Tennessee – Data Hosting and Storage Services Not Taxable

SALT Report 1151 – The Tennessee Department of Revenue has issued a ruling in regards to the application of sales and use tax for document and data management services.

According to the ruling, data hosting, storage, and project management services are not subject to Tennessee sales and use tax because they are not taxable services and are not provided in conjunction with the transfer of tangible personal property.

Services provided to clients are not taxable under the following circumstances:

  • Data Services – The taxpayer obtains data from clients.
  • Hosting Services – The taxpayer creates files and loads the files into a database that is hosted by the taxpayer and accessible to the client.
  • Storage Services – The client may request that the taxpayer maintain the data files on its servers.
  • Project Management Services – The taxpayer may charge the client a consulting fee for help and assistance in setting up and searching the information database.

Under Tennessee law no part of these transactions can be described as the sale of a taxable good or service because no tangible personal property is exchanged and the taxpayer does not sell, lease, license, or provide the use of computer software to clients in conjunction with these services.

Upon completion of a project the client may request that the taxpayer deliver certain files either electronically or via a physical medium.  Delivery by electronic means (download) is not a transfer of tangible personal property. However, a transfer of documents via a physical medium, i.e., an external hard drive or printed paper, is the sale of tangible personal property and taxable.

For Further Information:

Tennessee Department of Revenue Letter Ruling No. 11-38


https://saltcpa.com/ https://validate.saltcert.com/# https://saltcert.com/forms/