Present law authorizes dealers who are required to register for and collect and remit the sales and use tax imposed on items of tangible personal property, when such items are sold during the period of time beginning July 1, 2022, and ending June 30, 2023, to take a deduction from the tax due as compensation for accounting for and remitting the tax. The dealer's deduction may be taken as follows:
(1) The deduction must be applied only to the state portion of the sales and use tax;
(2) Two percent of the first $2,500 on each report; and
(3) One and fifteen one-hundredths percent of the amount over $2,500 on each report.
A deduction is not allowed for a dealer whose report or remittance of tax is delinquent.
The deduction provided by present law is limited to a maximum of $25.00 per report. An amount equal to the excess of the amount calculated by the formula set forth in (1)-(3), over and above the twenty-five-dollar limit, must be retained by the state and deposited in the state's general fund.
Also under present law, an out-of-state person making sales in Tennessee, who is not required to register for sales and use tax under applicable law, but who nevertheless voluntarily registers to collect and remit use tax on items of tangible personal property sold to Tennessee customers, is allowed, for the purpose of compensating such person in accounting for and remitting the tax, a deduction against taxes due, reported, and paid to the department as follows:
(1) 2 percent of the first $2,500 on each report; and
(2) 1.15 percent of amounts over $2,500 on each report.
Under present law, a Model 1 seller under the Streamlined Sales and Use Tax Agreement is not entitled to the vendor's compensation described above. Also under present law, in addition to any compensation that may be provided under the present law provisions described above, the commissioner of revenue may provide the monetary allowances required to be provided by the state to certified service providers and volunteer sellers pursuant to Article VI of the Streamlined Sales and Use Tax Agreement as it may be amended from time to time. Such monetary allowances must be in the form of vendor's compensation allowances that certified service providers or volunteer sellers are permitted to retain from sales and use taxes due that are to be collected and remitted to this state on sales of the volunteer seller in this state.
This bill extends the dealer's deduction, which presently will not apply beyond June 30, 2023, and replaces the provisions of present law concerning the deduction for out-of-state sellers with the extended dealer's deduction. The only difference between the deduction for out-of-state sellers and other dealers will be that the twenty-five dollar-limit will not apply to returns filed by any out-of-state person making sales in Tennessee who is not required to register for sales and use tax under applicable law but who nevertheless voluntarily registers to collect and remit use tax on items of tangible personal property sold to Tennessee customers.
ON FEBRUARY 26, 2024, THE SENATE ADOPTED AMENDMENT #1 AND PASSED SENATE BILL 1140, AS AMENDED.
AMENDMENT #1 rewrites this bill to direct the Tennessee Advisory Commission on Intergovernmental Relations (TACIR) to perform a study of the collection and remittance of state and local taxes, including sales and use taxes, collected at the point of sale by businesses in this state. The study must include, but not be limited to, examinations of the following:
(1) The cost to businesses of collecting and remitting state and local taxes;
(2) The cost to the State for reasonable remuneration for sales tax collection, including vendor compensation, to businesses as compared to other states; and
(3) The cost to businesses of payment card interchange fees on the tax portion of transactions.
This amendment requires all appropriate state departments and agencies to aid TACIR in connection with the study required by this amendment. It is the legislative intent that this study be conducted within existing resources.
REPORTING REQUIREMENT
On or before January 31, 2025, this amendment requires TACIR to report its findings and recommendations, including any proposed legislation, to the chairs of the finance, ways and means committees of the house of representatives and the senate and to the general assembly's legislative librarian.
ON APRIL 22, 2024, THE HOUSE SUBSTITUTED SENATE BILL 1140 FOR HOUSE BILL 886, ADOPTED AMENDMENT #1, AND PASSED SENATE BILL 1140, AS AMENDED.
AMENDMENT #1 revises the provision that requires the study to include an examination of the cost to businesses of payment card interchange fees on the tax portion of transactions to, instead, require the examination of the cost to businesses of payment card fees on the tax portion of transactions, including interchange fees and other fees associated with payment processing, as well as the cost to businesses of handling cash.

Statutes affected:
Introduced: 67-6-509