(a) It is declared to be the intention of this chapter to impose a tax on the sales price of all leases and rentals of tangible personal property and computer software in this state where the lease or rental is a part of the regularly established business, or the lease or rental is incidental or germane to the regularly established business. The tax is levied as follows:

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Terms Used In Tennessee Code 67-6-204

  • 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
  • Commissioner: means and includes the commissioner of revenue or the commissioner's duly authorized assistants. 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
  • Germane: On the subject of the pending bill or other business; a strict standard of relevance.
  • 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
  • Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
  • 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
  • Sales price: includes consideration received by the seller from third parties, if:
    (i) The seller actually receives consideration from a party other than the purchaser, and the consideration is directly related to a price reduction or discount on the sale. 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
  • 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) At the rate of the tax levied on the sale of tangible personal property at retail by § 67-6-202 of the sales price derived from the lease or rental of tangible personal property, as defined herein, where the lease or rental of such property is an established business, or part of an established business, or the same is incidental or germane to the business;
(2) At the rate of the tax levied on the sale of tangible personal property at retail by § 67-6-202 of the monthly lease or rental price by lessee or renter, or contracted or agreed to be paid by lessee or renter, to the owner of the tangible personal property.
(b)

(1) The lessee or renter of tangible personal property from a lessor that is a tax exempt entity may elect, in lieu of the tax imposed by this section on the monthly lease or rental price contracted or agreed to be paid by the lessee or renter to the tax exempt owner of the tangible personal property, to pay in a lump sum a use tax at the rate of the tax levied on the sale of tangible personal property at retail by § 67-6-202 of the purchase price to the lessor of the tangible personal property subject to the lease.
(2) The election shall be made by the lessee in accordance with rules and regulations to be promulgated by the commissioner of revenue. An election may be revoked with the consent of the commissioner. The effect of payment by a lessee of a use tax based on the purchase price to the lessor of the tangible personal property, pursuant to an election made as provided in this section, shall be to relieve and discharge the lessee and its successors and assigns of any obligation of paying any tax on the monthly lease or rental price contracted or agreed to be paid by the lessee or its successors and assigns to the lessor with respect to the tangible personal property that is the subject of the lease during the term of the lease and any extensions and renewals thereof, and of any obligation to pay any sales or use tax with respect to the purchase by lessee from the lessor of the tangible personal property pursuant to a purchase option contained in the lease of the tangible personal property.
(3) This subsection (b) also applies to permit a lump sum payment of a local option use tax under part 7 of this chapter, based upon the purchase price to the lessor, at the rate and subject to the limitation on the tax applicable in the particular municipality or county pursuant to § 67-6-702. The lump sum payment is in lieu of any local option tax imposed under part 7 of this chapter on the monthly lease or rental of tangible personal property from a lessor that is a tax exempt entity.
(c) Notwithstanding any other provision of law to the contrary, the one-half percent (0.5%) increase in the rate of the sales tax from five and one-half percent (5.5%) to six percent (6%) imposed by chapter 529 of the Public Acts of 1992 in this section and §§ 67-6-202, 67-6-203, 67-6-205, and 67-6-221 shall remain in effect until changed by the general assembly. All revenue generated from such increases shall be deposited in the state general fund and earmarked for education purposes as provided in § 67-6-103(c)(2).
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