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Up until this year the administration of the Business Tax in Tennessee had been handled by local governments, with whom businesses would file their annual Business Tax Return in order to receive their local business license. The Department of Revenue will begin administration of the Business Tax beginning with Class 1 & 5 businesses required to file no later than February 28, 2010.

The Department of Revenue issued an Important Notice in October that indicates the Department will enter into Voluntary Disclosure Agreements (VDA’s) with taxpayers who are not registered or paying the tax.
Click here to view the notice.

This shift in the Business Tax administration from the local jurisdiction to the Department of Revenue provides a new opportunity for the State to look for delinquent and non-filing businesses. As the Department of Revenue receives information about the Business Taxes from the local jurisdictions and begins processing it, the State expects to begin cross referencing the records of businesses registered for sales tax collection (and other State administered taxes) to those registered for the Business Tax. It is anticipated that in the near future the State will use this comparison to send out inquiries to businesses not registered or paying their required tax types.

Once businesses have been contacted by the State, they are no longer eligible to participate in the State’s Voluntary Disclosure Agreement program. Of course the advantage of entering into a voluntary disclosure with the state in this situation is that a business’s exposure can be significantly limited. The voluntary disclosure agreement generally limits the look back period to 3 years and penalties are usually waived. If your business is not filing the Tennessee Business Tax or Sales Tax, now is the time to review your exposure and consider filing a VDA before being contacted by the State. The deadline to file for a VDA under this program is Dec. 31, 2009.

The LBMC State and Local Tax group is ready to assist you if you have any questions about this process or if you need to prepare and file a Voluntary Disclosure with the state. Please contact us if we can help in any way.