Tennessee - Patent licensor not doing business in the state

January 2013

Overview

The Tennessee Department of Revenue ruled that a company's contact with Tennessee is "too remote and indirect" to be considered "doing business" in the state for franchise and excise tax purposes. The company licenses patents to an affiliate. The affiliate uses the patents to have products manufactured on its behalf outside of Tennessee. The products are sold to a partnership, 99% owed by an unrelated party, that ultimately sells the products to customers in Tennessee. Because none of the company's patent licensing activities occur in Tennessee, it is not "doing business" in the state. [Tennessee Department of Revenue, Revenue Ruling #12-27 (11/14/12, released 1/8/13)]

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Peter Michalowski
National SALT Practice Leader
Tel: +1 (646) 471 5259
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