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Tax Law

Look But Don't Touch: Tennessee DOR Ruling Analyzes Web-Based Software and Service

 By Liz Cha and Todd Lard

Applying the “true object” test to the taxpayer’s web-based services, the Tennessee Department of Revenue ruled that charges for granting access to the taxpayer’s website for purposes of obtaining information would not be subject to sales tax. While the access to web-based services is tax-exempt as a sale of services, a subscription to the taxpayer’s web-based technology solution system that allows a customer to manage its own information is taxable as a sale of remotely accessed software. However, the taxpayer’s purchase of the technology solution system from a third party qualifies for a sale for resale exemption if it provides the third party with a properly completed resale certificate. Tennessee Letter Ruling No. 16-01, 01/26/2016.