Sales Tax State Activity Update - October 2004

Furnishing Copy Machines Without an Operator is a Lease/Rental in Tennessee

In a recent letter ruling, the Tennessee Department of Revenue clarified copy machines provided to customers for a charge are considered tangible personal property and are subject to sales tax if they are leased or rented.

A Tennessee taxpayer provides copiers to customers at their place of business for a charge. The customer is charged a base amount that permits a certain number of copies and an additional charge for each copy made in excess of the base number of copies. The customer may terminate the contract by providing sixty days written notice and paying any applicable termination fees. During the term of the agreement, the customer may negotiate to replace original copiers with those copiers offering additional or different features. The customer maintains exclusive use of the copiers and directs the use of the copiers, including copier function and the number, type and time of day copies are made.

Tennessee law includes lease or rental within the definition of sale. Lease or rental activity is defined as leasing or renting of tangible personal property and the possession or use thereof by the lessee or renter for a consideration, without transfer of the title of such property. Tangible personal property means personal property, which may be seen, weighed, measured, felt, or touched, or is in any other manner perceptible to the senses. The taxpayer provides tangible personal property to customers for consideration without the transfer of title of the property and without furnishing an operator for the property. In this instance, providing the exclusive use of a copier to a customer at its place of business for consideration without transfer of title to or furnishing an operator for the copier is a sale subject to sales tax.

The full text may be accessed at: http://www.state.tn.us/revenue/rulings/sales/04-05.pdf

(Tennessee Department of Revenue Letter Ruling Number 04-05, 01/31/04)

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