25 January 2017 Registration by out-state-dealers under Tennessee's new economic nexus rule for sales and use tax purposes The Tennessee Department of Revenue (Department) has approved a new regulation, Rule 1320-05-01-.129, which adopts an economic nexus standard for sales and use tax purposes. The new regulation became effective January 1, 2017, but will expire on July 1, 2017, if not approved by the legislature. Under the regulation, an out-of-state dealer is deemed to have substantial nexus with Tennessee if the dealer engages in the regular or systematic solicitation of Tennessee consumers through any means, and makes sales exceeding $500,000 to Tennessee consumers during the previous 12 months. The regulation requires out-of-state dealers meeting the threshold to register with the Department for sales and use tax purposes by March 1, 2017, and begin collecting and remitting Tennessee sales tax to the Department by July 1, 2017. The Department recently notified taxpayers that, consistent with the requirements of the new regulation, it has included a link on its web page to a new on-line registration application for remote sellers that meet the $500,000 threshold. The regulation is still subject to approval by the legislature so the collection requirement does not begin until July 1, 2017. The regulation received no recommendation during the Joint Government Operations Committee hearing and thus, will become part of the omnibus rules legislation to be considered by the legislature in the spring. While the legislature is expected to approve the regulation, no collection activity will be required if the legislature does not take action, and the regulation is allowed to expire. Remote sellers making any retail sales to customers located in Tennessee should consider whether their sales to Tennessee customers are sufficient to obligate them to register for, collect and remit the Tennessee sales tax. Taxpayers should be mindful that out-of-state sellers may owe Tennessee's Business Tax, which is imposed based upon a similar sales threshold.1 The Department currently uses sales tax filings as the primary tool to determine if an entity should be filing Business Tax returns. This sales tax registration process for out-state-sellers will potentially give the Department a new set of entities to review for Tennessee Business Tax filings. The Department may similarly begin reviewing Franchise and Excise tax filings of newly registered entities.
Document ID: 2017-0164 | |||||||||
