Tenn. Comp. R. & Regs. 1320 — Revenue

Chapter 1320-01-01 Administration

Tenn. Comp. R. & Regs. 1320-01-01-.01 REPEALED

History

Authority: T.C.A. § 67-1-101 to implement § 9-1-108.
Administrative History: Original rule certified June 7, 1974. Repeal filed June 28, 2000; effective September 11, 2000.

Tenn. Comp. R. & Regs. 1320-01-01-.02 CREDIT FOR DISHONORED CHECKS

(1) Credit will be given by the Commissioner or Revenue to municipal or county officers for dishonored checks or money orders tendered to such officers in payment of State taxes, licenses and fees, under the following conditions:

(a) Credit will be allowed only for the amount of the check or money order which represents the state tax, license, or fee due and owing to the State regardless of the total amount of the check or money order.

(b) The dishonored check must show that it was deposited by the third business day after receipt; that it was returned unpaid by the bank on which it was drawn; that it was subsequently redeposited by the third business day after its return and that it was returned unpaid for the second time. Where it is the practice of the depositor's bank to automatically redeposit a dishonored check before it is returned unpaid to the depositor, the date of such action as noted on the check by the bank will be accepted as fulfilling the time requirement for redeposit.

(c) The municipal or county officer must initiate civil action to recover the amount of any dishonored check or money order within thirty (30) calendar days after the second or final return of the dishonored check or money order. If, prior to the initiation of the civil action, it is deemed advisable to send a notice to the taxpayer prior to initiating civil action, such notice must be mailed not later than the fourth business day after final return of the check or money order and the notice must include a limitation period for response not to exceed fifteen (15) days. If such notice does not result in recovery, civil action must be initiated within ten (10) calendar days after expiration of the period specified in the notice.

(2) Any claim for credit submitted to the Commissioner of Revenue by a municipal or county officer must be accompanied by:

(a) A copy of the tax, license, or fee document for which the dishonored check or money order was tendered.

(b) A copy of the 15-day notice, if any.

(c) A copy of the document initiating civil action by the municipal or county officer, along with the results of the civil action.

(d) A copy of the dishonored check or money order.

(e) The registration plate or privilege license and/or copies of receipts for state taxes.

(3) If a registration plate or license cannot be repossessed because the taxpayer cannot be located, a statement to this effect must accompany the claim. If the taxpayer resides outside the county where the dishonored check or money order was tendered, all available information known to the county or municipal officer concerning such taxpayer should be furnished with the claim.

(4) In all cases the municipal or county officer is expected to make every reasonable effort to effect collection of any dishonored check or money order. If unsuccessful in this, he is expected to obtain the return of the license or registration plate if same can be found in his county and take all necessary steps to prevent the operation of any unlicensed business or unregistered motor vehicle.

(5) A claim for credit will be denied unless filed with the Department of Revenue within twelve (12) months from the date civil action was initiated.

History

Authority: T.C.A. § 67-101 to implement § 9-108.
Administrative History: Original rule certified June 7, 1974. Amendment filed September 11, 1978, effective December 29, 1978.

Tenn. Comp. R. & Regs. 1320-01-01-.03 PAYMENT IN IMMEDIATELY AVAILABLE FUNDS

(1) The commissioner may require persons owing $10,000 or more in connection with any return, report or other document filed with the department to make such payment in immediately available funds. Upon notification by the commissioner, a person meeting the criteria set out in paragraph (2) of this rule for a particular tax type shall be required to make all payments of such tax type(s) in funds which are immediately available to the state no later than the due date of said tax or taxes. The term immediately available funds shall mean funds which are available to the State on the date of payment. Payment in immediately available funds may be made only by the following methods:

(a) Automated Clearing House Debit (ACH-debit), (b) Automated Clearing House Credit (ACH-credit), (c) Wire Transfer through the Federal Reserve System (FedWire), (d) Transfer into a State of Tennessee account in a Tennessee depository from the person's account at the same depository, or (e) Currency deposited in a State of Tennessee account at a Tennessee depository or delivered to the central office of the Department of Revenue in Nashville, Tennessee.

The commissioner may designate an agent to aid in the administration of the methods described in subparagraphs (a), (c) and (d) above.

(2) The commissioner's determination of whether a person will be required to make payment in immediately available funds, as set out in paragraph (1) of this rule will be based on the average tax payment for each tax type.

(a) A person's average tax payment will be determined by dividing the amount of tax shown to be due during the past consecutive 12 months, or such other period as the commissioner may deem appropriate, by the number of returns, reports or documents actually filed during the same period. Provided, however, for those tax types computed on an annual basis, for which quarterly payments are either required or permitted to be made by applicable law, the average tax payment will be determined by dividing the amount of tax shown to be due for the applicable annual reporting period by the number four (4).

(b) Persons with less than one year's reporting experience in Tennessee may be determined by the commissioner to be required to make payment in immediately available funds whenever it appears from information available to the commissioner that such person is likely to meet the criteria in paragraph (2)(a) of this rule.

(d) Once the commissioner's determination pursuant to paragraph (2) of this rule is made all payments of the same tax type must be made in immediately available funds even if some payments fall below $20,000.

(3) Persons whose average tax payment for a particular tax type is $20,000 or more will be notified by the commissioner that payment of tax will be required to be made in immediately available funds. A person so notified shall make an election as to which one of the methods set out in paragraph (1) of this rule it will use and shall provide such other information as the commissioner may require.

(4) Persons making consolidated payments of tax for separately registered locations shall be required to make such consolidated payment in immediately available funds if any location for which payment is being made has been determined by the commissioner to meet the criteria set out in paragraph (2) of this rule.

(5) Each payment under this rule shall be limited to a single tax type except when two or more tax types are permitted to be paid on a single return, as in the case of franchise and excise taxes. Whenever two or more tax types are permitted to be paid on a single return, a person determined by the commissioner to meet the criteria set out in paragraph (2) of this rule for one of the tax types shall make payment on said return in immediately available funds regardless of whether the average tax payment of the other tax type(s) is $20,000 or more.

(6) If a tax payment due date falls on a Saturday, Sunday or banking holiday, the tax payment must be made so that the funds are immediately available on the first business day thereafter.

(7) Persons not meeting the criteria set out in paragraph (2) of this rule who desire to make payments of tax by one of the methods set out in paragraph (1) of this rule may be permitted to do so. Such persons shall make the same election, complete the same forms and be subject to the same requirements as those persons required to make payment in immediately available funds.

(8) The requirement to make payment in immediately available funds does not change the requirement to file returns, reports and documents associated with said payments in the manner prescribed by statute and by rules and regulations promulgated by the commissioner.

(9) Failure to timely or properly make payment in immediately available funds shall subject the person to penalty and interest as provided by law for delinquent or deficient tax payments. If payment is made in other than immediately available funds in the manner prescribed in paragraph (1) of this rule, in addition to any penalty which may be imposed, interest shall be added to the amount of tax due from the due date of the tax payment to the date that the funds become available to the State which shall be presumed, in the absence of evidence to the contrary, to be the second business day following receipt of payment.

(10) Any person required by the commissioner to make tax payments in immediately available funds may apply to the commissioner to be relieved of such requirement if it appears that such person no longer meets the criteria set out in paragraph (2) of this rule. Any person making an election to make tax payments by one of the methods set out in paragraph (1) of this rule may apply to the commissioner to be relieved of such requirement if such person no longer desires to make payment of tax by one of said methods. A person may not make more than one (1) such application per calendar year. Any person may not make more than one (1) such application per calendar year. Any person making such an application shall continue to make payment by the method chosen under paragraph (1) of this rule until such time as it is finally determined that the person should be permitted to make tax payments by other than one of said methods.

(11) It is the intent of the commissioner to examine each person's compliance with the requirements of this rule. If a person making payment under this rule repeatedly fails to correctly complete a transaction under its chosen method of payment, the commissioner may, in his discretion, require that the person make future payments by another method set out in paragraph (1) of this rule.

