On June 2, 2020, Governor Bill Lee committed $200 million from the federal Coronavirus Relief Funds to reimburse Tennessee businesses for costs incurred as a result of mandatory business closures. The funds will be aimed at reimbursing costs incurred by the business during the Safer-At-Home order and helping businesses that suffered significant revenue drops in April 2020. Specific categories of businesses will automatically be eligible for these business relief payment, and other categories of businesses may qualify if their April sales were reduced by at least 25% as reflected on their sales tax returns (see below). Payments are available to businesses with annual gross sales/receipts of $10 million or less. According to state officials it is expected that roughly 28,000 Tennessee businesses will qualify, with more than 73% of those businesses having gross sales of $500,000 or less.
The payments will be administered by the Tennessee Department of Revenue and issued as a cash grant (not a refund or forgivable loan). Only those qualifying businesses that are registered for sales tax and/or business tax will be eligible for the payments. No application is required as eligible businesses will be identified by the Department of Revenue based on tax returns filed. The amount a taxpayer receives will vary but will be based on the greater of the entity’s (i) gross sales reported on its calendar year 2019 sales tax returns; or (ii) gross receipts reported on its most recently filed Business Tax return.
Payments are fixed amounts determined as follows:
|Annual Gross Sales/Receipts||Payment Amount|
|Up to $100,000||$ 2,500|
|$100,001 – $500,000||$ 5,000|
|$500,001 – $1,000,000||$10,000|
|$1,000,001 – $5,000,000||$20,000|
|$5,000,001 – $10,000,000||$30,000|
In determining an entity’s gross sales/receipts, the Department will look at the business as a whole (rather than each individual location), and a single payment will be issued to a qualifying business even if its tax returns include multiple locations. Note that qualifying businesses receiving forgivable loans under the federal Payroll Protection Program (PPP) are NOT precluded from receiving these payments.
The Department will notify potentially eligible businesses by e-mail, or by letter for those businesses without an email on file. The business will be asked to complete a pre-award certification form to verify its eligibility and agree to the program’s terms. Once the certification form has been completed and eligibility confirmed, the Department will issue the payment either by direct deposit (if this information is already saved in the Department’s TNTAP system) or by check. State officials have encouraged businesses to make sure their mailings addresses are correct at https://www.tntap.tn.gov/eservices.
The Department has indicated that the funds should be used to respond to the financial disruption stemming from COVID-19 and cannot be used for payment of tax liabilities to a government agency. By accepting the funds, a business acknowledges that it is subject to potential audit or other verification by the Department regarding the qualification for and use of the funds. Funds are subject to recapture if these requirements are not met, so businesses are strongly advised to keep adequate records demonstrating how the funds are spent.
Further details will be published by the Department of Revenue in the coming days. For now, the Department of Revenue has issued Frequently Asked Questions regarding the Program on its webpage at https://www.tn.gov/revenue/tennessee-business-relief-program.html.
The following businesses are eligible for relief funds:
- Beauty shops
- Nail salons
- Tattoo parlors, spas, and other personal care services
- Gyms and fitness centers
- Hotels and other travel accommodations
- Theaters, auditoriums, performing arts centers and similar facilities
- Museums, zoos, and other similar attractions
- Amusement parks
- Bowling centers and arcades
- Amusement, sports, and recreational industries
- Promoters of performing arts, sports, and similar events
- Agents and managers of artists, athletes, and entertainers
- Independent artists, writers, and performers
The following small businesses may be eligible if their sales were reduced by at least 25% as shown by their April 2020 sales tax returns:
- Furniture stores
- Home furnishing stores
- Clothing stores
- Shoe stores
- Jewelry, luggage and, and leather goods stores
- Sporting goods, hobby, and musical instrument stores
- Book stores
- Department stores
- Office supply, stationery, and gift stores
- Used merchandise stores
- Other miscellaneous stores
LBMC tax tips are provided as an informational and educational service for clients and friends of the firm. The communication is high-level and should not be considered as legal or tax advice to take any specific action. Individuals should consult with their personal tax or legal advisors before making any tax or legal-related decisions. In addition, the information and data presented are based on sources believed to be reliable, but we do not guarantee their accuracy or completeness. The information is current as of the date indicated and is subject to change without notice.