Tennessee Court of Appeals Partially Reverses Business Tax on Software Sales

The Tennessee Court of Appeals affirmed in part, reversed in part, vacated in part, and remanded the business tax assessment against the taxpayer. Taxpayer sells enterprise software through on-premise and cloud-based models, plus infrastructure hosting and support services, which Tennessee assessed business tax totaling over $728,000 for tax years 2014-2018. The court applied the “true object” test, finding software sales constitute non-taxable intangible property, but cloud hosting services are taxable rather than exempt property leases. [SAP America, Inc. v. Gerregano, Tenn. Ct. App., No. M2024-01399-COA-R3-CV, 05/13/26]

This story was produced by Bloomberg Tax Automation, and edited by Bloomberg Tax staff. ...