History

Authority: T.C.A. §§ 67-1-102 and 67-1-703(b) (1989 Tenn. Pub. Acts 332).
Administrative History: Original rules filed August 14, 1976; effective September 13, 1976. New rule filed November 13, 1989; effective January 1, 1990. Amendment filed June 28, 2000; effective September 11, 2000.

Tenn. Comp. R. & Regs. 1320-01-01-.04 through 1320-01-01-.28 REPEALED.

History

Authority: T.C.A. §§ 4-509 and 67-101.
Administrative History: Original rules filed August 14, 1976; effective September 13, 1976. Repealed by Public Chapter 575; effective July 1, 1986.

Tenn. Comp. R. & Regs. 1320-01-01-.29 TAXPAYER IDENTIFICATION NUMBERS

(1) The Commissioner of Revenue may require, for purposes of tax administration, any person who is liable for any tax administered by the Department of Revenue to disclose to the Department his social security account number or his federal employer's identification number as issued by the U.S. Internal Revenue Service.

(2) The failure to disclose, upon request, such information to the Department of Revenue will be cause for the Commissioner to deny or revoke, pursuant to law, any taxpayer's authority to do business in the State of Tennessee.

History

Authority: T.C.A. § 67-101(2).
Administrative History: Original rule filed March 20, 1978; effective June 14, 1978.

Tenn. Comp. R. & Regs. 1320-01-01-.30 PUBLIC RECORDS REQUESTS

(1) Definitions as used in this rule:

(a) Office of Open Records Counsel (“OORC”): The office established pursuant to T.C.A. §§ 8-4-601 et seq., or any successor office or entity.

(b) Personal Information: The term “personal information” shall have the same meaning as defined under T.C.A. § 55-25-103 of the Tennessee Uniform Motor Vehicle Records Disclosure Act.

(c) Public Records: The term “public record” shall have the same meaning as defined under T.C.A. § 10-7-503(a)(1)(A) of the Tennessee Public Records Act.

(d) Public Records Request Coordinator (“PRRC”): The individual, or individuals, designated in Section (3) of this rule who has, or have, the responsibility to ensure public record requests are routed to the appropriate records custodian and are fulfilled in accordance with the Tennessee Public Records Act (“TPRA”). The PRRC may also be a records custodian.

(e) Records Custodian: The office, official, or employee lawfully responsible for the direct custody and care of a public record. The records custodian is not necessarily the original preparer or receiver of the record.

(f) Requestor: A person seeking access to a public record, whether it is for inspection or duplication.

(g) Return: The term “return” shall have the same meaning as defined under T.C.A. § 67- 1-1701.

(h) Tax administration information: The term “tax administration information” shall have the same meaning as defined under T.C.A. § 67-1-1701.

(i) Tax information: The term “tax information” shall have the same meaning as defined under T.C.A. § 67-1-1701.

(j) Taxpayer identity: The term “taxpayer identity” shall have the same meaning as defined under T.C.A. § 67-1-1701.

(k) Tennessee Public Records Act (“TPRA”): The Tennessee Public Records Act as codified in Title 10, Chapter 7, of the T.C.A.

(2) Records Presumed to be Open for Inspection Unless Otherwise Provided by Law (a) The public records of the Tennessee Department of Revenue are presumed to be open for inspection unless otherwise provided by law. In accordance with the TRPA, nothing in this rule shall be construed as requiring the Department to sort through files to compile information or to create or recreate a record that does not exist.

(b) This rule shall not be construed to broaden or narrow the scope of exceptions to the TPRA, including confidentiality laws codified in Title 10, Title 55, Title 67, or elsewhere.

(c) A taxpayer’s returns, taxpayer identity, and tax information are confidential and are not available to the general public through a public records request. Requests for copies of returns, tax information, a taxpayer’s identity, or tax administration information will be denied unless an exception to Tennessee’s confidentiality laws applies.

(d) A person’s personal information associated with motor vehicle records is confidential and is not available to the general public through a public records request. Requests for personal information contained in motor vehicle records will be denied unless an exception to Tennessee’s confidentiality laws applies.

(3) Requesting Access to Public Records (a) Public record requests shall be made to the PRRC or the PRRC’s designee. The PRRC shall be the department’s acting Public Information Officer or designee.

(b) In order to ensure that requests are routed to the appropriate records custodian and fulfilled in a timely manner, requests may be made via online submission, if that option is available, by email to TNRevenue.PublicRecords@tn.gov , or by mail to:

Attn: Public Records Request Coordinator Tennessee Department of Revenue Andrew Jackson Building, 11th Floor 500 Deaderick Street Nashville Tennessee 37242.

(c) Requests for inspection of records are not required to be made in writing. However, the PRRC may request a mailing or email address from the requestor in order to provide any written communications required under the TPRA.

(d) Requests for copies of records shall be made in writing to the PRRC, and may be made using the attached Public Records Request Form. The Department of Revenue may modify or update the request form as needed.

(e) A taxpayer is not required to submit a public record request to obtain copies of the taxpayer’s own returns or tax information.

(4) Process for Responding to Public Records Requests (a) Public Record Request Coordinator 1. Upon receipt of a public record request, the PRRC shall acknowledge receipt of the request. The PRRC shall promptly forward the request to the Department’s General Counsel and/or designated staff attorney, who shall make an initial determination of the following:

(i) Whether the requested records are described with sufficient specificity to identify it;

(ii) Whether the requested records come within the scope of an exception to the TPRA; and (iii) Whether the Tennessee Department of Revenue is the custodian of the requested records.

Following review of the public record request by legal counsel, the PRRC may take any of the following action(s), as appropriate:

(i) If the requested record is not described with sufficient specificity to identify it, contact the requestor to see if the request can be amended;

(ii) Contact the requestor to obtain proof of Tennessee citizenship;

(iii) Contact the requestor to obtain proof that the requestor is authorized to access requested records that come within the scope of an exception to the TPRA;

(iv) If requested records are in the custody of a different governmental entity, and the PRRC knows the correct governmental entity, advise the requestor of the correct governmental entity and PRRC for that entity if known;

(v) Inform the requestor of any form(s) required to request copies of records;

(vi) Inform the requestor of any applicable fees, including labor thresholds and waivers; and (vii) Inform the requestor that the Department intends to aggregate multiple or frequent requests, as set out further in this rule.

If appropriate, after the review of records pursuant to Section (4)B of this rule, the PRRC shall deny the public record request in writing and provide a brief explanation of the grounds for denial, such as one of the following:

(i) The requestor is not, or has not presented evidence of being, a Tennessee citizen.

(ii) With respect to requests for records that are within the scope of an exception to the TPRA, the requestor has not presented sufficient proof that the requestor is authorized to access the records.

(iii) The request lacks specificity.

(iv) The Tennessee Department of Revenue is not the custodian of the requested records.

(v) The records do not exist.

If appropriate, after the review of records pursuant to Section (4)B of this rule, the PRRC shall promptly provide to the requestor all records to which an exception to the TPRA does not apply.

(b) Review of Records 1. The PRRC will promptly forward the records request to the appropriate records custodian(s) in the Tennessee Department of Revenue. Upon receiving a public records request, the records custodian shall promptly gather the records and provide them to the PRRC for review. The PRRC will review the records in consultation with the Department’s legal counsel to make a final determination as to whether the requested records come within the scope of an exception to the TPRA.

If not practicable to promptly provide requested records because additional time is necessary to determine whether the requested records exist; to search for, retrieve, or otherwise gain access to records; to determine whether the records come within the scope of an exception to the TPRA; to redact records; or for other similar reasons, then the PRRC shall, promptly and within seven (7) business days from the receipt of the request, send the requestor a written response as to why it is not practicable to promptly provide the requested records and provide the time reasonably necessary to produce the record or information.
If the PRRC denies a public record request, the PRRC shall deny the request in writing as provided in this rule and provide the basis for denial.
If the PRRC reasonably determines production of records should be segmented because the records request is for a large volume of records, or additional time is necessary to prepare the records for access, the PRRC shall notify in writing the requestor that production of the records will be in segments and that a records production schedule will be provided as expeditiously as practicable. If appropriate, the PRRC should contact the requestor to see if the request can be narrowed.
If a records custodian later discovers records responsive to a records request that were omitted from the response, the PRRC should contact the requestor concerning the omission and produce the records as quickly as practicable.

