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Tax Cybrary
Tennessee Clarifies Telecom Taxing Confusion Regarding Internet Services
Tennessee has issued a notice, providing taxpayers and the general public with information concerning the application of Tennessee sales tax to telecommunication services purchased, used, or sold by an Internet Service Provider.
The Internet Tax Nondiscrimination Act (ITNA) extended the moratorium on state taxation of Internet access until November 1, 2014. The Act also amended the definition of the term “Internet access” and expanded the moratorium on state taxation of Internet access including telecommunications services that are purchased, used, or sold by an ISP to provide Internet access.
Accordingly, telecommunications services purchased or used by an ISP to provide Internet access are exempt from Tennessee sales tax. Also, telecommunication services such as Digital Subscriber Line services (DSL) that are sold by an ISP to provide Internet access are exempt from sales tax.
Taxpayers are reminded though that telecommunication services such as telephone services, cellular services, paging services, and facsimile services that are not used to provide access to the Internet remain subject to sales tax when purchased, used or sold by an ISP. Voice over Internet protocol, also known as VoIP and other similar services that utilize Internet protocol are excluded from the amended definition of Internet access and continue to be subject to sales tax as a telecommunication service.
(Important Notice 07-21, Tennessee Department of Revenue, Issued December 2007)
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