The following are abbreviated summaries of 2003 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 9 SB 541 - HB 887
This act defines, for sales and use tax purposes, "energy resource recovery facility" as a facility that produces energy in the form of steam or chilled water from controlled burning of any combustible materials, where such energy is to be used to heat or cool 5 or more separate buildings.
Effective date: April 2, 2003.
Public Chapter 87 SB 1175 - HB 1248
This act amends Tenn. Code Ann. Sections 67-2-112(b) and 67-4-1703 to provide a filing extension for armed forces personnel stationed outside the United States during Operation Enduring Freedom or other hostilities who are liable for Hall income tax or professional privilege tax. The extended filing deadline is ninety (90) days following the end of the hostilities or ninety (90) days after they are transferred from the combat zone, whichever comes first. No penalty or interest will accrue during the extension period for timely filed returns.
(This act also applies to property taxes, which are not administered by the Department of Revenue.)
Effective date: May 5, 2003.
Public Chapter 118 SB 1753 - HB 1808
This act amends Tenn. Code Ann. Section 67-1-1445 to expand the Commissioner's authority to contract with debt collection agencies or attorneys to collect unpaid taxes, penalties, interest, etc. Prior law extended this authority only to collection activities outside Tennessee. This act extends such authority to in-state collection activities as well.
The taxpayer would remain entitled to all administrative and judicial remedies provided by law.
Effective date: May 12, 2003.
Public Chapter 132 SB 375 - HB 1555
This act amends Tenn. Code Ann. Section 57-4-102(24) to broaden the definition of a "premier type tourist resort" at which the sale and consumption of wine and alcoholic beverages is authorized. Under the act, a "premier type tourist resort" includes a commercially operated recreation facility located adjacent to a navigational river which, among other characteristics, contains a minimum of 200 slips for boats, is located upon or adjacent to a public park or preserve, which park is at least 100 acres in size, and is located in a county with a population of at least 380,000 according to the 2000 federal census or any subsequent census.
Effective date: May 19, 2003.
Public Chapter 138 SB 1787 - HB 1721
This act amends Tenn. Code Ann. Section 67-4-1709 to provide that any municipal or county government can pay the professional privilege tax on behalf of its employees who are subject to the tax. This public chapter should be read in conjunction with public chapters 355 and 418, which provide that any employer, including any governmental entity, can pay the tax on behalf of its employees.
Effective date: May 19, 2003.
Public Chapter 164 SB 1746 - HB 1802
This act amends Tenn. Code Ann. Section 67-4-2015(b) to provide that quarterly estimated payments for franchise, excise tax purposes must equal at least twenty-five percent (25%) of the combined franchise and excise tax liability for the preceding tax year or twenty-five percent (25%) of the combined franchise and excise tax liability for the current year, whichever is less.
Effective date: May 19, 2003.
Public Chapter 176 SB 940 - HB 1305
This act expands the special sales and use tax allocation for sports authorities to apply where a new stadium is constructed by a local government for an existing minor league baseball franchise, Class AA or higher. It limits the special allocation of local sales and use tax to tax collected in excess of that collected in the year preceding the new stadium occupancy.
Effective date: May 22, 2003.
Public Chapter 202 SB 1595 - HB 1361
This act amends Tenn. Code Ann. Section 67-4-2109 and 67-4-2009 such that the job tax credit and the industrial machinery excise tax credit can be computed by a general partnership that establishes a call center in Tennessee placed in service on or after June 30, 2003 and that would otherwise qualify for the credits; provided however that the job tax credit will first apply in the tax year in which the business increases net full-time employment by 400 or more jobs. A partner in such general partnership that is subject to Tennessee franchise and excise tax and directly holds a first tier ownership interest in such partnership may then take a percentage of such credits equal to its percentage interest in the partnership. The credits passed to the partner shall be subject to all applicable provisions and limitations otherwise provided in Tenn. Code Ann. Sections 67-4-2109 and 67-4-2009.
Effective date: May 29, 2003 and applies to a qualifying partner's tax years ending on or after June 30, 2003.