(c) Redaction 1. If a record contains confidential information or information that is not open for public inspection, the PRRC shall prepare a redacted copy prior to providing access. However, if a record constitutes a return, tax information, taxpayer identity, or tax administration information, the PRRC shall prepare a redacted copy only if legal counsel for the Tennessee Department of Revenue determines that providing a redacted record would not be in violation of T.C.A. § 67-1-1702.

If questions arise concerning redaction, the records custodian should coordinate with the Department’s legal counsel or other appropriate parties regarding review and redaction of records. The PRRC may also consult with the OORC or with the Office of Attorney General and Reporter.

Whenever a redacted record is provided, the PRRC should provide the requestor with the basis for redaction. The basis given for redaction shall be general in nature and not disclose confidential information.

(5) Inspection of Records (a) The location for inspection of records within the offices of the Tennessee Department of Revenue shall be determined by the PRRC in consultation with the appropriate records custodian.

(b) Under reasonable circumstances, the PRRC or a records custodian may require an appointment for inspection or may require inspection of records at an alternate location.

(6) Copies of Records (a) The PRRC shall promptly respond to a public record request for copies in the most economic and efficient manner practicable.

(b) Copies will be available for pickup at a location specified by the PRRC.

(c) Upon payment for postage, copies will be delivered to the requestor’s primary address by the United States Postal Service.

(d) Scanned copies (e.g., PDFs) of the requested records are available upon request and will be delivered to the requestor’s email address, as specified in the written request.

(7) Fees and Charges and Procedures for Billing and Payment (a) Fees and charges for copies of public records shall not be used to hinder access to public records.

(b) There shall be no charge for mere inspection of public records. Any charges for producing copies of records shall be in conformity to this rule.

(c) The PRRC shall provide requestors with an itemized estimate of any charges prior to producing copies of records and may require pre-payment of such charges before producing requested records.

(d) When fees for copies and labor do not exceed $25.00, the fees may be waived by the PRRC. Requests for waivers for fees above $25.00 must be presented to the Commissioner of Revenue or his delegate, who is authorized to determine if such waiver is in the best interest of the Tennessee Department of Revenue and for the public good.

(e) Fees and charges for copies are as follows:

$2.00 per tax return 2. $1.00 per motor vehicle record 3. $1.50 per certified motor vehicle record 4. $0.15 per page for letter- and legal-size black and white copies.
$0.50 per page for letter- and legal-size color copies.
Labor when time exceeds 25 hours.
If an outside vendor is used, the actual costs assessed by the vendor.

(f) Payment may be made in cash, by personal check, cashier’s check or by credit card.

Checks must be payable to the Tennessee Department of Revenue.

(g) Payment in advance may be required in all situations.

(h) Aggregation of Frequent and Multiple Requests 1. The Tennessee Department of Revenue may aggregate record requests in accordance with the Frequent and Multiple Request Policy promulgated by the OORC when more than four requests are received within a calendar month (either from a single individual or a group of individuals deemed working in concert).

If aggregating:

(i) The level at which records requests will be aggregated is by agency.

(ii) The PRRC in consultation with legal counsel is responsible for making the determination that a group of individuals are working in concert. The PRRC must inform the individuals that they have been deemed to be working in concert and that they have the right to appeal the decision to the OORC.

(8) Forms for Requesting Inspection/Copies of Records and Responding to Requests (a) Forms are not required in all instances for requesting inspection or copies of public records; provided that, the PRRC may require forms to provide timely and efficient access and assistance to requestors for copies of records.

(b) If the PRRC determines a form is necessary to timely and efficiently process a request for copies of public records, the form shall be as provided in this rule.

(c) If the PRRC determines a form is necessary to timely and efficiently provide a response to a request for copies or inspection of public records, the PRRC will use the form developed by the office of open records counsel, as updated and amended.

(9) With the assistance of General Counsel, the PRRC shall report to the Tennessee Department of Revenue’s Internal Audit and Consulting Services Division, on an annual basis, regarding the Tennessee Department of Revenue’s compliance with the TPRA for the preceding fiscal year and shall make recommendations, if any, for improvement or changes to this rule.

History

Authority: T.C.A. §§ 10-7-501; 10-7-503; 55-25-101, et seq.; 67-1-102; and 67-1-1701, et seq.
Administrative History: Original rule filed October 29, 2018; effective January 27, 2019. PUBLIC RECORDS REQUEST FORM The Tennessee Public Records Act (TPRA) grants Tennessee citizens the right to access open public records that exist at the time of the request. The TPRA does not require records custodians to compile information or create or recreate records that do not exist. This form is not necessary to obtain a taxpayer’s own tax information, which may be obtained by submitting a written request to the Records Custodian of the Tennessee Department of Revenue, Andrew Jackson Building, 500 Deaderick Street, Nashville, Tennessee, 37242 This form is not necessary to obtain motor vehicle records, which, subject to Tennessee’s confidentiality laws, may be obtained by submitting a Vehicle Information Request form available at https://www.tn.gov/content/dam/tn/revenue/documents/forms/general/f1313801Fill-in.pdf. To: Tennessee Department of Revenue, Public Records Request Coordinator From: Is the requestor a Tennessee citizen?  Yes  No Request:  Inspection  Copy/Duplicate (Note: Fees may apply) If costs for copies are assessed, the requestor has a right to receive an estimate. Do you wish to waive your right to an estimate and agree to pay copying and duplication costs in an amount not to exceed $_________________? If so, initial here: . Delivery preference:  On-Site Pick-Up  USPS First-Class Mail  Electronic Records Requested: Provide a detailed description of the record(s) requested, including: (1) type of record; (2) timeframe or dates for the records sought; and (3) subject matter or key words related to the records. Under the TPRA, record requests must be sufficiently detailed to enable a governmental entity to identify the specific records sought. As such, your record request must provide enough detail to enable the records custodian responding to the request to identify the specific records you are seeking. Signature of Requestor Date Submitted Signature of Coordinator Date Received

Chapter 1320-01-02 Taxpayer Remedies for Disputed Taxes

Tenn. Comp. R. & Regs. 1320-01-02-.01 REPEALED

History

Authority: T.C.A. §§ 67-1-102 and 67-1-1801.
Administrative History: Original rule filed April 15, 1987; effective July 29, 1987. Amendment filed July 13, 1988; effective October 29, 1988. Repeal filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-01-02-.02 CORPORATE SURETY BOND

A corporate surety bond filed to meet the requirements of § 67-1-1801 for a stay of collection shall be in a form as follows, containing the following terms and conditions:

BOND FOR STAY OF COLLECTION

OF TAX ASSESSMENT

RE: ______(style of lawsuit) , Chancery Court for ________________ County, Tennessee, No. _________________________________________________ ______________________(name of taxpayer), a (corporation, organization, or individual) as principal and (name of surety company), a corporation organized under the laws of the State of _____________________ and duly authorized by the Tennessee Commissioner of Insurance to engage in the surety insurance business in this state pursuant to Chapter 2 of Title 56 of Tennessee Code Annotated, as surety, are held and firmly bound unto the Tennessee Department of Revenue and acknowledge by this instrument their obligation to pay to said Tennessee Department of Revenue a sum not to exceed dollars ($ ) which is one hundred fifty percent (150%) of the amount of the tax assessment (including tax, interest and any applicable penalty) of ___________dollars ($) challenged by plaintiff in the above-referenced action.

This instrument is prepared for the purpose of filing in the above-referenced action to stay collection of the challenged tax pending final determination of the suit.

In the event the suit is withdrawn, nonsuited, or dismissed, or if final judgement thereon is rendered in favor of the Commissioner of Revenue as to all or any portion of the challenged assessment, both principal and surety hereunder shall, jointly and severally, satisfy such judgment amount in the case of final court determination, or in the case of dismissal, nonsuit, or withdrawal, the entire amount of the assessment challenged, plus interest subsequently accrued thereon, and any penalty assessed thereon.

