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Charges to access a company’s web-based technology solution that allows a customer to manage its own information are subject to Tennessee sales and use tax as remotely accessed softwareas of July 1, 2015. With respect to the taxable use of computer software in Tennessee that remains in the possession of the dealer or a third party on behalf of the dealer, Tennessee’s tax law requires the access and use of the computer software by a customer within the state. Here, the system is housed on a third party’s server and accessed remotely by customers from locations within Tennessee. As a result, charges to access the system are taxable. The company’s provision of customer access to its website is not subject to sales and use tax. Website access is offered in order to provide non taxable services. The true value of the right to access the website is for the users to view their own information. Any manipulation of the information that requires use of the website is incidental to the company’s provision of services. The true object of granting access to the website is the provision of services. The company may license the system from a third party as an exempt sale for resale if it presents the third party with a resale certificate.Regarding the company’s purchases of remotely accessed software used by persons located both within and outside Tennessee, the company can either: present the seller with a Remotely Accessed Software Direct Pay Permit at the time of purchase and remit sales tax directly to the Tennessee Department of Revenue on the portion of the sales price that corresponds to the percentage of its users located in Tennessee; or present the seller with a fully completed Streamlined Sales Tax certificate of exemption at the time of purchase to exclude the portion of the sales price that corresponds to its percentage of users located outside Tennessee, and pay sales tax based on its percentage of users located within Tennessee.(Letter Ruling No. 16-01, Tennessee Department of Revenue, January 26, 2016)

(03/24/2016)

On February 11, 2016, the U.S. Senate approved a permanent extension of the Internet Tax Freedom Act (ITFA) that is included in H.R. 644, the Trade Facilitation and Trade Enforcement Act of 2015. The bill also establishes an end date of June 30, 2020 for the seven states that currently impose a tax on internet access: Hawaii, New Mexico, North Dakota, Ohio, South Dakota, Texas, and Wisconsin. President Obama is expected to sign the permanent extension of the ITFA into law. The House of Representatives had previously passed H.R. 235, the Permanent Internet Tax Freedom Act, on December 15, 2015.  For our previous news item on this topic, visit Internet Tax Freedom Act Extended Through October 1, 2016.

 

UPDATE: On February 24, 2016, President Barack Obama signed into law the permanent extension of the Internet Tax Freedom Act.

 

(Trade Facilitation and Trade Enforcement Act of 2015)

(02/23/2016)

On December 18, 2015, President Barack Obama signed H.R. 2029 – Consolidated Appropriations Act, 2016. The Act extends the Internet Tax Freedom Act (ITFA) through October 1, 2016. Prior provisions that grandfather taxes that existed prior to October 1, 1998 are also extended through October 1, 2016. For our previous news item on this topic, see Internet Tax Freedom Act Extended Until December 11, 2015. (H.R. 2029 – Consolidated Appropriations Act, 2016)

(01/18/2016)

Tennessee has issued an opinion stating that individuals who regularly rent their homes or room on a short-term basis through rental websites are required to collect and remit Tennessee sales tax on the rentals. Individuals who rent their home once or infrequently aren’t required to collect and remit sales tax on the rental, as the rental is considered an occasional or isolated sale. Individuals who rent their home on a short-term basis in counties or municipalities that have a hotel occupancy privilege tax are responsible for collecting and remitting the hotel occupancy privilege tax on rentals. Statutes that authorize local hotel occupancy tax do not contain an exemption for occasional or isolated sales. Consequently, such rentals could possibly be subject to the tax unless the local ordinance includes such an exemption. (Opinion No. 15-78, Tennessee Attorney General, December 1, 2015)

(12/09/2015)

On September 30, 2015 the U.S. House of Representative passed H.R. 719, which includes a provision that would extend the Internet Tax Freedom Act (ITFA) through December 11, 2015. The ITFA was scheduled to expire on October 1, 2015. The bill will now go to President Obama for signature.

 

To see our previous news item on the ITFA, visit Internet Tax Freedom Act Extended Until October 1, 2015, Permanent Extension Introduced.

 

To see an update on this news item, visit Internet Tax Freedom Act Extended Through October 1, 2016,

 

(H.R. 719)

(10/26/2015)

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