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A collection of the brief insights throughout September 2023 of the type provided on an ad hoc basis in our Latest digital tax byte update.

20 September 2023 - Tennessee rules digital platform used for non-taxable services is not subject to tax

The Tennessee Department of Revenue has issued a letter ruling 23-05 addressing the taxability of staff augmentation and payment processing services accessed through a digital platform. The taxpayer is a technology company that matches companies with short-term labour needs with workers and processes payments for transactions. The taxpayer provides a digital platform accessed through a downloadable app to connect its customers and workers. The taxpayer charges customers a lump sum for job placement services based on an hourly rate, additional compensation, cancellation fees, and hiring fees if customers hire workers as their own employees.

The taxpayer inquired whether its fees are subject to sales and use tax. The Department ruled that because staff augmentation and payment processing services are not taxable services, providing them through a digital platform is not a transaction subject to sales and use tax. The Department noted that an app is taxable as the use of computer software. The taxpayer’s app provides customers with some functions that can be considered the taxable use of computer software, including the generation of templates for future job requests and a means of creating lists of favoured workers to contact in the future.

The Department ruled that