Public Chapter 241 SB 1931 - HB 2003
This act amends Tenn. Code Ann. Section 67-6-504 to provide that any taxpayer who is required to remit sales and use tax in immediately available funds (generally by electronic funds transfer) must also file its sales and use tax returns electronically.
Effective date: June 2, 2003, but applies only to tax periods beginning on or after January 1, 2004.
Public Chapter 284 SB 284 - HB 1959
This act extends the sales and use tax credit for qualified headquarters facilities. It reorganizes the statute and provides definitions of terms specific to the headquarters credit. In addition, it enacts an alternative to the $50,000,000 investment requirement, allowing the credit in cases of an investment of $20,000,000 and creation of 200 new full-time jobs paying at least twice the average wage in the county or metropolitan statistical area.
Effective date: June 4, 2003, and applies to applications and plans filed on or after January 1, 2003. Expires December 31, 2006.
Public Chapter 294 SB 1806 - HB 1772
This act amends Tenn. Code Ann. Title 67, Chapter 4, by adding new statutory provisions relative to certain tobacco products.
Significant provisions of the act include the following:
1. Each tobacco product manufacturer (as defined in the statute) who produces cigarettes sold in Tennessee, whether directly or indirectly, must file a certification with the Commissioner of Revenue containing various information relative to its cigarette business, including certain information about its cigarette brand families.
2. The Commissioner of Revenue shall develop and make available for public inspection a directory listing all tobacco product manufacturers that have provided current and accurate certifications conforming to the requirements of the statute and all brand families that are listed in such certifications.
3. The act makes it unlawful for any person (a) to affix a tobacco tax stamp to a package or other container of cigarettes from a tobacco product manufacturer or brand family not included in the directory; or (b) to sell, offer, or possess for sale, in Tennessee, or import for personal consumption in Tennessee, cigarettes of a tobacco product manufacturer or brand family not included in the directory.
4. The act contains various provisions in which a non-participating manufacturer, in order to have its brand families included or retained in the directory, is required to appoint and continually engage an agent for service of process on whom all process, and any action or proceeding against it arising out of the enforcement of the act and Tenn. Code Ann. Section 47-31-101 et seq., may be served.
5. Licensed agents (i.e., persons authorized to affix tobacco tax stamps to cigarettes or persons required to pay the tobacco tax) must submit information to the Commissioner of Revenue as the Commissioner may require to facilitate compliance with the act.
6. The act makes it a Class B misdemeanor for a person to (a) sell or distribute cigarettes that the person knows or should know are intended for distribution or sale in Tennessee in violation of the act, or (b) acquire, hold, own, possess, transport, import, or cause to be imported cigarettes, that the person knows or should know are intended for distribution or sale in Tennessee in violation of the act.
7. The Commissioner of Revenue is authorized to revoke or suspend the license of a licensed agent who violates certain provisions of the act and may seize, as contraband, cigarettes that have been sold, offered for sale or possessed for sale in Tennessee or have been imported for personal consumption in Tennessee in violation of the act.
8. The Attorney General, on behalf of the Commissioner, may seek an injunction to restrain a violation of certain provisions of the act by a licensed agent and to compel the licensed agent to comply with the act.
9. The act affords licensed agents and tobacco products manufacturers certain rights with respect to the revocation or suspension of tobacco licenses, the seizure of contraband cigarettes, and the Commissioner's election to exclude or remove a brand family or tobacco products manufacturer from the directory.
Effective date: June 6, 2003.
Public Chapter 309 SB 751 - HB 1179
This act amends Tenn. Code Ann. Section 57-4-102(7) to broaden the definition of a club at which the sale and consumption of wine and alcoholic beverages is authorized. Under the act, a club includes a for-profit recreational club located in Hamilton County which, among other characteristics, has at least 175 members paying annual dues and has a clubhouse with not less than 3,000 square feet. A club also includes a for-profit recreational club located in Sumner County which, among other characteristics, is adjacent to a residential development consisting of at least 100 residential units and where the club property and the residential development consists of at least 200 acres.
Effective date: June 11, 2003.
Public Chapter 314 SB 924 - HB 1825
This act amends Tenn. Code Ann. Section 57-4-102(21) to expand the definition of a museum at which the sale and consumption of wine and alcoholic beverages is authorized. Under the act, a museum includes a building or institution located in Shelby County that, among other characteristics, serves as a tribute to soul music and houses a music academy.
