Tennessee Sales Tax on Software and Digital Products Tennessee: Sales Tax Handbook

Tennessee:

Are Software and Digital Products subject to sales tax?

While Tennessee's sales tax generally applies to most transactions, certain items have special treatment in many states when it comes to sales taxes. This page describes the taxability of software and digital products in Tennessee, including canned software - delivered on tangible media, canned software - downloaded, custom software - delivered on tangible media, custom software - downloaded, customization of canned software and digital products. To learn more, see a full list of taxable and tax-exempt items in Tennessee.


Canned Software - Delivered on Tangible Media
TAXABLE
In the state of Tennessee, the exemptions may be applicable to use with any software which has been developed and fabricated by an affiliated company or for fabrication of software by a person for that person's own use or consumption.

Canned Software - Downloaded
TAXABLE
Sales of canned software - downloaded are subject to sales tax in Tennessee.

Custom Software - Delivered on Tangible Media
TAXABLE
In the state of Tennessee, any exemptions may be applicable for the use of any software which was developed and fabricated by an affiliated company or for fabrication of software by a person for that person's own use or consumption.

Custom Software - Downloaded
TAXABLE
In the state of Tennessee, it is possible for the exemptions to be applicable for the use of software which was developed and fabricated by an affiliated company, or is intended for fabrication of software by a person for that person's own use or consumption.

Customization of Canned Software
TAXABLE
In the state of Tennessee, any prewritten software that has been modified to the customized specifications of a purchaser is still deemed to be prewritten software. In a case where there is a separately stated charge for a modification, the modification is not considered to be prewritten software.

Digital Products
TAXABLE
In the state of Tennessee, digital products are considered to be exempt if their tangible equivalent is known to be exempt.



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Source: http://www.salestaxhandbook.com/tennessee/sales-tax-taxability/software-and-digital-products