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Tennessee Governor Seeks Level Sales Tax Playing Field

  • Feb 12, 2015 | Gail Cole

 Proposed legislation in Tennessee could extend sales tax to certain remote vendors.

In his 2015 State of the State Address, Tennessee Governor Bill Haslam told listeners that state revenue collections declined sharply in 2014. He chalked this up to the “natural volatility of business taxes in general,” unaccounted for reimbursements of overpayments, and unfair sales and business taxes.

Specifically, the governor noted that “companies outside of Tennessee, but that do business in Tennessee, aren’t always required to pay the same taxes that our in state and homegrown companies do.”

His proposed solution is the Revenue Modernization Act, “which aims to level the playing field in terms of sales tax and business taxes.” It was introduced to the Tennessee General Assembly earlier this week as companion bills SB 603 and HB 644.

Republican Senator Mark Norris released the following statement about his bill:
“The Revenue Modernization Act would help keep Tennessee a low tax state by leveling the playing field between in-state companies and out-of-state companies doing business in Tennessee. The proposal would also seek to close certain loopholes by adapting to changes in the way products are bought and sold. The proposed legislation includes:

  • Addressing “nexus” in sales and use, franchise and excise, and business taxes;
  • Adopting market-based sourcing of services to determine which state counts the sale of service for tax purposes when a company conducts business in more than one state;
  • Making Tennessee’s tax structure more competitive with surrounding states by changing the way a multi-state company’s income and net worth is taxed for franchise and excise purposes;
  • And allowing the use of software and video games being accessed remotely to be subject to sales tax as if they had been purchased or downloaded.”

Tennessee is not the only state interested in obtaining sales tax revenue from remote sales. In January, Illinois enacted legislation that expands the definition of out-of-state seller and fulfillment centers in Tennessee).

In the meantime, federal lawmakers are making little progress on legislation that would grant all states the right to collect sales tax from out-of-state vendors doing a certain amount of business in the state. The latest proposal, the Online Sales Simplification Act of 2015, is quite different from the Marketplace Fairness Act, which was passed by the Senate in May 2013 before being shelved by Congress.

Stay on top of sales tax changes in all states by implementing automated sales tax Software-as-a-Service (SaaS). Learn more.

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Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.