Effective date: June 11, 2003.
Public Chapter 355 SB 1991 - HB 2073
This act makes numerous provisions relative to the state budget. Many of these provisions do not impact tax law or the Department of Revenue and are not mentioned here.
For most state shared taxes, this act reduces by 9% the amount of previously distributed to counties and municipalities and directs that amount to the state general fund. For the Hall income tax, the act reduces by one-third the amount distributed to counties and cities.
For excise tax purposes, the act amends Tenn. Code Ann. Section 67-4-2004 to expand the definition of "doing business as a financial institution" to include the holding of participation loans in which more than one lender is a creditor to a common borrower. It also expands the definition of "financial institution" to include an investment entity that is indirectly more than 50% owned by a holding company or a regulated financial corporation, or any other person that is carrying on the business of a financial institution. However, the definition of "financial institution" continues to exclude insurance companies.
It amends Tenn. Code Ann. Sections 67-4-1708 to repeal the professional privilege tax exemption for state and federal employees, making the tax payable on June 30, 2003 and on June 1 in subsequent years. It also amends Tenn. Code Ann. Section 67-4-1709 to provide that any employer, including any governmental entity, can choose to remit the professional privilege tax on behalf of its employees who are subject to the tax.
Effective date: For reduction of state-shared taxes, including income tax, August 1, 2003. For excise tax amendments, June 24, 2003, and applies to the period beginning January 1, 2003. (See Ch. 418). For professional privilege tax amendments, June 24, 2003.
Public Chapter 357 SB 899 - HB 832
This act makes numerous changes to the Retailers' Sales and Use Tax Act in order to conform Tennessee's laws to the Streamlined Sales and Use Tax Agreement. A section-by-section summary of the act is included.
STREAMLINED SALES AND USE TAX
Section-by-section summary of Public Chapter 357
Technical amendment to authorize refunds based on bad debts.
Deletes definition of "cost price."
Substitutes "purchase price" for "cost price" wherever that term appears in Title 67, Chapter 6. (See Sec. 15 for definition.)
Technical amendment to definition of "dealer" to include sellers who use certified tax collection software or certified service providers.
Deletes definition of "farm equipment" and machinery because of $250 threshold. Farm equipment and machinery exemption is preserved in Section 27.
Removes the $1000 threshold for the exemption for machinery used to remanufacture industrial machinery and adds a definition of "remanufacturing."
Amends the definition of "lease or rental."
Amends the definition of "mobile telecommunications service."
Amends the definition of "retail sale."
Amends the definition of "sale." Preserves but moves provisions in current law.
Amends the definition of "sales price."
Deletes the definition of "service address." Definitions for sourcing telecommunications are moved to another section (see section 74 of the bill).
Amends the definition of "tangible personal property."
Adds definitions of certified automated system, certified service provider, commercial air carrier, computer, computer software, delivery charges, direct mail, direct pay permit, direct pay permit holder, drug, durable medical equipment, electronic, local tax jurisdiction, mobility enhancing equipment, model 1 seller, model 2 seller, model 3 seller, prescription, prewritten software, prosthetic device, purchase price.
Deletes definitions related to sourcing of mobile telecommunications. Definitions for sourcing telecommunications are moved to another section (see section 74 of the bill).
Deletes special provision regarding allocation of sales tax revenue from cable television services.
Provides for allocation of revenue from sales tax on interstate telecommunication services sold to business.
Technical amendment to the list of taxable privileges. [Cable, wireless cable and satellite are deleted from the list of taxable privileges and subjected to a special privilege tax in Section 76].
Amends reference to single article for purposes of applying state single article cap.
Makes clear that vending machine sales are subject to tax as any other sale of tangible personal property.
Deletes special provisions relating to the taxation of distributors of catalogs and fliers and nexus of customers of in-state printers and mailers. The nexus provision is moved to a new code section by section 62 of the bill.
Deletes provision stating that providing tangible personal property with an operator constitutes a service, which the bill provides for in section 8 in the definition of "lease." Also deletes the provision exempting property used in flight training, which the bill provides for in section 48.