Should the principal hereunder satisfy the assessment, including interest and penalty as described above, the surety's obligations hereunder to the Tennessee Department of Revenue will be discharged. Provided that nothing herein shall be construed to require the Commissioner of Revenue to seek payment from the principal prior to seeking payment from the surety hereunder and the obligation of the principal and surety to satisfy the tax assessment (including subsequently accrued interest) or judgment amount shall be joint and several up to the amount of this instrument.

This instrument shall remain in full force and effect for the benefit of the Tennessee Department of Revenue so long as any part of the challenged tax assessment or judgment amount remains outstanding and unsatisfied.

TAXPAYER:____________________________________

BY:____________________________________ ____________________________________

TITLE

SURETY:___________________________________

BY:___________________________________ ___________________________________

TITLE

History

Authority: T.C.A. §§ 67-1-1801 and 67-1-102.
Administrative History: Original rule filed April 15, 1987; effective July 29, 1987. Repeal and new rule filed April 19, 1990; effective June 3, 1990.

Tenn. Comp. R. & Regs. 1320-01-02-.05 REQUEST FOR INFORMAL CONFERENCE

(1)

(a) A request for an informal conference must be submitted in writing to the Commissioner of Revenue or the Commissioner’s designee in the Department’s Administrative Hearing Office.

(b) The conference request must be signed by the taxpayer or the taxpayer’s authorized representative. If the request is signed by an authorized representative, a Power of Attorney should be provided to the Administrative Hearing Office within five (5) business days.

(c) Statements of legal arguments and supporting documentation should be provided, where practicable, to the Administrative Hearing Office at least two weeks prior to the date of the informal conference. Upon written request by the taxpayer, the Commissioner or the Commissioner's designee may grant, in the Commissioner's or designee's discretion, a continuation of the conference in writing for a period of time reasonably necessary for the taxpayer to provide additional information or documentation relevant to the proposed assessment. A continuation may be granted either before or after the conference is held. If the taxpayer fails to provide such additional information or documentation during the time specified for the continuance, the conference decision shall be issued based on the information and documentation available at that time. Additionally, if the taxpayer fails to provide such additional information or documentation during the time specified for the continuance, the Commissioner or the Commissioner's designee may decline to consider a request for reconsideration that is based on any such additional information or documentation provided after the conference decision is issued.

(2) The written request will be deemed timely:

(a) If made via United States mail or a private delivery service that is designated by the Internal Revenue Service under I.R.C. §7502 and transmitted within thirty (30) days after the date of the notice of proposed assessment. A request for an informal conference is a tax document and, when transmitted through the United States Postal mail or a designated private delivery service, its timely filing date shall be determined in accordance with the provisions of T.C.A. § 67-1-107.

(b) If made via facsimile, electronic mail, or a non-designated delivery service and received by the Department on or before thirty (30) days after the date of the notice of proposed assessment.

(3) The day that a notice of proposed assessment is dated shall not be included in calculating the thirty (30) days.

(4) In the event that the thirtieth (30th) day after the date of a notice of proposed assessment falls on a Saturday, a Sunday, a legal holiday, or a day when state offices in Nashville are closed, the thirty (30) day period shall run at the end of the next day which is not a Saturday, a Sunday, a legal holiday, or a day when state offices in Nashville are closed.

(5) The person designated to respond to the issues contested at the informal conference shall sign and date the letter by which the taxpayer or his representative is advised of the decision(s) made on the issues(s) contested at the conference. The signature date shall be considered the date the informal conference decision is issued.

History

Authority: T.C.A. §§ 1-3-102, 15-1-101, 67-1-102(A), 67-1-102, 67-1-107, and 67-1-1801.
Administrative History: Original rule filed June 28, 2000; effective September 11, 2000. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-01-02-.03 IRREVOCABLE LETTER OF CREDIT

An Irrevocable Letter of Credit filed to meet the requirements of § 67-1-1801 for a stay of collection shall be in a form as follows. containing the following terms and conditions:

IRREVOCABLE LETTER OF CREDIT NO. ____________

BENEFICIARY APPLICANT

State of Tennessee (Taxpayer's name Department of Revenue and address)

Nashville, Tennessee RE:______________________ (style of lawsuit) ______________________________ , Chancery Court for ______________ County, Tennessee, No. ___________________.

Gentlemen:

We hereby issue in favor of the State of Tennessee, Department of Revenue, this irrevocable letter of credit which is available by presentment of your draft drawn at sight on ___________ (name of issuing bank) , subject to the condition that the draft be accompanied by a letter signed by the Commissioner of Revenue or his designate stating either:

(1) that the above-referenced lawsuit has been withdrawn or dismissed or terminated for any reason or that a judgment has been rendered in favor of the Commissioner of Revenue as to all or any portion of the challenged assessment; or, (2) that the above-referenced lawsuit is still pending and that notice has been given that this letter of credit will not be extended or replaced, and certifying that the Commissioner shall retain and deposit the proceeds of this letter of credit as collateral security for its assessments against the plaintiff, and shall return all remaining proceeds to the issuer after the assessment and all interest and penalties accrued thereon are extinguished.

SPECIAL CONDITIONS: A draft accompanied by the above statement concerning the nonextension or non-replacement of the credit shall not be honored if presented more than thirty (30) days prior to the original or any extended expiration date of this credit.

The amount of this letter of credit is ___________dollars ($_______), which is 150% of the amount of the challenged tax assessment (including tax, interest and any applicable penalty) of _________dollars ($).

This original of this letter of credit must accompany any draft. Drafts drawn under this credit must be endorsed and contain the clause "Drawn under (Name of Issuer) Letter of Credit No. ______________dated _____________________."

All documents must be presented to the issuer at the following address: ____________________________________________________________________________________ Except so far as otherwise expressly stated, this credit is subject to the Uniform Customs and Practice for Documentary Credits, 1983 Revision, IC Publication No. 400.

The issuer warrants that it is qualified under T.C.A. § 67-1-1801 to issue this letter of credit and is a bank designated by the Treasurer of this State as an authorized depository bank for the deposit of state funds.

This letter of credit shall expire three years from date, but shall be automatically renewed for successive one-year periods, unless and until the issuer shall have delivered written notice of non-renewal to the beneficiary thirty (30) days or more prior to the then-pending expiration date.

(Name of Issuer)

BY:_______________________________________

TITLE: ___________________________________

History

Authority: T.C.A. §§ 67-1-1801 and 67-1-102.
Administrative History: Original rule filed April 19, 1990; effective June 3, 1990.

Tenn. Comp. R. & Regs. 1320-01-02-.04 NOTICE OF LIEN

(a) Notices of lien filed to obtain a stay of collection pursuant to T.C.A. § 67-1-1801(c)(I)(C) must include either all of the taxpayer's property both real and personal, wherever situated, or unencumbered property of the taxpayer located in this state equal in value to at least one hundred fifty percent (150%) of the amount of the assessment or the portion thereof challenged by the suit. A notice of lien must be filed with the register of deeds of the county of the taxpayer's domicile or principal place of business in this state, the register of deeds of the county where the property is located, and the office of the Secretary of State.

(b) The notice of lien filed with the register of deeds shall be in a form as follows, containing the following terms and conditions:

NOTICE OF STATE TAX LIEN

Pursuant to the provisions of T.C.A. § 67-1-1801, a lien exists in favor of the State of Tennessee upon the following property (check one): [ ] All property wherever situated, both real and personal, and rights, title and interest in property acquired either prior to or subsequent to the filing of this notice, belonging to the hereinafter named taxpayer. [ ] Property located in Tennessee, otherwise unencumbered, and having a value equal to at least one hundred fifty percent (150%) of the amount of the assessment (including any penalty and interest) challenged in a lawsuit filed or to be filed by the taxpayer pursuant to the provisions of T.C.A. § 67-1-1801.

This property is described as follows:

(description of property, value and exact location)

This lien is given for the purpose of obtaining a stay of collection of tax assessment (including penalty and interest) challenged by the taxpayer in a lawsuit filed or to be filed by the taxpayer pursuant to the provisions of T.C.A. § 67-1-1801.

