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Tennessee challenges Quill


 Tennessee is working to create economic nexus to increase remote sales tax revenue.

Update 10.12.2016: The Tennessee Department of Revenue has adopted a new economic nexus policy requiring certain out-of-state sellers to collect and remit Tennessee sales and use tax. Additional information.

The Tennessee Department of Revenue (DOR) has been collecting Tennessee sales and use tax from out-of-state vendors engaged in certain nexus-creating in-state activities for more than a decade. Now the DOR is seeking to create an economic nexus threshold, which will make it even more challenging for remote vendors to avoid collecting tax.

The department recently submitted for review a new sales and use tax regulation entitled “Out-of-State Dealers,” which will be filed and available here by the end of next week. In so doing, it joins Alabama and South Dakota and several other states that are directly challenging the physical presence requirement upheld in the 1992 Supreme Court ruling, Quill Corp. v. North Dakota.

Under the proposed regulation, out-of-state dealers are considered to have substantial nexus with Tennessee when they do both of the following:

  • Engage in the regular or systematic solicitation of consumers in Tennessee through any means, and
  • Make sales to consumers in Tennessee that are in excess of $500,000 during any calendar year

If the proposed policy becomes actual policy, all businesses meeting the economic nexus threshold must register with the DOR by March 1, 2017, and report and pay all applicable sales and use tax on “tangible personal property and other taxable items delivered to Tennessee consumers by July 1, 2017, unless a later date is established by the DOR via notice.” Additional information.

Sales tax software (SaaS) ensures your business is collecting and remitting all applicable sales and use taxes. Learn more.

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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.