information securely online from remote locations using a combination of audio and visual
communication. Similarly, Web Service #4 allows subscribers to conduct synchronous online
training sessions using a combination of audio and visual communication, in addition to the
meeting capabilities offered with Web Service #3. Because these two Web Services “link[] two
(2) or more participants of an audio or video conference call,”6 they are properly considered
“conference bridging services” that come under the umbrella of “ancillary services.”7 It is
immaterial that the Taxpayer does not actually provide the Internet access services necessary to
access the Web Services. Web Services #3 and 4 are thus taxable ancillary services under TENN.
CODE ANN. § 67-6-205(c)(9).
As a result, Web Services #3 and 4 are subject to Tennessee sales and use tax.

R. John Grubb II
Tax Counsel

APPROVED:

Richard H. Roberts
Commissioner of Revenue

DATE:

10/31/12

5

TENN. CODE ANN. § 67-6-102(7).

6

TENN. CODE ANN. § 67-6-102(7)(A).

7

See TENN. CODE ANN. § 67-6-102(7).