This lien secures the payment of _________(amount of assessment, penalty and interest challenged in lawsuit) ___________($) plus subsequently accrued interest.

The current amount of this lien may be obtained by inquiry of the Tax Enforcement Division of the Tennessee Department of Revenue. ____________________________________________________________________________________ ____________________________________________________________________________________ Name of Taxpayer Account Number: Account Number:

Residence or Place of Business: County: ____________________________________________________________________________________ Witness my hand at ________________, Tennessee, on the day of ______________, __________.

Taxpayer __________________________________ By________________________________________ ____________________________________________________________________________________ * FOR REGISTER USE ONLY -PRINT OR STAMP * ____________________________________________________________________________________ BOOK NO. PAGE NO. DATE TIME REGISTER BY:_______________________________________ ___________________________________________ RV-1307 (REV.5-85) 02-018-0503 (c) A notice of lien must also be filed with the office of the Secretary of State. Notices of Lien field in the office of the Secretary of State shall be filed in quadruplicate, on 5" x 8" blue paper, in a form as follows, containing the following terms and conditions:

TAXPAYER'S VOLUNTARY GRANT OF LIEN

TO DEPARTMENT OF REVENUE ____________________________________________________________________________________ _

Taxpayer's Name and Lienholder: Date, Time, Number Business Address: and Filing Office: ____________________________________________________________________________________ Tennessee Department of Revenue 1200 Andrew Jackson Office Bldg.

Nashville, TN 37242 ________________________________________________________ TAXPAYER ACCOUNT NO.________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ Description of Property Under Lien:

See attached (attach copy of notice of lien filed with register of deeds, including attachments thereto) ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________ ____________________________ Taxpayer's Signature Date (d) If the taxpayer owns property, either real or personal in other states, a notice of lien must be filed in these states, in the office designated for the filing of liens on property in the county in which the property is located and in the office of the Secretary of State of the foreign state. Such notices shall contain the terms and conditions as provided in subparagraphs (b) and (c) and shall be in the same form to the extent possible to file a valid lien in that state.

History

Authority: T.C.A. §§ 67-1-1801 and 67-1-102.
Administrative History: Original rule filed April 19, 1990; effective June 3, 1990.

Chapter 1320-02-01 Tax Enforcement Procedures Act

Tenn. Comp. R. & Regs. 1320-02-01-.01 PARTIAL PAYMENT AGREEMENTS

The Commissioner may, in his discretion, agree to allow a taxpayer pay a liability to the department in installments over an extended period of time.

Interest on such an agreement shall be computed on the basis of the total tax, penalty, and interest due at the time the agreement is executed by the Commissioner. Interest on such an agreement shall be at a rate to be determined by the Commissioner by filing a notice of such rate with the Secretary of State.

History

Authority: T.C.A. §§ 67-1-102 and 67-1-801.
Administrative History: Original rule filed June 22, 1989; effective September 27, 1989.

Tenn. Comp. R. & Regs. 1320-02-01-.02 REPEALED

History

Authority: T.C.A. §§ 67-1-1402 and 67-1-1439.
Administrative History: Original rule filed June 7, 1974. Repeal filed June 22, 1989; effective September 27, 1989.

Tenn. Comp. R. & Regs. 1320-02-01-.03 LEVY AND DISTRAINT - NOTICE AND DEMAND

If any person liable to pay any tax neglects or refuses to pay the same within ten (10) days after notice and demand, it shall be lawful for the Commissioner or his delegate to collect such tax (and such further sum as shall be sufficient to cover the expenses of the levy) by levy. A levy may be made hereunder upon: (1) all property owned by the taxpayer, (2) all rights to property belonging to such taxpayer, and (3) all property or rights to property possessed by any person on which property or rights to property there is a lien provided by law for the payment of such tax.

History

Authority: T.C.A. §§ 67-1-1405 and 67-1-1439.
Administrative History: Original rule filed June 7, 1974. Amendment filed June 22, 1989; effective September 27, 1989. Amendment filed June 29, 2000; effective September 11, 2000.

Tenn. Comp. R. & Regs. 1320-02-01-.04 SEIZURE AND SALE AUTHORIZED

(1) The term “levy,” includes the power of distraint and seizure by any means. It is contemplated that the power of distraint and seizure shall be exercised by the Commissioner or his delegate as an exclusively administrative procedure. The exercise of the power of distraint and seizure shall be a distinctively nonjudicial process. Any commissioned officer or employee of the Department of Revenue is authorized to serve a levy which is lawfully executed under the provisions of this chapter by the Commissioner or his delegate. A levy intends only to property in possession of the person upon whom a levy is made and to those obligations of such person to the taxpayer actually existing at the time of the levy.

(2) (a) A levy may be accomplished under the provisions of this chapter by serving a notice of levy on any person in possession of, or obligated with respect to, property or rights to property subject to levy. Such property or rights to property include, but are not limited to, bank accounts, savings and loan association shares, evidences of debt, receivables, securities, and accrued commissions, salaries, wages, income, or other compensation.

(b) Property which is nonsalable under the laws of this state or property which has no marketable value in this state, such as but not limited to open containers of beverage or food or items which have intrinsic value only, shall not be levied upon, except upon specific direction of the Commissioner or his delegate.

History

Authority: T.C.A. §§ 67-1-1404, 67-1-1406, and 67-1-1439.
Administrative History: Original rule filed June 7, 1974. Amendment filed June 22, 1989; effective September 27, 1989.

Tenn. Comp. R. & Regs. 1320-02-01-.05 REPEALED

History

Authority: T.C.A. §§ 67-1-1409, 67-1-1439, 67-101, and 67-6044 to implement Title 67, Chapter 60.
Administrative History: Original rule filed June 7, 1974. Repeal filed June 22, 1989; effective September 27, 1989.

Tenn. Comp. R. & Regs. 1320-02-01-.06 REPEALED

History

Authority: T.C.A. §§ 67-1-1410, 67-1-1439, 67-101, and 67-6044 to implement Title 67, Chapter 60.
Administrative History: Original rule filed June 7, 1974. Repeal filed June 22, 1989; effective September 27, 1989.

Tenn. Comp. R. & Regs. 1320-02-01-.07 EXEMPT PROPERTY

Expensive items of wearing apparel, such as furs or jewelry, which are luxuries and are not necessary for the taxpayer or for members of his family, are not exempt from levy and are, therefore, subject to levy.

History

Authority: T.C.A. §§ 67-1-1407 and 67-1-1439.
Administrative History: Original rule filed June 7, 1974. Amendment filed June 22, 1989; effective September 27, 1989.

Tenn. Comp. R. & Regs. 1320-02-01-.08 REPEALED

History

Authority: T.C.A. §§ 67-1-102, 67-1-1411, and 67-1-1439.
Administrative History: Original rule filed June 7, 1974. Amendment filed June 22, 1989; effective September 27, 1989. Repeal filed October 30, 2025; effective January 28, 2026.

Tenn. Comp. R. & Regs. 1320-02-01-.09 REPEALED

History

Authority: T.C.A. §§ 67-1-1412 and 67-1-1439.
Administrative History: Original rule filed June 7, 1974. Repeal filed June 22, 1989; effective September 27, 1989.

Tenn. Comp. R. & Regs. 1320-02-01-.10 REPEALED

History

Authority: T.C.A. §§ 67-1-1413 and 67-1-1439.
Administrative History: Original rule filed June 7, 1974. Repeal filed June 22, 1989; effective September 27, 1989.

Tenn. Comp. R. & Regs. 1320-02-01-.11 REPEALED

History

Authority: T.C.A. §§ 67-1-1414 and 67-1-1439.
Administrative History: Original rule filed June 7, 1974. Repeal filed June 22, 1989; effective September 27, 1989.

Tenn. Comp. R. & Regs. 1320-02-01-.12 NOTICE OF SALE

(1) The Commissioner or his delegate may use other methods of giving notice of sale and of advertising seized property, in addition to those referred to in T.C.A. § 67-1-1415, when he believes that the nature of the property to be sold is such that a wider or more specialized coverage will enhance the possibility of obtaining a substantially higher price for the property.

