Tennessee Department of Revenue Issues Notice on Sales and Use Tax Exemption for Computer Software Developed for Personal Use
The Tennessee Department of Revenue recently issued Important Notice #22-05 regarding the sales and use tax exemption for computer software developed by a person for that person’s own use.
Currently, if the user of the software was a business, the exemption only applied when the individual fabricating the software was a direct employee of that business. Direct employees are individuals to whom the business is obligated to issue a federal form W-2 and withhold taxes under the Federal Insurance Contributions Act.
Effective July 1, 2022, Public Chapter 1065 (2022) extends the exemption to include fabrication, installation and repair of computer software performed by an agent of the business. Although an agent is not a traditional employee, the business would control an agent’s actions and day-to-day activities in a manner similar to its control over an employee.
Use of Remotely Accessed Software to Fabricate Personal Use Software Exempt From Sales and Use Tax
The exemption provided in Tenn. Code Ann. § 67-6- 387 for access and use of software remaining in the possession of the dealer for the purpose of fabricating other software for personal use is also extended to include the person’s agent by Public Chapter 1065 (2022), effective July 1, 2022.
For more information, visit the Tennessee Department of Revenue website.