Tennessee Legislation Requires Out-of-State Dealers to Provide Local Sales Information, Eliminates Flat Rate Local Tax & Adds SST Sourcing Rule

Tennessee has enacted legislation that has new information reporting requirements for out-of-state dealers, eliminates the state’s 2.25% flat rate local tax option for out-of-state sellers, and adds a Streamlined Sales and Use Tax sourcing provision, effective October 1, 2019.

An out-of-state dealer must provide sufficient information as prescribed by the commissioner to indicate the incorporated municipality or unincorporated area of a county into which a sale is shipped or delivered when reporting local sales and use tax. This is required even if the local tax rates of the municipality and unincorporated area of the county are the same.

As proscribed in Tennessee Department of Revenue Notice #19-05, out-of-state dealers must report the actual jurisdiction into which a sale is shipped or delivered when filing their sales and use tax returns so that the DOR can properly distribute the tax collected to the local jurisdictions.

Sales shipped or delivered to an address within an incorporated municipality must be reported separately from sales shipped or delivered to an address in the unincorporated area of a county. The DOR suggests using their boundary database available on the DOR website to determine the local rates.

The legislation repealed the uniform local rate option of 2.25% previously available to some out-of-state dealers. Beginning October 1, 2019, out-of-state dealers must apply the specific local sales tax rate in effect for the city or county jurisdiction into which sales are shipped to or delivered.

Finally, the legislation adds to Tennessee’s SST sourcing provisions. When a product is sold from a location in Tennessee and the purchaser instructs the seller to ship or deliver the product to another location within the state, the sales shall be sourced to the seller’s location. (Ch. 491 (H.B. 326), Laws 2019, effective October 1, 2019)

For more details on Tennessee’s requirements for out-of-state dealers, read our news item: Tennessee Enacts Economic Nexus Regulation.

Posted on July 29, 2019