United States

Tennessee: Signed House Bill 534 Reduces Sales Tax on Food: Allows Manufacturers to Elect Single-Receipts Factor Apportionment

May 01, 2017
From KPMG TaxWatch

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On April 26, 2017, House Bill 534, the so-called IMPROVE Act was signed into law by Governor Haslam. Many of the tax and fee changes in the bill, such as increases in gasoline and diesel tax rates as well as motor vehicle registration and other fee increases, are earmarked to fund road and bridge improvements. However, the bill also adopts certain other tax changes. On the franchise and excise tax side, effective January 1, 2017, House Bill 534 allows taxpayers whose primary business activity in Tennessee is manufacturing to elect to use a single-receipts apportionment formula. A taxpayer's “principal business in Tennessee is manufacturing” if more than fifty percent of the revenue derived from the taxpayer’s activities in Tennessee, excluding passive income, is from fabricating or processing tangible personal property for resale and consumption off the premises. “Passive income" means dividend income, interest income, income derived from the sale of securities, and income derived from the licensing or sale of patents, trademarks, tradenames, copyrights, know-how, or other intellectual property. The election to use single-receipts factor apportionment, once made, is binding for five years.  After five years, a taxpayer may revoke the election; however, once that is done the election may not be made again for five years. House Bill 534 also decreases the state sales tax rate on the retail sale of food and food ingredients from five percent to four percent effective July 1, 2017. Please contact Loren Chumley at 615-248-5565 with questions.

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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.