Tennessee ~ Sales and Use Tax: Out-of-State Dealer Registration Enforcement Delayed

CCH Tax Day Report

In January 2017, the Tennessee Department of Revenue issued Important Notice 17-01 (see TAXDAY 2017/01/31, S.38) to explain the requirements of a sales and use tax regulation (i.e., Rule 1320-05-01-.129(2)) that provides that out-of-state dealers who regularly and systematically solicit business in Tennessee must register by March 1, 2017, and begin to collect sales tax by July 1, 2017. The notice also stated that the Department will certify that it will not audit or assess out-of-state dealers for tax periods that occur before the dealer begins to collect the tax, if the dealer meets the criteria specified in the notice.

In March 2017, a lawsuit was filed in the Davidson County Chancery Court challenging Rule 129(2), and in April 2017, an agreed order was issued by the court that delays enforcement of Rule 129(2) while the challenge is pending. While the agreed order is in effect, out-of-state dealers are not required to collect and remit sales and use tax as a result of Rule 129(2). The agreed order does not affect any requirement to collect sales and use tax under any other provision of law.

Although an out-of-state dealer is not required to comply with Rule 129(2) while the agreed order is in place, the agreed order does not prevent out-of-state dealers from voluntarily registering and collecting and remitting the sales tax. If an out-of-state dealer who meets the criteria specified in Notice 17-01 does begin to collect and remit tax on or before July 1, 2017, the Department will still certify that it will not audit or assess the business for periods prior to the date the dealer begins to collect and remit the tax.

Important Notice No. 17-12, Tennessee Department of Revenue, May 2017, ¶401-685



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