Tennessee Letter Ruling 16-09 determined that sales involving proprietary software that allows customers to communicate through a single, web-based interface that supports text messaging, despite being stored on a cloud-based server, were subject to Tennessee sales and use tax as an ancillary service under Tenn. Code Ann. § 67-6-205(c)(9) (2013). Pursuant to Tenn. Code Ann. § 67-6-102(7), ancillary services are “services that are associated with, or incidental to, the provision of telecommunication services, including, but not limited to, detailed telecommunications billing service, directory assistance service, vertical service, and voice mail service.”
Despite the taxpayer’s interface allowing a customer to send and receive text messages, a telecommunications service, the overarching purpose behind the taxpayer’s interface services was the facilitation of communication through various mediums which were “associated with, or incidental to, the provision of telecommunication services.” The taxpayer’s interface allowed the customer to access and respond to communications from and through various mediums in one centralized location. Thus, the service facilitated the text messaging telecommunication service, making it ancillary. Accordingly, the taxpayer’s interface was subject to the Tennessee sales and use tax as an ancillary service.