Tennessee challenges Quill
- Jun 17, 2016 | Gail Cole
Update 10.12.2016: The Tennessee Department of Revenue has adopted a new economic nexus policy requiring certain out-of-state sellers to collect and remit Tennessee sales and use tax. Additional information.
The Tennessee Department of Revenue (DOR) has been collecting Tennessee sales and use tax from out-of-state vendors engaged in certain nexus-creating in-state activities for more than a decade. Now the DOR is seeking to create an economic nexus threshold, which will make it even more challenging for remote vendors to avoid collecting tax.
The department recently submitted for review a new sales and use tax regulation entitled “Out-of-State Dealers,” which will be filed and available here by the end of next week. In so doing, it joins Alabama and South Dakota and several other states that are directly challenging the physical presence requirement upheld in the 1992 Supreme Court ruling, Quill Corp. v. North Dakota.
Under the proposed regulation, out-of-state dealers are considered to have substantial nexus with Tennessee when they do both of the following:
- Engage in the regular or systematic solicitation of consumers in Tennessee through any means, and
- Make sales to consumers in Tennessee that are in excess of $500,000 during any calendar year
If the proposed policy becomes actual policy, all businesses meeting the economic nexus threshold must register with the DOR by March 1, 2017, and report and pay all applicable sales and use tax on “tangible personal property and other taxable items delivered to Tennessee consumers by July 1, 2017, unless a later date is established by the DOR via notice.” Additional information.
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