Tennessee Taxability of DSL Services Discussed

The Tennessee Department of Revenue has issued a letter ruling explaining the taxability of DSL services. The letter clarified that the state does not impose sales and use tax on the retail sales of DSL Internet access services that are directly provided to end-user customers, but all other DSL services that do not constitute internet access services are subject to the state sales and use taxes. The state also imposes sales and use tax on the sales of Layer 2 transmission services to a non-Internet service provider that owns a point of presence. Finally, the state will not impose sales and use tax on the telecommunications services purchased by the taxpayer in order to provide DSL Internet access services, provided that the taxpayer uses such telecommunications services exclusively to provide Internet access services. (Letter Ruling No. 08-29, Tennessee Department of Revenue, March 24, 2008)

Posted on May 20, 2009