A video game digital product is the permanent or temporary right to access a video game when the possession of the video game remains with the seller or a third party. In other words, the video game cannot be downloaded onto the user’s own computer. The sale of a video game that is downloaded onto the purchaser’s computer remains a sale of computer software, and it is governed by a different sales and use tax law.
The sale, lease, licensing, or use of video game digital products are subject to sales and use tax in the same way that digital books, movies, and music are subject to sales and use tax. The 7% state sales and use tax and the applicable local sales and use tax rate applies to any charges for the permanent or temporary right to access video game digital products, whether the charge is on a per use, per user, per license, subscription, or any other basis. The charges are taxable in Tennessee if the residential or primary business address of the person who accesses the video game digital product is located in Tennessee.
Reference: Important Notice 15-13. Tenn. Code Ann. §§ 67-6-102(102) and 67-6-233.