On June 2, 2020, Governor Bill Lee committed $200 million from the federal Coronavirus Relief Funds (CARES Act) to reimburse Tennessee businesses for costs incurred as a result of mandatory business closures. The Tennessee Business Relief Program’s 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.
Tennessee Businesses Eligible for Relief Payments
Specific categories of businesses will automatically be eligible for these business relief payments, 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. See categories of qualifying businesses below.
The payments will be administered by the Tennessee Department of Revenue and issued as a cash grant (not a refund or forgivable loan). More than 40,000 Tennessee businesses likely qualify for the Tennessee Business Relief Program. Eligible businesses have until September 25, 2020, to confirm their information with the Department of Revenue in order to receive a relief payment between $2,500 and $30,000 in no-cost funds from the state.
Only those qualifying businesses that are registered for sales tax and/or business tax will be eligible for the payments. 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.
The Department of Revenue has issued Frequently Asked Questions and other helpful guidance regarding the Program on its webpage at https://www.tn.gov/revenue/tennessee-business-relief-program.html.
Which Tennessee Businesses are Getting Free Money?
The following businesses are eligible for relief funds and were included in the initial June 2 announcement:
- Barbershops
- Beauty shops
- Nail salons
- Tattoo parlors, spas, and other personal care services
- Gyms and fitness centers
- Restaurants
- Bars
- 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
- Marinas
- 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
In addition, the following businesses were declared eligible for funds on August 13, 2020:
- Caterers, mobile food services, and foodservice contractors
- Wedding and event planners
- Convention and trade show organizers
- Wedding and banquet hall and similar property rental
- Linen supply services
- Photography studios
- Travel agencies and travel arrangement Services
- Car, truck, trailer, and RV rental
- Sightseeing and tour operators
- Taxi, limousine, bus, and other transportation services Recreational vehicle and vacation camps
- Sports and recreation instruction
- Fine arts instruction, exam prep, driving schools, and other similar instruction
- Motion picture and video production and distribution services
- Music production, distribution, and publishing services
- Sound recording studios
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 (filed in May):
- 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
In addition, per the August 13 program expansion, the following small businesses are now eligible if their sales were reduced by at least 25% as shown on their April 2020 sales tax returns (filed in May):
- Florists
- Party and banquet equipment and other supply rentals
- Formal wear and costume rental
- Consumer electronics and appliances rental
- Home centers, hardware stores, and paint stores
- Household appliance and electronics stores
- Nurseries, garden centers, and outdoor power equipment stores
- Pharmacies and drug stores
- Optical goods stores
- Cosmetics, beauty supply, and perfume stores
- Supermarkets and other grocery stores
- Baked goods and other specialty food stores
- General rental centers and other consumer goods rental
- Gasoline stations and convenience stores
- Warehouse clubs and general merchandise stores
- Beer, wine, and liquor stores
- Food supplement stores
- Vending machine operators
- New and used car dealers
- Recreational vehicle, boat, and other vehicle dealers
- Automotive parts and accessories stores
- Tire dealers
- Online stores (selling from a Tennessee location)
- Other direct selling establishments
Content provided by LBMC State and Local Tax professional, Jay Hancock.
Jay Hancock is the LBMC State and Local Tax Practice Leader. He can be reached at 615-690-1982 or jay.hancock@lbmc.com.
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.