RAP issue also addressed; further monitoring needed.
RAP Issue Also Addressed, Further Monitoring Needed
Tax reform was a key priority for NFIB/Tennessee during the 109th General Assembly session, which concluded last month. Here’s a look at two reform measures that will provide tax relief and clarity for many small business owners.
Franchise and Estimate Tax Reform
The Legislature passed reform to the franchise and estimate tax system. Under HB 1554, which was sent to Gov. Bill Haslam last month, penalties for underestimating F&E tax obligations will be lowered. The legislation also offers a current-year estimate method to provide greater flexibility for businesses, such as retailers, that have uncertain fourth quarters. NFIB plans to continue advocating for a prior-year “annualization” estimate method that would provide even more flexibility for many members.
Retail Accountability Program Reform
RAP, implemented as a pilot program under a 2012 law, was designed to ensure that certain retailers are accurately reporting their sales taxes. The program was initially applied only to beer and tobacco taxes, but was then expanded on June 30, 2015 to 21 other categories, beyond how it was explained to the Legislature and business interests. In short, the Commissioner of Revenue was granted too much authority; NFIB strongly and successfully advocated for removal of this sweeping authority in 2016.
The legislation clarifies that the 2015 expansion only applies to wholesalers who report on specified products that they ship to grocery and convenience stores, big box retailers, and pharmacies. The legislation, however, reins in the breadth of the reporting program, provides greater flexibility in timing and method of filings, increases the reporting threshold mandate to protect smaller shippers, and sunsets the program in July 2019 for a review by the Legislature.
The RAP reform is a compromise between the Department of Revenue and the Tennessee Grocers and Convenience Store Association, with input from NFIB and other business interests. NFIB will be monitoring implementation closely and appreciates any feedback from impacted wholesalers and retailers.