(2) When the property to be sold is real property it shall be sufficient if the notice specifies the property to be sold property to be sold as that located at a particular mailing address and which is otherwise sufficient to locate the property, identify the improvements thereon, if any, and indicate whether it is a residence, commercial property, a farm, or other property devoted to other specialized uses. A description of real property by metes and bounds shall not be required; however, the approximate acreage, or dimensions where more appropriate, shall be specified in the notice.

History

Authority: T.C.A. §§ 67-1-1415 and 67-1-1439.
Administrative History: Original rule filed June 7, 1974. Amendment filed June 22, 1989; effective September 27, 1989.

Tenn. Comp. R. & Regs. 1320-02-01-.13 REPEALED

History

Authority: T.C.A. §§ 67-1-1416 and 67-1-1439.
Administrative History: Original rule filed June 7, 1974. Repeal filed June 22, 1989; effective September 27, 1989.

Tenn. Comp. R. & Regs. 1320-02-01-.14 REPEALED

History

Authority: T.C.A. §§ 67-1-1417 and 67-1-1439.
Administrative History: Original rule filed June 7, 1974. Repeal filed June 22, 1989; effective September 27, 1989.

Tenn. Comp. R. & Regs. 1320-02-01-.15 MANNER AND CONDITIONS OF SALE

(1) The manner of sale shall be determined by the Commissioner or his delegate before publication of notice thereof. The sale shall not be conducted in any manner other than as determined and announced. The manner of sale shall be either: (a) at public auction at which open competitive bids shall be received, or (a) At public auction at which open competitive bids shall be received, or (b) At public sale under sealed bids. The following rules, in addition to the other rules provided for herein, shall be applicable to a sale of property seized by levy at public sale under sealed bids:

Bids shall be solicited through a public notice of sale and invitation to bidders.
A bid shall be submitted on a form which shall be furnished by the Commissioner or his delegate upon request. The form shall be completed in accordance with the instructions appearing thereon.
The seized property may be offered for sale (i) As separate items, or (ii) As groups of items, or (iii) In the aggregate, or (iv) Both as separate items (or in groups) and in the aggregate. If offered for sale under this provision, the property shall be sold under the method which produces the highest aggregate amount.

The Commissioner or his delegate shall select whichever of the four foregoing methods of offering the property for sale as, in his opinion, is most feasible under all of the facts and circumstances of the case.

Such selection shall be made prior to notice of sale if the manner of sale is under sealed bids but may be made at the sale if it is at public auction. If the property to be sold includes both real and personal property, only the personal property may be grouped for the purpose of offering such property for sale.

However, real and personal property may be offered for sale in the aggregate, provided the real property, as separate items, and the personal property as a group, or as groups, or as separate items, are first offered separately.

(2) The officer conducting the sale may announce the minimum price before the sale begins or, in his discretion, may simply state that a minimum price has been determined and defer announcement of the amount of the minimum price until after the receipt of the highest bid. In the latter event and if the highest bid is greater than the minimum price, no announcement of the minimum price shall be made by him.

(3) Property seized by levy shall be offered for sale upon whichever of the following terms is fixed by the Commissioner or his delegate as may be determined by him and as announced in the public notice of sale:

(a) Payment in full upon acceptance of the highest bid without regard to the amount of such bid, or (b) If the aggregate price of all property purchased by a successful bidder at the sale is more than $200, an initial payment of $200 or 20% of the purchase price, whichever is the greater, and payment of the balance (including all costs incurred for the protection or preservation of the property subsequent to the sale and prior to final payment) within a specified period, not to exceed one month from the date of the sale.

(4) The Commissioner or his delegate may use other methods of giving notice of sale and of advertising seized property in addition to those referred to in T.C.A. § 67-1-1415 when he believes that the nature of the property to be sold is such that a wider or more specialized advertising coverage will enhance the possibility of obtaining a higher price for the property.

(5) When it appears to the Commissioner or his delegate that an adjournment of the sale will best serve the interest of the state or that of the taxpayer, he may adjourn, or cause the officer conducting the sale to adjourn, the sale from time to time; but the sale shall be held no later than one month after the date fixed in the original notice of sale.

(6) (a) If payment in full is required upon acceptance of any bid and it is not then and there paid, the officer conducting the sale shall forthwith proceed again to sell the property in the manner provided by T.C.A. § 67-1-1418 and the rule prescribed thereunder. If the manner of sale is at public auction the officer conducting the sale may declare the bid of the defaulting bidder to be null and void for failure to make full payment of the amount bid. He may proceed forthwith to sell the property to any other bidder offering the highest bid from among those bidders remaining on the premises; but he shall not sell it for less than the minimum price determined by the Commissioner or his delegate.

If no additional bids are received, or if the highest bid thereafter received is for not as much as the minimum price, the property shall again be advertised and sold as provided by law.

(b) If the conditions of the sale permit part of the payment to be deferred, and if such part is not paid within the prescribed period, suit may be instituted against the purchaser for the purchase price or such part thereof as has not been paid, together with interest at the rate allowed by the Tax Enforcement Procedures Act from the date of sale; or, in the discretion of the Commissioner or his delegate, the sale may be declared null and void for failure to make full payment of the purchase price and the property may again be advertised and sold as provided by law. In the event of such readvertisement and sale, any new purchaser shall receive such property or rights to property free and clear of any claim or right of the former defaulting purchaser, of any nature whatsoever, and the amount paid upon the bid price by such defaulting purchaser shall be forfeited to the states such amount forfeited shall be paid over by the Commissioner and distributed in the same manner as the subject tax.

History

Authority: T.C.A. §§ 67-1-1418 and 67-1-1439.
Administrative History: Original rule filed June 7, 1974. Amendment filed June 22, 1989; effective September 27, 1989. Amendment filed June 28, 2000; effective September 11, 2000.

Tenn. Comp. R. & Regs. 1320-02-01-.16 SALE OF PERISHABLE GOODS

The Commissioner or his delegate shall, as soon as practicable, make public sale of perishable property in accordance with the following terms and conditions:

(1) If the owner can readily be found, a notice shall be given to him. A notice of sale shall also be posted in two public places in the county in which the property is to be sold. The notice shall specify the time and place of sale, the property to be sold, and the manner and conditions of sale. The Commissioner or his delegate may give such other notice and in such other manner as he may deem advisable under the circumstances. The time of sale shall be determined by the Commissioner or his delegate without regard to the restrictive provisions of T.C.A. § 67-1-1415 and the rule prescribed thereunder. If a levy upon perishable goods has been made pursuant to a jeopardy assessment, as provided by T.C.A. § 67-1-1431, the time of sale may be fixed without regard to the requirements of either T.C.A. §§ 67-1-1405, 67-1-1406(a), or 67-1-1415.

(2) The property shall be sold at public auction to the highest bidder.

(3) The purchase price shall be paid in full upon acceptance of the highest bid.

History

Authority: T.C.A. §§ 67-1-1419 and 67-1-1439.
Administrative History: Original rule filed June 7, 1974. Amendment filed June 22, 1989; effective September 27, 1989.

Tenn. Comp. R. & Regs. 1320-02-01-.17 REDEMPTION OF PROPERTY

When any real property is redeemed, the Commissioner or his delegate shall cause an entry of the fact to be made upon the record of sale kept in accordance with T.C.A. § 67-1-1424 and such entry shall be evidence of such redemption. The party who redeems the property shall notify the Commissioner or his delegate of the date of such redemption and of the transfer of the certificate of sale, the amount of the redemption price, and the name of the party to whom such redemption price was paid.

History

Authority: T.C.A. §§ 67-1-1420 and 67-1-1439.
Administrative History: Original rule filed June 7, 1974. Amendment filed June 22, 1989; effective September 27, 1989.

Tenn. Comp. R. & Regs. 1320-02-01-.18 REPEALED

History

Authority: T.C.A. §§ 67-1-1421 and 67-1-1439.
Administrative History: Original rule filed June 7, 1974. Repeal filed June 22, 1989; effective September 27, 1989.

