IBM Corporation v. Reagan Farr, Commissioner of Revenue, State of Tennessee

Commissioner of Revenue assessed Company a sales and use tax for its sale of a wide area network (“WAN”) service during the period 1998 through 2003 on the basis that the service was a “telecommunication service” as that term is defined in Tenn. Code Ann. § 67-6102(a)(32) (2003). Company denied its WAN constituted a taxable telecommunication service because users were limited to accessing information on geographically remote computers; the WAN did not allow its users to communicate with one another. Following motions for summary judgment, the trial court concluded the WAN service was a taxable telecommunication service. Company appealed, and we reverse the trial court’s judgment. The primary purpose of the WAN was to enable a company’s authorized users to access information related to the company’s business,not to provide communication between users. The fact that Company itself did not provide information does not alter the result.