Apr 17, 2017
From KPMG TaxWatch
The Tennessee Department of Revenue recently ruled that a taxpayer did not owe sales or use tax on the transfer of internally developed software and the provision of services by an affiliated company. Under Tennessee law, a sales and use tax exemption applies to an entity’s use of computer software that is developed and fabricated by an affiliate company. The exemption extends to the repair of computer software or any other services otherwise taxable that are rendered by a company for an affiliated company. Companies are considered affiliated for purposes of the exemption if either company directly owns or controls 100 percent of the ownership interest in the other company or both companies are 100 percent owned or controlled by a common parent. Although the taxpayer’s affiliate had developed the software prior to becoming affiliated with the taxpayer, the Department concluded that the exemption statute did not require that the transferred software be developed while the parties were affiliates. Please contact Loren Chumley at (615) 248- 5565 with questions on this Tennessee Letter Ruling 17-02.
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