Tenn. Comp. R. & Regs. 1320-02-01-.19 REPEALED

History

Authority: T.C.A. §§ 67-1-1421 and 67-1-1439.
Administrative History: Original rule filed June 7, 1974. Repeal filed June 22, 1989; effective September 27, 1989.

Tenn. Comp. R. & Regs. 1320-02-01-.20 EXECUTION OF DEED TO REAL PROPERTY

In the case of any real property sold as provided in T.C.A. §§ 67-1-1414 through 67-1-1418, and not redeemed in the manner and within the time prescribed in T.C.A. § 67-1-1420 the Commissioner or his delegate shall execute (in accordance with the laws of the state pertaining to sales of real property under execution) to the purchaser of such real property at the sale, or his heirs or assigns, upon surrender of the certificates of sale, a deed of the real property so purchased, reciting the facts set forth in the certificates.

History

Authority: T.C.A. §§ 67-1-1422 and 67-1-1439.
Administrative History: Original rule filed June 7, 1974. Amendment filed June 22, 1989; effective September 27, 1989.

Tenn. Comp. R. & Regs. 1320-02-01-.21 REPEALED

History

Authority: T.C.A. §§ 67-1-1422 and 67-1-1439.
Administrative History: Original rule filed June 7, 1974. Repeal filed June 22, 1989; effective September 27, 1989.

Tenn. Comp. R. & Regs. 1320-02-01-.22 REPEALED

History

Authority: T.C.A. §§ 67-1-1423 and 67-1-1439.
Administrative History: Original rule filed June 7, 1974. Repeal filed June 22, 1989; effective September 27, 1989.

Tenn. Comp. R. & Regs. 1320-02-01-.23 REPEALED

History

Authority: T.C.A. §§ 67-1-1424 and 67-1-1439.
Administrative History: Original rule filed June 7, 1974. Repeal filed June 22, 1989; effective September 27, 1989.

Tenn. Comp. R. & Regs. 1320-02-01-.24 EXPENSE OF LEVY AND SALE

(1) The Commissioner or his delegate shall determine the expenses to be allowed in all cases of levy and sale. Such expenses shall include the expenses of protection and preservation of the property during the period subsequent to the levy, the posting and advertising of notices, the cost of conducting the sale, the cost of preparation, recordation and service of lawfully required documents and any other expenses actually incurred in connection with or properly attributable to the levy and sale. There shall be no charges made for any such services performed by authorized commissioned officers or employees of the Department of Revenue while acting in their official capacities.

(2) In case real and personal property (or several tracts of real property) are sold in the aggregate, the Commissioner or his delegate shall properly apportion the expenses to the real property (or to each tract where appropriate).

History

Authority: T.C.A. §§ 67-1-1425 and 67-1-1439.
Administrative History: Original rule filed June 7, 1974. Amendment filed June 22, 1989; effective September 27, 1989.

Tenn. Comp. R. & Regs. 1320-02-01-.25 APPLICATION OF PROCEEDS

(1) Any money realized by proceedings under the Tax Enforcement Procedures Act whether by seizure or by surrender (except pursuant to subsection (b)(2) of T.C.A. § 67-1-1412 or by sale of seized property, or by sale of property redeemed for the state (if the interest of the state in such property was a lien arising under the provisions of this title) shall be applied as hereinafter indicated.

(a) First, against the expenses of the proceedings.

(b) Taxes such as ad valorem taxes on the property seized shall only be paid after the expenses in (a) if the state does not have a senior lien for taxes pursuant to T.C.A. § 67-1-1403.

(c) The amount, if any, remaining after complying with the provisions of subparagraphs (a) and (b), as hereinabove stated, shall then be applied against the liability in respect of which the levy was made or the sale was conducted.

(2) Any surplus proceeds remaining after the application of paragraph (l), as hereinabove stated, shall, upon application and satisfactory proof in support thereof, be credited or refunded by the Commissioner or his delegate to the person or persons legally entitled thereto. The delinquent taxpayer is the person entitled to the surplus proceeds unless another person establishes a superior claim thereto. If there are multiple claims to surplus proceeds, the Commissioner may file an interpleader action as to any surplus funds in the Davidson County Chancery Court.

History

Authority: T.C.A. §§ 67-1-1426 and 67-1-1439.
Administrative History: Original rule filed June 7, 1974. Amendment filed June 22, 1989; effective September 27, 1989.

Tenn. Comp. R. & Regs. 1320-02-01-.26 RELEASE OF LEVY

(1) The Commissioner or his delegate may release the levy upon either all or part of the property or rights to property levied upon where the Commissioner or his delegate determines that such action will facilitate the collection of the liability. Such a release shall not operate to prevent any subsequent levy upon the same or other property of the delinquent taxpayer.

(2) A levy may be released under the provisions of T.C.A. § 67-1-1427 only if the delinquent taxpayer complies with such of the conditions thereunder as the Commissioner or his delegate may require.

(3) The Commissioner or his delegate may release the levy as authorized hereunder if any one or more of the following arrangements are made or circumstances are found to exist:

(a) The delinquent taxpayer offers, and there is accepted by the Commissioner or his delegate, a satisfactory arrangement placing property in escrow to secure the payment of the liability (including the expenses of levy) which is the basis of the levy.

(b) The delinquent taxpayer delivers an acceptable bond to the Commissioner or his delegate conditioned upon the payment of the liability (including the expenses of levy) which is the basis of the law.

(c) The delinquent taxpayer or any other person having an interest in the property levied upon pays to the Commissioner or his delegate an amount determined by him to be equal to the interest of the state in the seized property or the part of the seized property to be released.

(d) The delinquent tax payer executes an agreement directing his employer to pay to the Commissioner or his delegate amounts deducted from the employee’s salaries or wages on a regular, continuing, or periodic basis, in such manner and in such amount as is agreed upon with the Commissioner or his delegate, until the full amount of the tax liability is satisfied, and such agreement is accepted by the employer.

(e) The delinquent taxpayer makes satisfactory arrangements with the Commissioner or his delegate to pay the amount of the tax liability in installments.

(f) The delinquent taxpayer executes an agreement to extend the statute of limitations on the collection of taxes.

(g) The Commissioner or his delegate may release the levy if he determines that the value of the interest of the state in the seized property, or in the part of the seized property to be released is insufficient to cover the expenses of the sale of such property to be released, is insufficient to cover the expenses of the sale of such property and such action will facilitate the collection of the liability to the extent that the incurrence of additional liability is thereby avoided.

History

Authority: T.C.A. §§ 67-1-1427 and 67-1-1439.
Administrative History: Original rule filed June 7, 1974. Amendment filed June 22, 1989; effective September 27, 1989.

Tenn. Comp. R. & Regs. 1320-02-01-.27 REPEALED

History

Authority: T.C.A. §§ 67-1-1428 and 67-1-1439.
Administrative History: Original rule filed June 7, 1974. Repeal filed June 22, 1989; effective September 27, 1989.

Tenn. Comp. R. & Regs. 1320-02-01-.28 REPEALED

History

Authority: T.C.A. §§ 67-1-1429 and 67-1-1439.
Administrative History: Original rule filed June 7, 1974. Repeal filed June 22, 1989; effective September 27, 1989.

Tenn. Comp. R. & Regs. 1320-02-01-.29 REPEALED

History

Authority: T.C.A. §§ 67-1-1430 and 67-1-1439.
Administrative History: Original rule filed June 7, 1974. Repeal filed June 22, 1989; effective September 27, 1989.

Tenn. Comp. R. & Regs. 1320-02-01-.30 REPEALED

History

Authority: T.C.A. §§ 67-1-1431 and 67-1-1439.
Administrative History: Original rule filed June 7, 1974. Repeal filed June 22, 1989; effective September 27, 1989.

Tenn. Comp. R. & Regs. 1320-02-01-.31 REPEALED

History

Authority: T.C.A. §§ 67-1-1431 and 67-1-1439.
Administrative History: Original rule filed June 7, 1974. Repeal filed June 22, 1989; effective September 27, 1989.

