Tennessee Governor Bill Haslam signed legislation codifying the terms of an agreement between the state and Amazon. Under the agreement, Amazon has agreed to begin collecting and remitting Tennessee sales and use tax beginning in 2014. Although this bill was geared towards the agreement with Amazon, the exclusion from tax collection responsibilities will apply to any other business that meets the requirements under the legislation. The bill states that the activities of distribution facilities operated by a company’s affiliates in Tennessee are not considered in determining whether a company has a physical presence establishing nexus in the state. This exclusion does not apply to affiliates that operate a retail store or kiosk at which customers make purchases, return or exchange items or place orders for tangible personal property; or use personnel to solicit sales of tangible personal property, either by direct employment or on a contract basis. The agreement will only apply to a person that has an affiliate that places one or more distribution facilities in service, directly or through a third party, after January 1, 2011 and before January 1, 2014; makes, or causes to be made, through a third party, a capital investment of at least $350 million after January 1, 2011 and before January 1, 2014; creates at least 3,500 qualified jobs after January 1, 2011 and before January 1, 2014; and maintains at least 3,500 qualified jobs until January 1, 2016. The provisions in the bill will be repealed on the earliest of the following: January 1, 2014; upon an affiliate’s failure to satisfy the above investment or job creation requirements; or the effective date of any federal legislation authorizing the state to require remote sellers to collect and remit tax. The provisions in the bill only apply if the person enters a written agreement pursuant to which the person and its affiliates will collect Tennessee sales and use tax beginning immediately after the earliest of the events described above.
In exchange for the exclusion from tax collection, a reporting requirement is imposed on any qualifying retailer. This provisions requires any retailer that does not establish nexus with Tennessee pursuant to the above provisions and that makes sales to Tennessee purchasers to notify the purchaser in a confirmation email that the purchaser may owe Tennessee use tax on the total sales price of the transaction and include in the email an internet link to the Department of Revenue’s website that allows the purchaser to pay the use tax. The notice must include language that is substantially similar to wording provided in the bill. Any person who becomes subject to these requirements will have 60 days to comply with the requirements. The person must also provide to each purchaser a statement of the total sales made to the purchaser during the preceding calendar year. The person shall provide notice for calendar year 2011 within 60 days after the effective date of the act and by February 1 of each subsequent year. “Total sales” means the total purchase price of all sales of tangible personal property delivered in Tennessee, including shipping and delivery charges. The statement must include language that is substantially similar to wording provided in the bill. The statement must not contain any other information that would indicate, imply, or identify other details of the items purchased, which is considered confidential information. The statement may be provided by mail or email. (H.B. 2370, Laws 2012, effective March 26, 2012)