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A taxpayer’s sales of call tracking services are not subject to Tennessee sales and use tax. The taxpayer collects and analyzes information pertaining to a retailer’s customers, advertising, and employee call handling skills. The call tracking services do not meet the definition of a taxable telecommunications service. Tennessee tax law excludes from taxable telecommunications services those 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.” The retailer’s primary purpose for purchasing the call tracking services is to receive the processed data or information. The true object of the transaction is the acquisition of this data, therefore the call tracking services are not subject to Tennessee sales and use tax. (Letter Ruling No. 12-05, Tennessee Department of Revenue, May 30, 2012)

(08/17/2012)

Effective July 1, 2012, the sales and use tax rate applicable to food and food ingredients in Tennessee is reduced from 5.5% to 5.25%. The new law also requires that the local option sales tax, which under existing law can be in an amount up to 2.75%, be at a rate that is a multiple of 0.25%. Tennessee defines “food and food ingredients” as substances, whether in liquid, concentrated, solid, frozen, dried, or dehydrated form, that are sold for ingestion or chewing by humans and are consumed for their taste of nutritional value. The definition does not include alcoholic beverages or tobacco. “Food and food ingredients” does not include prepared foods. (H.B. 3761, Laws 2012, effective as noted)

(06/22/2012)

Individuals who receive disaster assistance from the Federal Emergency Management Agency (FEMA) as a result of a natural disaster happening in Tennessee can claim a refund of Tennessee sales and use tax paid on eligible items purchased to replace or repair damaged items in their primary residence. The maximum refund per residence is $2,500. Eligible items include major appliances and residential furniture with a sales price of $3,200 or less per item and residential building supplies with a sales price of $500 or less per item. In order to qualify for the refund, an individual must file a refund claim with the Department of Revenue within one year of the date on the FEMA decision letter and can only file one refund claim. Claimants must keep suitable records of the purchases for which the refund is claimed. (S.B. 2701, Laws 2012, effective May 15, 2012, and applicable to any federally declared natural disaster occurring in Tennessee on or after January 1, 2012)

(06/22/2012)

The services of a taxpayer that obtains financial information from its customers, converts it into a compliant file then transmits the file electronically to the U.S. Securities and Exchange Commission (SEC) are subject to Tennessee sales and use tax as a telecommunication service. The definition of “telecommunications service” includes electronic data transmission. Converting customers’ information into the SEC-compliant file also falls within the perimeters of the statute. The service is not considered data processing since its primary purpose is the conversion of information into a SEC-compliant file and electronic transmittal to the SEC, not the processing or retrieval of data. The taxpayer charges customers per-page or per-document. This is considered to be a sale on a call-by-call basis. If a telecommunications service is sold on this basis and the call doesn’t originate and terminate in the same location, the sale is sourced to the taxing jurisdiction where the call either originates or terminates and in which the service address is located. The transmission originates at the taxpayer’s server (located outside of Tennessee) and terminates at the SEC. The call is sourced to one of those locations, not to Tennessee, therefore the taxpayer’s sales are not subject to Tennessee tax. (Letter Ruling No. 11-35, Tennessee Department of Revenue, July 22, 2011, released September 23, 2011)

(05/21/2012)

Purchasers of building supplies used to construct storm or tornado shelters are able to claim a refund of Tennessee sales and use tax paid on the items. The items must be purchased between July 1, 2011 and December 31, 2011, used in a primary residence, and the sales price per item cannot exceed $3,200. Building supplies include trash bags, boxes, construction tools, hardware, sheetrock, drywall, insulation, paint and paint materials, flooring, and other necessary building materials determined by the Tennessee Department of Revenue. The total refund for any one residence cannot exceed $2,500. Only one refund application is allowed per residence, and the application needs to be filed on or before February 1, 2012. (S.B. 267, Laws 2011, effective June 6, 2011, and applicable as noted)

(05/21/2012)

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