SAP America Owes Tennessee Business Tax on Cloud Hosting Sales

Some of SAP America Inc.'s software that customers download or remotely access is a service subject to Tennessee’s business tax, a state appeals court ruled.

The company’s computer software is nontaxable intangible personal property, but its cloud-based services and cloud hosting are subject to the state’s business tax, the Tennessee Court of Appeals ruled in an opinion posted Friday.

The court of appeals disagreed with the lower court’s finding that SAP’s cloud hosting services were nontaxable because they essentially provide a lease of computer equipment.

“Although SAP’s Cloud Hosting customers used SAP’s hardware or server equipment or software platform on ...