What legislation was passed in 2015 that affects sales & use tax?

Streamlined Sales Tax Effective Date

Public Chapter 273 delays, from July 1, 2015 to July 1, 2017, the effective date of statutory changes that would bring Tennessee into further compliance with the Streamlined Sales and Use Tax Agreement. (Note: Legislation signed by Governor Haslam on April 19, 2017 delays effective date to July 1, 2019. See important notice 17-06.)

Effective: April 28, 2015

Taxability of Warranty Contracts

Public Chapter 273 provides clear guidance on the taxability of warranty and service contracts for sales tax purposes. It specifies that warranty or service contracts covering the repair and maintenance of tangible personal property is subject to tax in Tennessee when:

The warranty or service contract is sold as part of, or in connection with, the sale of tangible personal property that is subject to sales tax, or
The warranty or service contract applies to tangible personal property located in Tennessee.
The warranty or service contract is for tangible personal property where the location of the property is unknown, and the purchaser has a Tennessee address.

If a warranty or service contract applies to tangible personal property located both inside and outside of Tennessee, dealers or users may allocate to Tennessee a percentage of the sales price or purchase price of the warranty or service contract that equals the percentage of tangible personal property located inside the state.

Effective: October 1, 2015

Retail Accountability Program

Public Chapter 342 makes updates to the Department’s Retail Accountability Program. It authorizes the Commissioner to require wholesalers to report the sales of an expanded range of products. The public chapter also allows the Department to receive data from credit card payment processing companies and cigarette manufacturers, which can be used to verify the correct reporting of sales for tax purposes.

Effective: May 4, 2015

Diabetic Testing Supplies Exemption

Public Chapter 274 exempts diabetic testing supplies from sales and use tax. Such supplies include lancets, test strips for blood glucose monitors, visual read test strips, and urine test strips.

Effective: July 1, 2015

Cap on Sales Tax on Aviation Fuel

Public Chapter 462 limits the total amount of the 4.5% sales and use tax imposed and remitted on any one person’s purchase, use, consumption, or storage of aviation fuel to the following amounts:

For the period from July 1, 2015 to June 30, 2016: $21,375,000;

For the period from July 1, 2016 to June 30, 2017: $17,750,000;

For the period from July 1, 2017 to June 30, 2018: $14,125,000;

For the period from July 1, 2018 to June 30, 2019: $10,500,000.

Effective: May 18, 2015

Revenue Modernization Act – Remote Accessed Software and Video Games

Public Chapter 514 amends the sales and use tax statute to tax software and video games consistently, regardless of the delivery method. As a result, software and video games accessed remotely are subject to sales and use tax effective July 1, 2015.

Effective: July 1, 2015

Revenue Modernization Act – Sales and Use Tax Nexus

Public Chapter 514 creates a rebuttable presumption that out-of-state dealers have nexus and must collect sales and use tax from Tennessee customers if the dealer pays an in-state party a fee or commission to route customers to the dealer, and such dealer derives more than $10,000 over the past 12 months from the referred customers.

Effective: July 1, 2015

Sales Tax Exemption – Time Frame for Removal of Airplanes and Helicopters

Public Chapter 48, for purposes of sales tax exemptions, extends from 15 to 30 days the period of time within which a helicopter, airplane, or related equipment that a non-resident purchases must be removed outside of Tennessee.

Effective: January 1, 2016

Sales Tax Exemption for Community Foundation Auctions

Public Chapter 52 states that, for sales and use tax purposes, “business” does not include community foundation sales made during biannual auctions. Such sales must take place during no more than two auctions, lasting up to 24 hours, in any calendar year in each county.

Effective: July 1, 2015

Sales Tax Exemption for Water Pollution and Sewage Machinery

Public Chapter 81 clarifies a sales and use tax exemption for machinery used by water and wastewater treatment authorities, created by private act or pursuant to the Water and Wastewater Treatment Authority Act, for use in water pollution control or sewage systems.

Effective: July 1, 2015

Sales Tax Exemption for Co-Generation Equipment

Public Chapter 420 clarifies a sales and use tax exemption for certain co-generation equipment that a qualified manufacturing facility purchases or leases, and that is used for generating, producing, and distributing utility service directly to the qualified manufacturing facility. Such facilities must be located in a non-attainment area and make a minimum capital investment exceeding $30 million.

Effective: July 1, 2015

Sales Tax Exemption for Sale or Repair of Large Airplanes

Public Chapter 506 exempts from sales and use tax the sale, use, storage, or consumption of parts, components, software, systems, accessories, materials, equipment and supplies that are sold to or sold by an authorized large aircraft service facility or affiliate. The public chapter also exempts certain repair and refurbishment service labor performed by an authorized large aircraft service facility. These exemptions do not apply to fuel and other petroleum products or to shop equipment and tools.

An “authorized large aircraft service facility” means a repair station located within this state that is engaged in repair and refurbishment services of large aircraft mainframes, large aircraft engine equipment, and large aircraft accessories under a valid air agency certificate issued by the Federal Aviation Administration in accordance with 14 CFR Part 145 of the federal aviation regulations, with an authorized class rating of Air Frame Class IV, and organization designation authority, or similar, or successor certificate, rating, and authority as the Federal Aviation Administration may provide for from time to time.

Effective: July 1, 2015

Sales and Use Tax on Major Procurement Contracts

Public Chapter 515 requires a state governmental entity to include in any major procurement contract with a vendor a provision that says the vendor and the vendor’s subcontractors must collect and remit sales and use taxes on sales of goods or services made by the vendor or subcontractors.

“Major procurement contract” is defined as any good or service costing more than $75,000.

“State governmental entity” means a state agency, department, board, or commission, or a public corporation or quasi-public instrumentality that performs essential public functions entrusted to it by the state.

Effective: July 1, 2015

 

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