United States

Tennessee: Legislature Passes Bill Prohibiting Enforcement of Economic Nexus Rule

May 15, 2017
From KPMG TaxWatch

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Last year, the Tennessee Department of Revenue approved a rule (Rule 129) that adopted an economic nexus standard for sales and use tax purposes. The rule applied to out-of-state dealers that engaged in regular or systematic solicitation of Tennessee consumers by any means. Under the rule, if such dealers made sales exceeding $500,000 to Tennessee consumers during the calendar year, they were considered to have substantial nexus with the state. By March, 1, 2017, out-of-state dealers meeting these tests were required register with the Department of Revenue, and they were required to begin collecting and remitting sales and use taxes by July 1, 2017.

On March 30, 2017, the American Catalog Mailer’s Association and NetChoice (the plaintiffs), filed a suit challenging the constitutionality of the rule. Shortly thereafter, the plaintiffs and the Department submitted a joint motion to the court to prevent the Department from enforcing the rule pending a final judgment in the lawsuit. Most recently, the General Assembly approved a bill (House Bill 261) that prohibits the Department from collecting any sales or use taxes authorized under Rule 129 or permitted under any court ruling until the court’s ruling has been fully reviewed and Rule 129 has been approved by the General Assembly. It has been reported that Governor Haslam will likely sign the legislation. Please stay tuned to TWIST for future updates on the Tennessee rule and the efforts to overturn Quill.

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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.