The following are abbreviated summaries of 2002 legislative changes to the laws administered by or affecting the Department of Revenue. The language used is not quoted verbatim from the law or the amendments and should not be used as a substitute for the formal text.
For a complete copy of a particular public chapter, please visit the Secretary of State's Web site.
Public Chapter 492 SB 2274 - HB 2341
This Act amends Tenn. Code Ann. Section 67-4-1907 to provide that, in administering and enforcing the local Rental Car Tax, the county clerk shall have the powers provided in Title 67 including the power to collect penalty and interest to the same extent as is provided in Tenn. Code Ann. Section 67-4-1408 for the hotel occupancy tax (12% per annum interest, 1% per month penalty).
If a local government creates a sports authority that issues bonds to pay costs incurred in modification or construction of a facility for a National Basketball Association member professional basketball team, all revenues by the county from the Rental Car Tax surcharge or tax shall be transferred monthly to a fund of the sports authority to be applied to payment of principal and interest on such bonds and other costs of the sports authority. If the amount transferred each year exceeds the bond principal and interest and other costs, the surplus is to be deposited in a fund to be held for future costs of the sports authority. When the bonded indebtedness and other costs are paid in full, then the tax revenue will be deposited in the NBA Arena Fund and applied in accordance with the provisions of the law governing that fund and shall terminate in accordance with applicable law.
This Act applies only to the Shelby County local Rental Car Tax found in Tenn. Code Ann. Section 67-4-1907. It has no application to the state Rental Car Tax administered by the Department of Revenue and found in Tenn. Code Ann. Section 67-4-1901 et seq. It affects the Department of Revenue only to the extent that someone may confuse it with the state Car Rental Tax that the Department administers.
Effective 2-20-02 for purposes of approving or rejecting its provisions, but otherwise, the Act shall have no effect unless approved by two-thirds vote of the County Legislative Body before January 1, 2003.
Public Chapter 555 SB 2435 - HB 2386
This Act amends Tenn. Code Ann. Section 67-4-719(b) to authorize adoption of delinquent business tax collection procedures by two-thirds vote of the governing body of a municipality or county. Prior law permitted such an adoption only by a county.
Public Chapter 559 SB 2013 - HB 2159
This Act amends Tenn. Code Ann. Section 67-4-603 to provide that collection of the Tennessee litigation tax on civil appeals is to occur at time the appeal is docketed, except when such appeal is brought pursuant to a pauper's oath. Tenn. Code Ann. Sections 67-1-801(a), and 67-1-804 are amended to provide that penalty and interest does not apply to delinquent or deficient litigation taxes collected by the clerk of an appellate court.
Public Chapter 599 SB 2960 - HB 2913
This Act amends Title 67, Chapter 1, Part 1 to add a new Section that requires all persons and entities to keep and preserve suitable records from which the taxpayer and the Commissioner of Revenue can determine the Tennessee tax liability. Such records must be open for examination by the Commissioner or agents of the Commissioner at reasonable hours and, if the records are in electronic format, the taxpayer must comply with reasonable requests to provide those records in standard record format. Taxpayers failing to comply with these provisions will be assessed taxes plus applicable penalty and interest on the best information available to the Department of Revenue and the taxpayer shall have the burden of showing by clear and cogent evidence that such an assessment is incorrect.
Public Chapter 614 SB 2959 - HB 2912
Act amends Tenn. Code Ann. Section 67-1-1707 to permit the Department of Revenue to disclose a return or tax information in response to a subpoena properly served under the Federal or Tennessee Rules of Criminal Procedure.
Public Chapter 647 SB 2327 - HB 3079
This Act amends Tenn. Code Ann. Section 57-4-102(32) to broaden the definition of a "motor speedway" so that a motor speedway located in Shelby County is authorized to serve alcoholic beverages for consumption on premises.
Public Chapter 649 SB 2388 - HB 2530
This Act amends Tenn. Code Ann. Sections 39-13-101, 39-13-102, and 39-13-111 to impose additional $200 fine against persons convicted of domestic type assault or aggravated assault and provides that revenue raised from the additional fine is to be appropriated by the general assembly for funding family violence shelters and shelter services.
This funding is in addition to the amount appropriated from the marriage license fee and forwarded by the county clerk to the Commissioner of Revenue under Tenn. Code Ann. Section 67-4-411.
The one-time cost incurred by the Department of Revenue for changes to the information systems that are necessary to implement the provisions of the Act are to be deducted from the revenue collected during the first year from the additional fines imposed by the Act.
