Tennessee – Services Provided to Advertising Co-ops Not Taxable

SALT Report 1796 РThe Tennessee Department of Revenue determined that services provided by a Taxpayer to his clients who have entered into a cooperative advertising agreement with a third party are not subject to Tennessee sales and use tax. Cooperative advertising is an arrangement between manufacturers, wholesalers, or distributors and another business, in which one party helps to pay for some or all of the other party’s advertising.

Services provided by the Taxpayer include:

  • Maintenance and management of the co-op database which contains all co-op data and financial information
  • Information services including fielding phone calls regarding co-op funds, rules, and requests for claim forms
  • Administration duties such as receiving and processing of co-op claims, and
  • Reporting services which are delivered to co-op members electronically

The Taxpayer bills his clients for the service separately from any other goods or services that he may provide to the client.

The Department ruled that because the taxpayer does not make any sales of tangible personal property in connection with the services, none of the services provided are taxable.

For Further Information:

Tennessee Department of Revenue – Letter Ruling No. 12-14