Signup for Vertex Tax Matters

Get the latest news from Vertex on Tax Accounting, Tax Data Warehouse and our other tax innovations.

Conquer Future
Tax Challenges
with Vertex

Vertex is
shaping the future
of corporate tax

Vertex Enterprise, a true enterprise technology solution, will set the standard for tax operations excellence.

Learn More

Still Have Questions?

Contact us at 800.355.3500
or submit a
Web inquiry

Sales, Use and International Tax Articles

Sales, Use and International Tax Activity Update - November 2012

Fee charged for access to online content is taxable in Tennessee

In Letter Ruling 12-11, the Tennessee Department of Revenue determined that a fee charged by a taxpayer to its customer for accessing a variety of online content via their website is taxable for periods beginning on or after January 1, 2009 and exempt from sales tax for periods prior to January 1, 2009.

Some of the online content includes a library with periodicals and reference sources, such as dictionaries and encyclopedias, as well as application service provider computer simulation programs, which are stored on the taxpayer’s servers outside of Tennessee and are not transferred to its customers.  This content was not taxable prior to January 1, 2009 for several reasons.  Digital books were not taxable, there was no sale of tangible personal property, the provision of the online content was not an enumerated taxable service, and the taxpayer retained title, possession, and control of the computer simulation programs.

On January 1, 2009, Tennessee’s statute was revised to include “specified digital products sold with rights of less than permanent use” as “retail sales, leases, licensing, or use subject to tax” under code section 67-6-233(b)(1). The dictionaries and encyclopedias that are part of the online content that the taxpayer provides fall within the meaning of “digital books,” which are “specified digital products” under code section 67-6-102(31). These “digital books” can be viewed, downloaded, or printed by the taxpayer’s customers as part of the fee that they are charged.  Although there is nontaxable online content that is offered in connection with the fee, the entire fee is taxable because the nontaxable items and taxable items are part of a single charge and are not separately stated.

A copy of letter ruling 12-11 can be found at:

Subscribe to CyberTax News and receive the latest indirect tax news, including rate changes, rule updates, compliance issues, and more, delivered directly to your email.

Email Address