Effective July 1, 2002, signed by the Governor 4-24-02.
Public Chapter 661 SB 2643 - HB 2118
This Act amends Tenn. Code Ann. Section 57-4-102(10) to redefine a "convention center" so that the Manchester convention center is authorized to sell alcoholic beverages for consumption on the premises.
Public Chapter 664 SB 2419 - HB 2451
This Act amends Tenn. Code Ann. Sections 67-5-2011, 67-4-113 and 67-2-112 to provide special property tax and Hall income tax provisions with regard to military personnel involved in Operation Enduring Freedom. Property taxes owed by a person in the armed forces of the United States and engaged in hostilities outside the United States are not due until 90 days following the conclusion of such hostilities or 90 days after the person is transferred from the theater of operations of such hostilities, whichever is sooner.
The property tax is not administered by the Department of Revenue, but the Act requires a person claiming the delay for payment of property taxes to apply to the Commissioner of Revenue on or before the tax due date. If the application is approved, the Commissioner will give notice to the city and county collecting officials and to the clerk and master of the chancery court.
The amendment to Tenn. Code Ann. Section 67-2-112(b) expressly applies to Operation Enduring Freedom, the already existing Hall income tax provisions regarding Operations Desert Storm and Desert Shield that permit delay in the filing of a Hall income tax return and payment of the tax when the taxpayer is in the active military service of the United States armed forces outside the United States during a period of hostilities.
The amendment to Tenn. Code Ann. Section 67-4-113 permits the Commissioner to promulgate rules and regulations concerning any delay of time limitations affecting taxpayers that are members of the United States armed forces outside the United States during a period of hostilities. The Commissioner is also permitted to give notice to the media or to branches of the armed services in which taxpayers affected by the Act may serve.
Effective 7-1-02, signed into law by the Governor 4-24-02.
Public Chapter 672 SB 3127 - HB 2853
This Act amends Tenn. Code Ann. Sections 57-3-404(h) and 57-3-406(f) to permit retailers of alcoholic beverages to store open bottles or damaged containers of unmarketable products for the purpose of returning them to a wholesaler or for conducting a sales demonstration. A wholesaler or his representative is permitted to conduct sales demonstrations on the premises of a licensed retailer and, for this limited purpose, may offer free samples to employees of the licensed retailer for consumption on the premises. A retail licensee is also allowed to conduct such a sales demonstration for his employees using products provided by a wholesaler.
Public Chapter 676 SB 3050 - HB 2940
This Act amends Tenn. Code Ann. Section 57-4-102(17) to define a "premier type tourist resort" for purposes of authorizing sale and consumption of alcoholic beverages on the premises of Telliquah Resort in Tellico Plains, Monroe County.
Public Chapter 678 SB 3039 - HB 3014
This Act amends Tenn. Code Ann. Section 67-4-409 to revise procedure for calculating the recordation tax due on secured property located partially in and partially outside Tennessee. As an optional method, the tax may be apportioned on the basis of a formula, the denominator of which is the value of all collateral and the numerator of which is the value of Tennessee collateral. The ratio so obtained is applied to the indebtedness to compute the taxable Tennessee indebtedness. For of the apportionment calculation described in the statute, the terms "collateral," "mobile goods," "taxable Tennessee indebtedness," "Tennessee collateral," "total collateral" and "value" are defined.
Public Chapter 679 SB 2913 - HB 3037
This Act amends Tenn. Code Ann. Section 57-4-102(17) to expand the definition of a "premier type tourist resort" for purposes of authorization of sales and consumption of alcoholic beverages. The expanded definition will include a facility in Loudon County.
Public Chapter 688 SB 2137 - HB 2119
This Act amends Tenn. Code Ann. Section 67-8-104 to provide that no law shall be construed to limit the Tennessee gift tax exemption applicable to contributions made on behalf of beneficiaries under the Tennessee Baccalaureate Education System Trust Act. (See: Tenn. Code Ann. Section 49-7-801 et seq.) Such contributions are completely exempt from the gift tax Tenn. Code Ann. Section 49-7-822.
Public Chapter 705 SB 3125 - HB 2320
This Act amends Tenn. Code Ann. Section 57-4-102(32) to broaden the definition of a "motor speedway" for purposes of authorization to sell alcoholic beverages for consumption on the premises. Under then new definition, a "motor speedway" would, among other things, have to be a facility situated on at least 500 acres.