Amends description of tax base on sale of services to "sales price" instead of "gross charge."
Moves and makes certain amendments required by SSUTA to description of services subject to tax.
Provides complete exemption for, rather than reduced tax rates on, energy and water sold to manufacturers. (See section 75 below for special user tax.)
Amends exemption on farm equipment and related parts and service by limiting the exemption to farmers and nurserymen and moves exemptions for farm and nursery items listed elsewhere in TCA 67-6-102(9), 67-6-218 and 67-6-329.
Amends exemption on materials used for college construction to include local tax.
Amends description of tax base on sale of admissions and other amusements to "sales price" instead of gross receipts.
Replaces reduced rate on aviation fuel with the full state rate. (See sections 54, 60 and 75 below for treatment of commercial air carriers.)
Repeals reduced rate for energy fuels used in farming. Complete exemption provided in Section 27 of this Act.
Repeals reduced rate on sales to common carriers for use outside the state. (See sections 53, 60 and 75 below for sales tax exemption and special user tax for common carriers.)
Repeals special tax rate on interstate telecommunication service sold to business. (See section 18 for special allocation provisions.)
Repeals special tax rates on cable television service. (cable and wireless cable are exempted from sales and use tax and subjected to a special privilege tax. See Sections 19, 48 and 76).
Repeals special tax rates on satellite television service. (satellite television service is exempted from sales and use tax and subjected to a special privilege tax. See Sections 19, 48 and 76).
Technical amendments to definitions relating to reduced rate on food.
Moves to new section the existing tax treatment of sales to schools.
Moves to new section the existing tax treatment of pre-paid telephone calling cards, warranty contracts, and computer software.
Repeals separate section exempting insulin. Insulin exemption preserved in section 41 below.
Revises exemptions for various health related items.
Repeals separate section exempting oxygen. Oxygen exemption preserved in section 42 below.
Exempts prescription drugs, insulin and oxygen.
Exempts from state tax the sale of energy in the form of steam or chilled water sold by an energy resource recovery facility. An exemption from local tax is preserved in TCA 67-6-704. A privilege tax on the sale of energy in the form of steam or chilled water sold by an energy resource recovery facility at a rate equal to the state sales tax rate is imposed in Section 75 of this Act.
Removes reference to gasoline for agricultural purposes. This exemption is preserved in Section 27 of this act.
Repeals exemption on farm and nursery related items. These exemptions are preserved in Section 27 of this act.
Repeals $500 threshold on sales of caskets and burial vaults.
Deletes exemption for "school lunches" as a product. Exemption preserved as entity exemption in section 48 below.
Moves certain existing exemptions to new code section, and adds exemptions for certain food sold by a school. Exempts cable, wireless cable and satellite from sales and use tax as these sales are subjected to a special privilege tax in Section 76.
Technical amendment to description of tax base of certain miscellaneous exemptions.
Repeals $150 threshold for membership fees to recreation clubs or community service organizations.
Repeals due care requirement imposed on sellers of exempt railroad materials.
Defines "clothing" for purposes of exempting certain sales of used clothing.
Provides an exemption for qualified common carriers purchasing items for use outside of Tennessee. (See also sections 32, 60, 75).
Provides an exemption for commercial air carriers purchasing aviation fuel and an exemption for common carriers purchasing diesel fuel for use in locomotives and railcars. (See also sections 30, 60, 75)
Moves to new section the current exemption for computer software fabricated for one's own use.
Deletes reference to tax brackets.
Adopts exemption administration provisions.
Provides that each entity may not be required to file more than one return per month, permits computation of tax on item or invoice basis, and adopts rounding rule. Provides that any seller may choose to be a model 1 or 2 seller, that a seller who qualifies may be a model 3 seller. Provides for the rights and liabilities of certified service providers and model 1 and model 2 sellers.
Adopts SSUTA bad debt provision.
