The sale, lease, licensing, and use of digital audio-visual works, digital audio works, and digital books are subject to sales and use tax. This group of products is referred to as specified digital products.
Specified digital products are sold to customers by electronic transfer which includes downloading, podcasting, streaming, and accessing online. Examples of digital audio-visual works include: motion pictures, musical videos, news and entertainment programs, and live events. Examples of digital audio works include prerecorded and live music, speeches, readings, sound recordings, and ringtones. Digital books can be fiction, non-fiction, and short stories. The total sales price of specified digital products is subject to the 7% state tax rate and a standard local tax rate of 2.5%.
Reference: Tenn. Code Ann. §§ 67-6-102, 67-6-233, and 67-6-702.