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Tennessee Ruling: Taxability of IT Services and Software Customization in Single Contracts

  • A Tennessee ruling states that when multiple taxable and nontaxable services are provided under a single contract, the entire contract may be taxable.
  • It is important to carefully analyze all services and products provided under a single contract to determine taxability.
  • The Tennessee Department of Revenue issued a ruling regarding the taxability of certain IT services.
  • The ruling focused on a master services agreement and three separate statements of work.
  • The ruling concluded that phases 1, 3, and 4 of the project were not taxable, but phase 2, which included customization of software, was taxable.
  • Tennessee taxes the sale of custom computer software, including when it is created on the premises of the consumer.

Source: aprio.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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