Tennessee Department of Revenue Proposes Economic Nexus Regulation for Sales and Use Tax


Out-of-state sellers that maintain no physical presence within the State of Tennessee will be required to register with the Tennessee Department of Revenue (TDOR) and collect sales and use tax from Tennessee consumers if a new regulation proposed last week by TDOR is enacted.

On June 16, 2016, TDOR proposed Rule 1320-05-01-.129 in an effort to impose taxing jurisdiction over out-of-state sellers that engage in regular or systematic solicitation of consumers in Tennessee through any means and that make sales exceeding $500,000 to consumers in Tennessee during any calendar year. These sellers would be deemed to have “substantial nexus” with Tennessee and would be required to register with TDOR to collect and remit Tennessee sales and use tax. If enacted, the proposed regulation would require out-of-state sellers to register with TDOR by January 1, 2017, and begin collecting and remitting Tennessee sales and use tax to TDOR by July 1, 2017.

TDOR will accept oral or written comments at a public hearing scheduled for August 8, 2016, and will further accept written comments before the public meeting. Written comments should be directed to Lauren Fields, Associate General Counsel and Assistant Director - Legal, Tennessee Department of Revenue, 500 Deaderick Street, 11th floor, Nashville, TN 37242.

The obvious intent behind TDOR proposed economic nexus standard for sales and use tax – as well as recent similar enactments in other states such as Alabama and South Dakota – is to override the United States Supreme Court’s 1992 decision in Quill Corp. v. North Dakota, wherein the Court affirmed that an out-of-state seller must establish a “physical presence” within a state in order for the state to constitutionally impose its sales and use tax collection obligations.

For additional information, please contact Christopher A. Wilson, J. Leigh Griffith, Charles A. Trost or G. Michael Yopp in Waller’s State and Local Tax practice at 800.487.6380.

The opinions expressed in this bulletin are intended for general guidance only. They are not intended as recommendations for specific situations. As always, readers should consult a qualified attorney for specific legal guidance.