Tennessee Reduces Sales Tax Nexus Threshold to $100,000 for Both Remote Sellers and Marketplace Facilitators

On June 30, 2020, Governor Bill Lee signed legislation (Public Chapter 759) reducing the remote seller sales tax nexus threshold from $500,000 to $100,000 for out-of-state dealers and marketplace facilitators. These provisions apply to dealers with no physical presence in the state of Tennessee who engage in the “regular and systematic solicitation of consumers in the state through any means” and who have “made sales that exceeded $100,000 to consumers in the state during the previous 12 month period.” Such dealers shall begin collecting and remitting by the first day of the 3rd calendar month following the month in which this threshold is met; however, no dealer shall be required to collect tax for sales made before October 1, 2020. The legislation conforms Tennessee to the sales threshold that was held to be constitutional by the US Supreme Court in the South Dakota v. Wayfair case in 2018, it and replaces Tennessee’s previous remote seller threshold of $500,000 which had been adopted in an administrative agency rule, Rule 1320-5-1-.129. These new provisions will be codified in Tenn. Code Ann. Sec. 67-6-543. The legislation also amends the comprehensive marketplace facilitator and marketplace seller provisions that were enacted via separate legislation earlier this year (Public Chapter 646) to reduce the sales threshold from $500,000 to $100,000, as measured over the previous 12-month period. The marketplace facilitator and marketplace seller provisions also take effect on October 1, 2020 and will be codified in Tenn. Code Ann. Sec. 67-6-501. Notably Tennessee did not adopt for either remote sellers or marketplace facilitators/sellers the quantitative threshold of 200 or more transactions that was also held to be constitutional in the Wayfair case. In determining whether the $100,000 threshold has been met, out-of-state dealers and marketplace facilitators should include all retail sales, including exempt retail sales, but should exclude all sales for resale.

The legislation takes effect on October 1, 2020, at 12:01 a.m. The bill does not change the substantial nexus sales thresholds that are in place for other Tennessee taxes, i.e., the Franchise and Excise taxes, and the Business Tax, which remain at $500,000 of receipts from Tennessee-sourced sales.

The Tennessee Department of Revenue has issued two Important Notices, No. 20-23 (Out-of-State Dealers), and No. 20-24 (Marketplace Facilitators), explaining how these new thresholds will be implemented and administered.

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