Public Chapter 708 SB 2183 - HB 228
This Act amends Tenn. Code Ann. Section 67-6-102(29) to provide that "tangible personal property" does not include signals broadcast over the airwaves.
Public Chapter 714 SB 2840 - HB 3028
This Act amends Tenn. Code Ann. Section 67-6-222 to provide that a telephone cooperative experiencing a tax savings solely as the result of receiving an ad valorem tax equity payment shall implement a revenue distribution to its patrons. This distribution is to be made pursuant to Tenn. Code Ann. Section 65-29-121 in the form of a cash refund, a capital credit, a general rate reduction, or a combination of a cash refund and a capital credit.
Public Chapter 718 SB 2514 - HB 2506
This Act amends Tenn. Code Ann. Sections 67-4-1425 and 67-4-503 to remove the prohibition on city and county multiple taxation of same privilege with respect to the hotel occupancy tax and certain gross receipts taxes in circumstances where the city has constructed a qualifying project under the Convention Center and Tourism Development Financing Act of 1998.
The Department of Revenue does not administer the hotel occupancy tax, but would be affected by the Act to the extent that it does administer certain gross receipts taxes levied by cities and counties.
Effective 5-1-02, became law without Governor's signature.
Public Chapter 719 SB 2812 - HB 3013
This Act amends Title 67, Chapter 6, Part 5 and Tenn. Code Ann. Sections 7-86-108, 67-6-102, 67-6-501, 67-6-702, and 67-6-710 to bring Tennessee into conformity with the federal Mobile Telecommunications Sourcing Act (4 U.S.C. 116 et seq.) enacted in 1999. The Act does the following:
- Provides for a uniform 2.5% local sales tax rate on all intrastate telecommunication services.
- Sources mobile telecommunication services to Tennessee if the charges for such services are billed to or charged to a service address in Tennessee if the customer's place of primary use is located in Tennessee without regard to where the service actually originates or terminates. If the customer's place of primary use is not located in Tennessee such charges are not subject to the tax.
- Provides that 50% of the local sales tax on intrastate telecommunication services will be distributed to each city based on the ratio that the population of each bears to the aggregate population of the state and to counties in the proportion that the population of unincorporated areas of the county bears to the aggregate population of the state.
- Provides that 50% of the local sales tax on intrastate telecommunication services will be distributed to the counties based on a ratio of local tax collections in the county over total tax collections in all counties.
Effective 5-1-02, became law without Governor's signature.
Public Chapter 721 SB 375 - HB 1056
This Act amends Titles 6, 7, 65 and 67 to allow an electric cooperative to enter into or remain in the retail sale and distribution of liquified petroleum gas and certain related services if such is provided by a for-profit corporation, limited liability company, limited partnership, or limited liability partnership. The for-profit entity is liable for applicable federal and state taxes. All costs of doing business must be borne by the for-profit entity. The Act does not apply to the sale and distribution of propane in relation to or for use in fuel cell or other power generation devices.
Effective 1-1-03, signed by the Governor 5-8-02.
Public Chapter 729 SB 2786 - HB2856
This Act amends Tenn. Code Ann. Section 67-4-2107(b) to allow a taxpayer to deduct from its Tennessee franchise tax net worth base the value of an interest held in any other taxpayer paying the gross premiums tax levied under Tenn. Code Ann. Sections 56-4-205 or 56-4-206 against certain insurance companies doing business in Tennessee including insurance companies writing workers' compensation insurance.
Public Chapter 742 SB 2927 - HB 2941
This Act amends Tenn. Code Ann. Sections 48-101-610 and 48-248-401 to allow certain optometrists, podiatrists and physicians, except for radiologists, pathologists or anesthesiologists, to form and own shares in a professional limited liability company to provide health care services to their patients.
Effective 7-1-02, signed by the Governor 5-8-02.
Public Chapter 744 SB 2036 - HB 3101
This Act amends Tenn. Code Ann. Section 57-5-109 to clarify the definition of phrase "on the same location" for the purpose of previously existing beer permits issued to businesses near a school, residence, church or other place of public gathering. Under this Act, the phrase means within boundaries of parcel or tract on which business is located as of January 1, 1993. Existing law provides that the prohibition against revoking a previously existing beer permit does not apply if beer is not sold, distributed or manufactured at that location during a 6 month period after January 1, 1993. The Act states that, if a business applies for a beer permit within 6 months after January 1, 1993 and such permit is denied and the business appeals, a new 6 month period begins to run on the date when the appeal of the denial is final.
