[Effective 7/1/2024]

(a)

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Terms Used In Tennessee Code 67-6-902

  • Business: includes occasional and isolated sales or transactions of aircraft, vessels, or motor vehicles between corporations and their members or stockholders and also includes such transactions caused by the merger, consolidation, or reorganization of corporations. See Tennessee Code 67-6-102
  • Computer: means an electronic device that accepts information in digital or similar form and manipulates it for a result based on a sequence of instructions. See Tennessee Code 67-6-102
  • Delivered electronically: means delivered to the purchaser by means other than tangible storage media. See Tennessee Code 67-6-102
  • Donee: The recipient of a gift.
  • Lease: A contract transferring the use of property or occupancy of land, space, structures, or equipment in consideration of a payment (e.g., rent). Source: OCC
  • Lease or rental: includes agreements covering motor vehicles and trailers where the amount of consideration may be increased or decreased by reference to the amount realized upon sale or disposition of the property as defined in 26 U. See Tennessee Code 67-6-102
  • Personal property: All property that is not real property.
  • Personal property: includes money, goods, chattels, things in action, and evidences of debt. See Tennessee Code 1-3-105
  • Property: includes both personal and real property. See Tennessee Code 1-3-105
  • Sale: includes the furnishing of any of the things or services taxable under this chapter. See Tennessee Code 67-6-102
  • Software: means computer software. See Tennessee Code 67-6-102
  • State: when applied to the different parts of the United States, includes the District of Columbia and the several territories of the United States. See Tennessee Code 1-3-105
  • Tangible personal property: includes electricity, water, gas, steam, and prewritten computer software. See Tennessee Code 67-6-102
  • United States: includes the District of Columbia and the several territories of the United States. See Tennessee Code 1-3-105
  • Use: means and includes the exercise of any right or power over tangible personal property incident to the ownership thereof, except that it does not include the sale at retail of that property in the regular course of business. See Tennessee Code 67-6-102
  • Use tax: includes the "use" "consumption" "distribution" and "storage" as defined in this section. See Tennessee Code 67-6-102
(1) For purposes of this subsection (a):

(A) “Location” does not include a location that merely provided the digital transfer of the product sold; and
(B) “Receive” or “receipt”:

(i) Means:

(a) Taking possession of tangible personal property;
(b) Making first use of services; or
(c) Taking possession or making first use of digital products, whichever comes first; and
(ii) Does not include possession by a shipping company on behalf of the purchaser.
(2) The retail sale, excluding lease or rental, of a product from out of state into this state is sourced as follows:

(A) When the product is received by the purchaser at a business location of the seller, the sale is sourced to that business location;
(B) When the product is not received by the purchaser at a business location of the seller, the sale is sourced to the location where receipt by the purchaser or the purchaser’s donee as designated by the purchaser occurs, including the location indicated by instructions for delivery to the purchaser or the purchaser’s donee, known to the seller;
(C) When subdivisions (a)(2)(A) and (a)(2)(B) do not apply, the sale is sourced to the location indicated by an address for the purchaser that is available from the business records of the seller that are maintained in the ordinary course of the seller’s business when use of that address does not constitute bad faith;
(D) When subdivisions (a)(2)(A)-(a)(2)(C) do not apply, the sale is sourced to the location indicated by an address for the purchaser obtained during the consummation of the sale, including the address of a purchaser’s payment instrument, if no other address is available, when use of that address does not constitute bad faith; and
(E) When subdivisions (a)(2)(A)-(a)(2)(D) do not apply, or in the circumstance in which the seller is without sufficient information to determine which sourcing requirement in this subdivision (a)(2) applies, then the location is determined by the address from which tangible personal property was shipped, from which the digital good or the computer software delivered electronically was first available for transmission by the seller, or from which the service was provided.
(b)

(1) For purposes of this subsection (b), “transportation equipment” means:

(A) Locomotives and railcars that are utilized for the carriage of persons or property in interstate commerce;
(B) Trucks and truck-tractors with a gross vehicle weight rating (GVWR) of ten thousand one pounds (10,001 lbs.) or greater, trailers, semi-trailers, or passenger buses that are:

(i) Registered through the International Registration Plan; and
(ii) Operated under authority of a carrier authorized and certificated by the United States department of transportation or another federal authority to engage in the carriage of persons or property in interstate commerce;
(C) Aircraft that are operated by air carriers authorized and certificated by the United States department of transportation or another federal or foreign authority to engage in the carriage of persons or property in interstate or foreign commerce; and
(D) Containers designed for use on and component parts attached or secured on the items set forth in subdivisions (b)(1)(A)-(b)(1)(C).
(2) The lease or rental of tangible personal property imported into this state is sourced as follows:

(A) For a lease or rental that does not require recurring periodic payments, the payment is sourced the same as a retail sale in accordance with subsection (a);
(B)

(i) Except as provided in subdivisions (b)(2)(C) and (b)(2)(D), for a lease or rental that requires recurring periodic payments, the first periodic payment is sourced the same as a retail sale in accordance with subsection (a). Periodic payments made subsequent to the first payment are sourced to the primary property location for each period covered by the payment;
(ii) The primary property location is as indicated by an address for the property provided by the lessee that is available to the lessor from its records maintained in the ordinary course of business, when use of that address does not constitute bad faith; and
(iii) The property location must not be altered by intermittent use at different locations, such as use of business property that accompanies employees on business trips and services calls;
(C) For the lease or rental of motor vehicles, trailers, semi-trailers, or aircraft that do not qualify as transportation equipment and watercraft with a displacement of under fifty (50) tons, that requires recurring periodic payments, the first and each subsequent periodic payment is sourced to the primary property location. The primary property location is determined in accordance with subdivision (b)(2)(B); and
(D) Notwithstanding the primary property location covered by a recurring periodic payment, the lease or rental of transportation equipment is sourced the same as a retail sale in accordance with subsection (a).
(3) This subsection (b) does not affect the imposition or computation of sales or use tax on leases or rentals based on a lump sum or accelerated basis, or on the acquisition of property for lease.
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