Requires common carriers and commercial air carriers to apply for certificate to make exempt purchases. (See also sections 30, 53, 54)
Provides that sellers have no liability for relying on erroneous data provided by commissioner on tax rates and tax jurisdiction boundaries, and that sellers may use zip codes to determine tax boundaries in certain situations. Provides that commissioner may require sellers to file additional, information returns twice each year, and that model 1, 2 and 3 sellers shall report and remit electronically. Provides for limited amnesty if a seller registers within one year of Tennessee become a member of the SSUTA. Provides that a purchaser's claim against a seller for over-collected taxes does not accrue until the purchaser gives notice to the seller.
Moves current law provision regarding nexus of out-of-state person using Tennessee printer or mailer.
Permits registration using central system provided by SSUTA member states. Provides that such registration is effective for all SSUTA member states.
Limits "single article" treatment to motor vehicles, aircraft, boats and manufactured homes.
Eliminates special local tax rates on industrial machinery, water used by manufacturers, farm machinery, and items sold to common carriers. Eliminates reduced local rate on interstate telecommunication services and repeals local tax exemption for interstate telecommunication services sold to business. Imposes reduced rate of local tax on sale of certain energy fuels delivered by the seller. Eliminates special local rate for sellers with no Tennessee location.
Repeals local tax exemption on fuels to electricity, piped natural and artificial gas, and heating fuels delivered by the seller. A reduced rate local tax is imposed on the sale of these items in Section 65. Exempts from local tax sale of energy by energy resource recovery facility.
Provides that new local tax may not go into effect for at least 60 days after enactment and must begin on the first day of a calendar quarter.
Repeals special allocation rules of local tax on tax remitted by sellers with no Tennessee location and on local tax on interstate telecommunication services.
Repeals local tax exemption for cable television service.
Authorizes taxpayers that pay business tax, franchise and excise tax, or sales and use tax to file a claim for refund for amounts paid on single articles of tangible personal property other than motor vehicles, aircraft, watercraft, modular and manufactured homes, if purchased for business use. The refund is limited to the difference in tax paid and the tax that would have been paid prior to the effective date of this act. Provides for, in the alternative, a credit to be taken on the taxpayer's sales and use tax return, if certain required information is provided to the Department by the taxpayer.
Enacts limitations on when a new local tax or a local rate change may go into effect, generally and with respect to catalog sales. Requires the commissioner to give notice.
Technical amendment re-defining "agreement" for purposes of provisions regarding the state becoming a member of the SSUTA.
Authorizes the commissioner to enter into the SSUTA. Re-enacts provisions regarding legal effect of agreement itself. Requires the commissioner to provide a data base of local jurisdiction boundaries and to participate with SSUTA member states to develop an address-based system for assigning local tax jurisdictions.
Enacts SSUTA sourcing rules for determining which state's and local jurisdiction tax applies to certain sales.
Enacts special user taxes to replace special sales tax rates not permitted under SSUTA: Water and utilities used by manufacturers, materials used in college construction, items purchased by common carriers for use outside the state, aviation fuel sold or used by commercial air carriers, diesel fuel sold to common carriers for use in locomotives and railcars in interstate commerce and energy purchased from energy resource recovery facility.
Enacts special privilege taxes to replace sales taxes on cable, wireless cable and satellite services.
Enacts special privilege taxes to replace sales taxes on the sale of dyed diesel fuel.
Defines "bundled transactions" for telecommunications industry and provides for sales tax treatment for those transactions.
Rewording of the "import/manufacture for export" provision in Sec. 67-6-313(a) to make clear the provision is retained, but applies only to goods where title, risk of loss, or possession passed to seller before importation.
Effective date: Sections 20, 64 and 70 are effective 1/1/06.
Statement of legislative finding for need of SSTA. Effective date: Unless a particular section has an effective date (See Sec. 81), effective first day of the second quarter following the effective date of the SSTA, but in no event prior to July 1, 2004.
The act does not modify the present provision allowing exclusion of trade-in allowances from the tax.
Public Chapter 358 SB 38 - HB 662
This act permits operators of vending machines vending merchandise for 25 cents or less, and operated for the benefit of a charitable non-profit organization, an option to pay, in lieu of sales tax, a gross receipts tax at the rate of one and one-half percent (1 ½%). It requires permanent registration of each taxpayer and each machine, for which the Department may charge $1 per machine plus $2 for each taxpayer. It defines "vending machine" for purpose of the act to mean a machine built so that only a fixed, predetermined price can be charged for the item dispensed by the machine and the machine cannot return or make change.