Public Chapter 832 SB 272 - HB 451
This Act amends Tenn. Code Ann. Section 57-4-102 with regard to service and consumption of alcoholic beverages by the drink.
For this purpose, the definition of a "club" at which such beverages may be sold is expanded to include a facility that:
- Is owned by a for-profit corporation incorporated in Tennessee prior to 9-30-2000 as a private club that does not discriminate on the basis of gender, race, religion or national origin; and
- Is located within 3 miles of a municipal golf course in Knox county; and
- Has, on July 3, 2002, at least 300 members paying annual dues; and
- Is in a building having at least 1,800 square feet and has a kitchen and dining area to seat at least 75 people.
The Act also amends the definition of a "sports Authority facility" in which wine or alcoholic beverages may be sold to include a facility owned or operated by a public building authority or governmental entity if it otherwise qualifies under the law.
The definition of a "suite" where wine or alcoholic beverages may be sold or distributed in unsealed containers is defined as a room or group of rooms leased by the operator of a sports authority facility or convention center that are physically located in the facility or center but to which access is restricted to the lessee or his guests.
The Act also amends Tenn. Code Ann. Section 57-4-203(e)(1) to permit the sale and distribution of wine and alcoholic beverages in unsealed containers to an occupant of a suite located in a sports authority facility or convention center provided that such occupant is at least 21 years of age, does not remove the wine or alcoholic beverages from the facility and is authorized by the lessee of the suite to receive them.
Public Chapter 836 SB 1708 - HB 1430
This Act amends Tenn. Code Ann. Section 67-6-334(b) to provide that in situations where an owner of a residential unit does not advise the electric utility that the unit is being used for a purpose that would cause the sale of electricity to the unit to be subject to sales and use tax, the owner, rather than the electric utility, will be liable for the tax, penalty or interest due.
Effective: August 12, 2002. (Note that Section 2 of the Act provided that it would take effect July 1, 2002. However, the Governor did not sign the Act into law until July 3, 2002. An Act cannot become effective before it is signed into law unless its retroactivity is specifically stated in the Act itself. Accordingly, pursuant to Article II, Section 20 of the Tennessee Constitution, this Act will become effective August 12, 2002 which is 40 days after the Governor signed it into law.
Public Chapter 856 SB 3110 - HB 3046
Chapter 856 of the Public Acts of 2002 enacted tax legislation for the purpose of funding the state budget for the fiscal year beginning July 1, 2002 and ending June 30, 2003. Major features of the Act are as follows:
- Amends Tenn. Code Ann. Section 57-3-302(a) to increase the tax on the sale or distribution of wine by 10% from $1.10 to $1.21 per gallon. Effective 7-15-02.
- Amends Tenn. Code Ann. Section 57-5-201(a)(1) to increase the tax on the sale, storage, distribution or manufacture of beer 10% from $3.90 to $4.29 per barrel. Effective 7-15-02.
- Amends Tenn. Code Ann. Section 57-3-302(b) to increase the tax on the sale or distribution of spirits by 10% from $4.00 to $4.40 per gallon. Effective 7-15-02.
- Amends Tenn. Code Ann. Section 67-4-1004(a) to increase the price of cigarette tax stamps purchased by every dealer or distributor of tobacco products to $.01 per cigarette. This is an increase from $.13 to $.20 for a pack of 20 cigarettes or from $.16.25 to $.25 for a pack of 25 cigarettes. Effective 7-15-02.
- Amends Tenn. Code Ann. Section 67-4-1005 to increase the tax on tobacco products or any substitute therefore, such as cigars, cheroots, stogies, beedies, bidis, manufactured tobacco and snuff, to 6.6% of the wholesale cost price. Effective 7-15-02.
- Effective September 1, 2002, repeals the coin-operated amusement law found in Tenn. Code Ann. Section 67-4-507 and enacts the "Coin-Operated Amusement Machine Tax Act" which will be codified as Tenn. Code Ann. Section 67-4-2201 et seq. and which contains the following requirements:
- An owner of a coin-operated amusement machine in commercial use must annually affix to each machine a $10 sticker issued by the Commissioner of revenue to evidence payment of the machine tax.
- An owner of coin-operated amusement machines must obtain a Master License from the Department of Revenue and pay an annual tax as follows:
- Level One License: $500 for 50 or fewer machines.
- Level Two License: $1,000 for more than 50 but not in excess of 200 machines.
