NFIB is seeking membership feedback on a new tax proposal for Tennessee.
Gov. Bill Haslam announced a new tax agenda in his State of the State speech to the Tennessee General Assembly, saying he planned to “level the playing field” between in-state and out-of-state businesses. His proposal, named the Revenue Modernization Act, has moved to the Senate.
Last year, a sharp decline in business tax revenue resulted in tough budget cuts. The governor looks to modernize the tax code to ensure out-of-state businesses are paying their fair share for conducting business within Tennessee borders and to boost revenue.
“Tennessee has fallen behind other states in asserting its ability to require out-of-state companies to pay taxes here,” Gov. Haslam said on his website.
The act is said to bring in $20 million in revenue.
The ideas in the Revenue Modernization Act are already well established in other states throughout the country. While many original tax codes state that businesses must pay franchise and excise taxes and business taxes if they are physically operational in a state, online retail has prompted 31 other states to broaden the definition to companies with a certain level of economic presence. This is commonly known as the “economic nexus” standard.
“Our advisory council is comfortable with the economic nexus standard proposal for franchise and excise and the business tax,” says NFIB/Tennessee state director Jim Brown. “So far we’ve heard from Tennessee members who understand the need for or would appreciate a more level playing field with out-of-state entities.”
Another change in the bill is “market-based sourcing,” which 20 other states, including Alabama and Georgia, have already adopted. This allows Tennessee to collect taxes on delivered services, even if the seller is from out of state. NFIB is still seeking membership feedback on this issue and awaiting a fiscal projection “for every part of the proposal,” says Brown.
Members should note that if the legislation looks likely to advance this year, NFIB may do a special survey and/or reach out to businesses that will likely be impacted. Should the bill not advance this year, NFIB will engage the membership in the 2016 ballot.
“We want to understand which industries will be impacted positively and negatively under the market-based sourcing proposal,” Brown adds. “Member feedback would be appreciated.”
We have engaged our tax experts since the bill language was made public in February and are very interested in more member feedback. Please email [email protected] or call 615.874.5288.
