Avalara Taxrates > Blog > Sales Tax News > Expanding Retail Accountability in Tennessee - Avalara

Expanding Retail Accountability in Tennessee

 If you look for it hard enough, you might find it.

The Retail Accountability Program (RAP) launched in Tennessee in 2012 and has been working well ever since, according to the Tennessee Department of Revenue. It assists the Department with monitoring sales tax collections and remittances.

Wholesalers have been required to maintain records of sales to retailers since 1947, when sales tax was introduced in Tennessee. RAP adds a reporting requirement for wholesalers of beer and tobacco: they must electronically file beer and tobacco sales information reports with the Department of Revenue. The Department then uses that information to review retail sales tax accounts and identify under-reporting. “The identification of non-compliance has led to over $60 million in additional sales tax collections through the end of 2015.”

October 2015 expansion

The following reporting requirements were added in October 2015 due to the enactment of Senate bill 107 (Public Chapter No. 342):

  • Beer or tobacco wholesalers that also sell food or beverages must include records of those sales in the information reports.
  • Non-beer and non-tobacco wholesalers that make sales for resale of $500,000 or more per year must report food and beverage sales to the Department if these items are sold on a resale certificate to retailers that sell beer or tobacco products. Any edible product, including candy, should be included in the food and beverage category.

It is not necessary for wholesalers to report non-food, non-beverage (other than tobacco) products. However, if it is more convenient to report this information along with the required information, it is permitted.

Sales or transfers made to affiliates are exempt from the above reporting requirements. See the Tennessee Department of Revenue for additional compliance information and information for wholesalers.

Expanded controversy

The expansion of the Retail Accountability Program is being challenged. A coalition of statewide business associations is lobbying for “a scrap-the-RAP-expansion bill that also imposes a formal rule-making process on the original program.” According to Bob Ikard, president of the Tennessee Grocers & Convenience Store Association, the program is not as it was billed. “It ended up applying to wholesalers and suppliers of just about every item that’s in [most big-box, grocery, and pharmacy retailers] and it became a really burdensome reporting requirement for the wholesalers and suppliers.” Critics say the program has been expanded to more than 21 new areas, including “anything from paper towels to possibly even furniture.” The legislation authorizes information reports for beer, tobacco products, “or other categories or types of tangible personal property, as may be designated form time to time by the commissioner” [emphasis mine].

Officials with the Department of Revenue are staunchly defending both the original program and the expanded one. They know “there’s a population that hasn’t been complying” and underscore that the point of the program is to increase compliance. Deputy Commissioner David Gerregano reminds that RAP has already generated “at least $60 million in sales tax that is paid by the consumer to retailers but would not have otherwise paid over to the state.” He also says the Department is listening to taxpayer concerns: the category on non-edible grocery items (like paper towels), for example, has been removed.

Simplify sales and use tax reporting in all states with sales tax software (SaaS). Learn more.

photo credit: Taxes - Illustration via photopin (license)

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.