Tennessee – Taxable Maintenance Services

SALT Report 1349 – The Tennessee Department of Revenue issued a Letter Ruling regarding the taxability of maintenance and monitoring services performed by a taxpayer to their customers’ property.  The Taxpayer charges customers either on an hourly or monthly lump sum basis. The monthly lump sum amount covers all services performed by the Taxpayer during the month in question. The Taxpayer also charges customers for reimbursable expenses, including: supplies, the cost of trucks and their maintenance, travel expenses, certain training classes, and other related costs.

Tennessee Code Ann. § 67-6-101 states that the “retail sales of tangible personal property and enumerated services in Tennessee are subject to the sales and use tax.”  In particular, Tennessee Code Ann. § 67-6-205(c)(4) (2011) imposes sales tax on “performing, for a consideration, any repair service with respect to any kind of tangible personal property or computer software.”
Therefore, the Department ruled that the repair services performed by the taxpayer are subject to Tennessee sales and use tax because they constitute work done to preserve or restore tangible personal property. The Department further ruled that the taxpayer must collect tax on charges for any reimbursable expenses that relate to repair services.
However, the taxpayer’s sales of repair services may be exempt as repairs to industrial machinery if the customer provides an exemption certificate.
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