Effective date: July 1, 2003.
Public Chapter 367 SB 1472 - HB 1489
This act amends Tenn. Code Ann. Title 4, Chapter 29 to extend the sunset date for the Department of Revenue to June 30, 2008.
Effective date: June 17, 2003.
Public Chapter 375 SB 324 - HB 466
This act expands the list of unlawful activities set out in Tenn. Code Ann. Section 57-3-412(a)(3) concerning liquor and beer. Under this act, it is unlawful for any person under twenty-one (21) years of age to consume intoxicating liquor or beer. Also, it is unlawful for any person under twenty-one (21) years of age to transport beer for any purpose, provided that any person eighteen (18) years of age or older can do so in the exercise of this or her employment.
Effective date: June 23, 2003.
Public Chapter 386 SB 1577 - HB 1229
This act amends Tenn. Code Ann. Section 67-4-409(j) to provide that proceeds from the real estate transfer tax that are deposited in the state lands acquisition fund may be used for the redevelopment, renovation, and restoration of historic theaters owned by a governmental entity or a not-for-profit corporation or its controlled affiliate and listed on the National Register of Historic Places.
Effective date: June 23, 2003.
Public Chapter 418 SB 1874 - HB 1991
This act addresses several taxes administered by the Department of Revenue:
1. It repeals the requirements in Tenn. Code Ann. Sections 67-4-1004 and 67-4-1005 that sales tax indirectly generated by the 2002 cigarette and tobacco tax increases be deposited only in the general fund.
Effective date: June 24, 2003.
2. It amends Tenn. Code Ann. Section 67-4-709 to make it clear that the 2002 business tax increase applies to transactions occurring on or after September 1, 2002.
Effective date: June 24, 2003.
3. It amends Tenn. Code Ann. Section 4-18-103 to make it clear that the False Claims Act does not apply to taxes administered by the Department of Revenue.
Effective date: June 24, 2003.
4. It amends Tenn. Code Ann. Section 67-3-1501 to change the renewal period on licenses for governmental agencies to purchase petroleum products tax exempt from three (3) years to four (4) years.
Effective date: June 24, 2003.
5. It amends the Tenn. Code Ann. Title 67, Chapter 6, to provide a credit from sales and use tax for the amount of sales and use tax due on tobacco buydown payments included in the sales price of tobacco sold at retail.
Effective date: June 24, 2003 but applies to all taxes assessed on or after January 1, 2002.
6. It amends Tenn. Code Ann. Sections 67-4-1708 to repeal the professional privilege tax exemption for state and federal employees, making the tax payable on June 30, 2003 and on June 1 in subsequent years. It also amends Tenn. Code Ann. Section 67-4-1709 to provide that any employer, including any governmental entity, can choose to remit the professional privilege tax on behalf of its employees who are subject to the tax.
Effective date: June 24, 2003.
7. It amends Tenn. Code Ann. Section 67-1-1438 to provide that no claim or cause of action to challenge a tax assessment or seek a refund shall arise based on the Department's procedures for signing or recording the liability of a taxpayer in the office of the Department.
Effective date: June 24, 2003 and applies to all currently pending or future lawsuits except for those currently pending suits in which a challenge to the assessment based on the department's recording procedures was specifically alleged in either the plaintiff's complaint, interrogatories, requests for production of documents, or requests for admissions prior to May 1, 2003.
8. For excise tax purposes, the act amends Tenn. Code Ann. Section 67-4-2004 to expand the definition of "doing business as a financial institution" to include the holding of participation loans in which more than one lender is a creditor to a common borrower. It also expands the definition of "financial institution" to include an investment entity that is indirectly more than 50% owned by a holding company or a regulated financial corporation, or any other person that is carrying on the business of a financial institution. However, the definition of "financial institution" continues to exclude insurance companies.
Effective date: June 24, 2003 and applies to the period beginning January 1, 2003.
Senate Joint Resolution 184
Encourages Congress to enact legislation that would permit a federal income tax deduction for state and local sales tax paid by residents of states without a general Hall income tax.
Signed by the Governor April 2, 2003.