United States

Tennessee: Department Issues Summaries of Informal Conference Decisions

Dec 04, 2017
From KPMG TaxWatch

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Recently, the Tennessee Department of Revenue issued its annual report summarizing several tax topics addressed during informal conferences held in fiscal year 2017. Without identifying the taxpayers involved, the report generally describes the facts involved in the conference and the conclusion reached by the applicable Hearing Officer. In 47 percent of the conferences held, taxpayers received a partial or full adjustment to their proposed assessment. Of the 286 informal conferences held during fiscal year 2017, 35 addressed franchise and excise tax issues only and 117 were sales and use tax related.

Two of the franchise/excise tax disputes addressed the treatment of gains from the sale of business assets. The taxpayers had treated the gains as nonbusiness earnings, but the Hearing Officer concluded in both cases that the gains were business earnings because the assets sold (businesses) were integral part of the taxpayers’ regular trade or business operations. Another dispute involved whether the parent of two regulated financial corporations was included (along with the regulated financial corporations) in the financial institution unitary group. The taxpayer argued—and the Hearing Officer agreed—that the company was not a “bank holding company” as defined under Tennessee law and therefore the three entities were not included in the financial institution unitary group.

On the sales and use tax side, many of the disputes related to the purchase of goods outside of Tennessee for use in the state. The report notes that the Department of Revenue routinely receives information from the U.S. Customs Department about items that are imported into Tennessee. One of the assessments that was upheld related to the purchase of jewelry on eBay by a Tennessee resident that was imported into Tennessee from another country. Another conference addressed whether late payment fees, repossession fees, and attorney’s fees associated with the lease of tangible personal property were included in the sales tax base. Although the Hearing Officer concluded that the late payment fees were part of the taxable lease payment, it abated the part of the assessment related to repossession and attorney’s fees. Please contact Loren Chumley at 615-248-5565 with questions on the annual report.

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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.