(a) The retail sale of, use of, or subscription to a warranty or service contract covering the repair or maintenance of tangible personal property shall be subject to the tax levied by this chapter. The tax shall be levied on the sales price or purchase price of the warranty or service contract at a rate equal to the rate of tax levied on the sale of tangible personal property at retail by § 67-6-202.

Terms Used In Tennessee Code 67-6-208

  • 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
  • Computer software: means a set of coded instructions designed to cause a computer or automatic data processing equipment to perform a task. See Tennessee Code 67-6-102
  • Computer software maintenance contract: means a contract that obligates a person to provide a customer with future updates or upgrades to computer software, support services with respect to computer software, or both. See Tennessee Code 67-6-102
  • Contract: A legal written agreement that becomes binding when signed.
  • Personal property: includes money, goods, chattels, things in action, and evidences of debt. See Tennessee Code 1-3-105
  • Personal property: All property that is not real property.
  • 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
  • Subscription: includes a mark, the name being written near the mark and witnessed. 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
(b) The retail sale of, use of, or subscription to a computer software maintenance contract shall be subject to the tax levied by this chapter. The tax shall be levied on the sales price of the computer software maintenance contract at a rate equal to the rate of tax levied on the sale of tangible personal property at retail by § 67-6-202.
(c) Warranty or service contracts covering the repair and maintenance of tangible personal property and computer software maintenance contracts shall be subject to tax in this state when:

(1) The warranty or service contract is sold as part of or in connection with the sale of tangible personal property that is subject to the tax levied by this chapter, or the computer software maintenance contract is sold as part of or in connection with the sale of computer software that is subject to the tax levied by this chapter;
(2) The warranty or service contract applies to tangible personal property located in this state, or the computer software maintenance contract applies to computer software installed on computers located in this state. If a warranty or service contract applies to tangible personal property located both inside this state and outside this state or a computer software maintenance contract applies to computer software installed on computers located both inside this state and outside this state, dealers or users may allocate to this state a percentage of the sales price or purchase price of the warranty or service contract or computer software maintenance contract that equals the percentage of tangible personal property located in this state or computer software installed on computers located in this state; or
(3) The location of the tangible personal property covered by the warranty or service contract or computer software covered by the computer software maintenance contract is not known to the seller but the purchaser’s residential street address or primary business address is in this state.
(d) No additional tax shall be due under this chapter on any repairs or maintenance provided pursuant to a warranty or service contract covering the repair and maintenance of tangible personal property that is subject to tax under subsection (a) or on any repairs, modifications, updates, or upgrades provided pursuant to a computer software maintenance contract that is subject to tax under subsection (b), unless the seller makes an additional charge for the repairs, maintenance, modifications, updates, or upgrades.
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