- Level Three License: $2,000 for more than 200 machines.
- Tenn. Code Ann. Section 67-4-2006 is amended to require depreciation for Tennessee excise tax years ended on or after July 15, 2002 to be computed under the federal provisions of Title 26 U.S.C.A., Section 168 as it existed and applied immediately prior to the passage of the Job Creation and Worker Assistance Act of 2002. This means that the 30% first year depreciation allowed for federal purposes under the Job creation and Worker Assistance Act of 2002 found in Title I U.S.C.A., Section 101 will not be allowed for Tennessee excise tax purposes for tax years ended on or after July 15, 2002.
If this computation of depreciation for Tennessee excise tax purposes results in less depreciation than has been expensed in the computation of federal net earnings, the difference between federal deprecation and depreciation for excise tax purposes must be added to federal net earnings in computing the excise tax base. If this computation of depreciation for Tennessee excise tax purposes results in more depreciation than has been expensed in the computation of federal net earnings, the difference between federal depreciation and depreciation for excise tax purposes must be deducted from federal net earnings in computing the excise tax base.
- Effective for tax years ended on or after July 15, 2002, the Tennessee excise tax rate applicable to net earnings will increase from 6% to 6.5%.
- Effective July 15, 2002, the following changes will take place in Tennessee sales and use tax rates:
- Unless otherwise provided by law, a 7% state sales and use tax rate will apply to the sale of tangible personal property and taxable services. However, the 6% state sales tax rate will continue to apply to the sale of all food and food ingredients except for candy, dietary supplements, prepared food, beer, wine, alcoholic beverages, cigarettes, cigars and other tobacco products as those terms are defined by law.
- The local sales and use tax rates will continue to apply in the same way that they always have to the first $1,600 of each single article of tangible personal property sold.
- A new 2.75% state sales and use tax rate will apply to the amount in excess of $1,600 but not in excess of $3,200 of the sale or use of any single article of tangible personal property.
- Tangible personal property sold to or used by a contractor, subcontractor, or material vendor, including rentals thereof and labor or services performed in the fabrication, manufacture, delivery, or installation, is subject to the 6% state rate plus the local option tax in effect on July 1, 2002 when the property is sold or used solely in performance of a lump sum or unit price construction contract entered into prior to July 15, 2002, or awarded by the state or a political subdivision pursuant to a bid opening which occurred prior to July 15, 2002.
- Sales or use of tangible personal property under the conditions described in (d) above by a subcontractor entering into a written subcontract prior to September 1, 2002 will receive the same tax treatment as described in (d) above if the subcontract is made pursuant to a general contract qualifying for the reduced rate.
- A contractor or subcontractor qualifying for the reduced sales tax rate under the conditions described in (d) and (e) above must pay the sales tax at the increased rate but may file a refund claim with the Commissioner of Revenue for any tax paid in excess of the 6% rate or in excess of the local option sales tax rate in effect on July 1, 2002 where the sale took place.
- Effective July 15, 2002, the vending machine gross receipts tax levied by Tenn. Code Ann. Section 67-4-506 is repealed and sales made from any vending machine or device are subject to the sales tax.
- The professional privilege tax levied by Tenn. Code Ann. Section 67-4-1703 is increased from $200 annually to $400 annually, effective July 15, 2002, with full time state employees being exempt from the tax.
- Certain taxes applicable to motor vehicles are increased. However, these taxes are administered by the Department of Safety rather than the Department of Revenue.
- Effective for tax years ended on or after September 1, 2002, the maximum Business Tax rates are increased by 50% with the increase going to the state general fund. Personal property taxes paid may not be taken as a credit against the state portion of the increase.
- The Commissioner of Revenue is authorized to waive any tax liability and associated interest and penalties imposed for failure to timely pay taxes levied pursuant to Chapter 856 of the Public Acts of 2002. To qualify for such a waiver, the vendor must show to the satisfaction of the Commissioner of Revenue that the noncompliance unavoidably and directly resulted from the close proximity of the effective date of the Act with implementation of the increase in tax rates, items, or activities taxed pursuant to the Act.
- An independent Tax Study Commission is created to perform a comprehensive study of the entire system of taxation in Tennessee and to report its findings, recommendations and any proposed legislation to the Chief Clerks of the House and Senate by July 1, 2004 at which time the Commission will cease to exist.
As of Jan. 1, 2008, the sales tax rate on food was changed to 5.5%. Please see notice 07-14 for more information.