Tennessee Imposes Taxes on Sales of Certain Software/Services, Digital Products

Effective June 5, 2008, the sales price of leased or rented computer software will be taxable where the lease or rental is a part of, or incidental or relevant to, a regularly established business. Additionally, computer software repair and installation services are taxable, regardless of whether the service is incidental to the sale or transfer of tangible personal property.

Effective January 1, 2009, the retail sale, lease, licensing, or use of specified digital products will be taxable. Examples include electronically transferred motion pictures, music videos, news and entertainment programs, songs, music, ringtones, and books. Electronic greeting cards, video or electronic games, newspapers, magazines, subscriptions to satellite radio, and digital goods provided for less than permanent use are not included. In addition, the industrial machinery exemption expands to include items and labor that are necessary to and used primarily for the conversion of tangible personal property into taxable specified digital products for resale and consumption off the premises. (S.B. 4173, Laws 2008, effective June 5, 2008)

Posted on August 11, 2008