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 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 were 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.