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Tennessee: maintenance contracts taxable; standalone training may be nontaxable
Summary
The department said software maintenance contracts that obligate future updates and support are taxable when covering software located in Tennessee; standalone training or optional configuration services that are separately invoiced may be nontaxable.
The department clarified the tax treatment of maintenance, training and support. "Computer software maintenance contracts are subject to sales and use tax in Tennessee, and it applies to computer software installed on computers located in Tennessee," Katie Julian said.
Julian distinguished between maintenance (taxable) and standalone services: training or configuration sold separately and optional may not be subject to tax. The presenters said that when services (training, configuration, installation) are "necessary to complete the sale" and are bundled with a taxable software sale, those charges become part of the sales price and are taxable.
The panel also pointed to Important Notice 15‑25 for maintenance contract guidance and recommended that sellers itemize optional services and keep clear contract language to support a nontaxable treatment when warranted.
