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Tennessee Nexus Bill With A Twist Passes House


UPDATE: 3/23/2012. Governor Bill Haslam signed HB 2370 into law.

UPDATE: 3/9/2012--House Bill 2370 was approved by the Tennessee Senate as SB 2232.

February 16, 2012, the Tennessee House of Representatives “…pushed legislation through the House…that will help Tennessee develop and maintain 3,500 jobs in the State.” House Bill 2370 (HB2370), “…establishes requirements for determining whether certain affiliates have physical presence in this state sufficient to establish nexus for sales and use tax purposes.”

This bill has an expiration date. According to the introductory paragraph, this will is to be repealed January 1, 2014. So what does the bill actually state?

In general, according to Tennessee State law, “…an affiliate is a business that, through one or more intermediaries, controls, is controlled by, or is under common control with another business. A business controls another business if that business holds more than a 50 percent ownership interest in the other business.”

Although this definition would fit Amazon, the bill specifically delays the sales tax collection requirement of those businesses fitting the description of having an affiliate in the state. The bill states, “…the activities of a business's affiliates in Tennessee, including the sale of tangible personal property for resale and other non-retail activities, may not be considered in determining whether the person has a physical presence in Tennessee sufficient to establish nexus for sales and use tax purposes.”

The bill is “…an effort to codify the agreement reached last year between Governor Bill Haslam and officials from Amazon.com Inc.” The bill is intended to ensure the Internet retailer continues with their plans to build several fulfillment houses and bring up to 3,500 new jobs to the state by delaying the requirement to charge, collect and remit sales tax on purchases by Tennessee residents.

The bill gives Amazon specifically and any other internet retailer with physical presence (nexus) in Tennessee who meets the criteria, a holiday from collecting taxes until January 1, 2014, when all businesses that fall under the affiliate definition mentioned above will be required to collect and remit sales tax. According to the Chattanoogan, "...this legislation will ensure the online retail giant will pay Tennessee sales taxes if a national online sales tax law is not passed by the federal government by 2014." The bill clarifies that "...the new Amazon fulfillment centers located across the State will meet the requirement for establishing nexus in Tennessee."

Internet Retailers Without Nexus Required to Notify Purchasers

In addition to the specifics that came from Governor Haslam’s agreement with Amazon, the bill specifies that online retailers who have no nexus affiliation with the state must “…notify such purchasers in a confirmation email that the purchaser may owe Tennessee use tax on the total sales price of the transaction,” and include a link to the Tennessee Department of Revenue’s website. The business must also “…provide to each purchaser to whom tangible goods were delivered in this state a statement of the total sales made to the purchaser during the preceding calendar year. The person must provide the notice for calendar year 2011 within 60 days after the effective date of this bill and by February 1 of each subsequent year.”

The bill is now being considered by the Tennessee Senate.

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Avalara Author
Susan McLain
Avalara Author Susan McLain
Susan McLain began her career as a technical writer in technology industries such as satellite networking and medical devices. Her skills encompass technical and marketing writing, usability engineering, verification and validation testing and protocol writing, requirements development, business analysis, technical illustration/graphic design and marketing. She has owned her own business providing service to small to medium sized business and in other positions, she has been in project management, documentation and marketing. She is currently the content specialist for Avalara helping to “make sales tax less taxing.”