Tenn. Comp. R. & Regs. 1320-02-01-.32 REPEALED

History

Authority: T.C.A. §§ 67-1-1432 and 67-1-1439.
Administrative History: Original rule filed June 7, 1974. Repeal filed June 22, 1989; effective September 27, 1989.

Tenn. Comp. R. & Regs. 1320-02-01-.33 REPEALED

History

Authority: T.C.A. §§ 67-1-1432 and 67-1-1439.
Administrative History: Original rule filed June 7, 1974. Repeal filed June 22, 1989; effective September 27, 1989.

Tenn. Comp. R. & Regs. 1320-02-01-.34 EFFECT OF ENFORCEMENT OF OTHER LIENS

If the state is not joined as a party, a judgment in any civil action or suit, or a judicial sale pursuant to such a judgment, with respect to property on which the state has or claims a lien under the provision of this

chapter.

(1) Shall be made subject to and without disturbing the lien of the state, if notice of such lien of the state has been filed in the place provided by law for such filing at the time such action or suit is commenced, or (2) If a judicial sale of property pursuant to a judgement in any civil action or suit to which the state is not a party discharges a lien of the state arising under the provisions of this chapter, the state may claim, with the same priority as its lien had against the property sold, the proceeds of such sale (exclusive of the cost of such sale) at any time before the distribution of such proceeds is ordered. For the purposes of this section, a judicial sale is one conducted under judicial proceedings which are plenary in nature and proceed on formal pleadings.

History

Authority: T.C.A. §§ 67-1-1433 and 67-1-1439.
Administrative History: Original rule filed June 7, 1974. Amendment filed June 22, 1989; effective September 27, 1989.

Tenn. Comp. R. & Regs. 1320-02-01-.35 NONJUDICIAL SALES

(1) A sale of property on which the state has or claims a lien, or a title derived from enforcement of a lien under the provisions of this chapter shall, except as otherwise provided, be made subject to and without disturbing such lien or title of the state if notice of such lien or title was recorded in the place provided by law for such filing or recording more than thirty (30) days before such sale and the state is not given notice of such sale in the manner prescribed in subsection (2) hereof when such sale is made pursuant to:

(a) An instrument creating a lien on such property or (b) A confession of judgement on the obligation secured by such an instrument, or (c) A nonjudicial sale under a statutory lien on such property.

The term “nonjudicial sale” as used herein includes, but is not limited to, the divestment of the taxpayer’s title to property which occurs by operation of law as well as those which result from a public or a private sale. A nonjudicial sale made pursuant to a lien even though notice of the nonjudicial sale is given to the state through the Commissioner or his delegate.

(2) (a) Except in the case of the sale of perishable goods described in paragraph (2)(c) hereof, a notice of a nonjudicial sale shall be given in writing, by registered or certified mail or by personal service, not less than 25 days prior to the date of such sale. Such notice shall be addressed to the Commissioner of Revenue. It shall be submitted in an envelope addressed to the attention of, or personally delivered to, the Director, Tax Enforcement Division.

Notices required to be made under the provisions of this section shall be considered timely made only if actual notice is received by the Commissioner or his delegate in a timely manner. In the event that notice of a sale is given in accordance with the provisions hereof with respect to a scheduled sale which is postponed to a later time or date, the seller of the property is required to give notice of the postponement to the Commissioner in the same manner as is required with respect to the previously scheduled sale. In any case in which notice of sale is required to be given with respect to a scheduled sale and notice of the sale is not given, any postponement of the scheduled sale shall not affect the rights of the state under T.C.A. § 67-1-1433.

(b) Notwithstanding the notice requirements of this section, any sale of property described in subsection (1) hereof shall discharge or divest such property of the lien or title of the state if the Commissioner to his delegate consents to the sale of such property free of such lien or title. The Commissioner or his delegate may, in his discretion, give such consent for the state with respect to the sale of property in appropriate cases. Such consent shall be effective only if given in writing and shall be subject to such limitations and conditions as the Commissioner or his delegate may require. The Commissioner or his delegate may not, however, consent to a sale of property under this section after the date of such sale or where request therefor was not timely made (i.e., before the sale) and in the same manner as a notice of sale.

Any person desiring the state’s consent to sell property free of a tax lien or a title derived from the enforcement of a tax lien shall submit a written application therefor to the Commissioner of Revenue requesting that such consent be given. The application shall be submitted in an envelope addressed to the attention of, or personally delivered to, the Director, Tax Enforcement Division. It shall contain a declaration that it is made under the penalties of perjury and shall include the following information:

The name and address of the person submitting the notice of sale.
A copy of each notice of state tax lien affecting the property to be sold and a copy of the financing statement or trust deed or other lien interest being enforced.
With respect to the property to be sold, a detailed description, including location, of the property affected by the notice, the date, time, place, and terms of the proposed sale of the property, and in the case of a sale of perishable property described in paragraph (2)(c) of this section, a statement of the reasons why the property is believed to be perishable.
The approximate amount of the principal obligation, including interest, secured by the lien sought to be enforced and a description of the other expenses (such as legal expenses, selling costs, etc.) which may be charged against the sale proceeds.

(c) Notwithstanding the notice requirements of this section, any sale described in subsection subsection (l) involving personal property which is liable to perish or become greatly reduced in price or value by keeping, or which cannot be kept without great expense, shall discharge or divest such property of the lien or title of the state if notice of such sale is given to the Commissioner or his delegate at any time before such sale. Thus, in such cases the requirement that such notice shall be given more than 25 days before such sale is not applicable. However, notice thereof must be timely given, i.e., before the sale, and in the manner described here in above in all other respects. If a notice of a nonjudicial sale is timely given in the manner described, the nonjudicial sale of perishable goods shall discharge or divest the tax lien, or a title derived from the enforcement of a tax lien of the state in the property.

The seller of the perishable goods shall hold the proceeds (exclusive of costs) of the sale of such goods as a fund, for not less than 30 days after the date of the sale, subject to the liens and claims of the state in the same manner and with the same priority as the liens and claims of the state had with respect to the property sold. If the seller fails to hold the proceeds of the sale in accordance with the provisions of this paragraph the seller shall be personally liable to the state for an amount equal to the interest of the state in the fund. However, even if the proceeds of the sale are not so held by the seller but all of the other provisions of this paragraph are satisfied, the buyer of the property at the sale takes the property free of the liens and claims of the state. In the event of a postponement of the scheduled sale of perishable goods, the seller is not required to notify the Commissioner or his delegate of the postponement.

History

Authority: T.C.A. §§ 67-1-1433 and 67-1-1439.
Administrative History: Original rule filed June 7, 1974. Amendment filed June 22, 1989; effective September 27, 1989.

Tenn. Comp. R. & Regs. 1320-02-01-.36 REDEMPTION OF PROPERTY BY THE STATE

(1) In the case of a nonjudicial sale of real property to which T.C.A. § 67-1-1433(b) applies, which was made to satisfy a lien prior to that of the state, the Commissioner or his delegate may redeem such property within the period allowable for redemption of real property with respect to other secured creditors. The right of redemption of the state exists under this

section even though the Commissioner or his delegate has consented to the sale under T.C.A. § 67-1-1433(b)(2)(B).

(2) In any case in which the state redeems real property pursuant to subsection (1) hereinabove, the amount to be paid for such property shall be the amount paid by the purchaser plus interest at the rate allowed by the Tax Enforcement Procedures Act from the date of purchase to the date of redemption. In the case of a purchaser who is the holder of the lien being foreclosed, the amount paid by the state shall be considered to be the amount of the obligation secured by such lien to the extent legally satisfied by reason of the sale.

History

Authority: T.C.A. §§ 67-1-1433 and 67-1-1439.
Administrative History: Original rule filed June 7, 1974. Amendment filed June 22, 1989; effective September 27, 1989.

Tenn. Comp. R. & Regs. 1320-02-01-.37 CIVIL ACTIONS BY PERSONS OTHER THAN TAXPAYERS

If a levy has been made on property or property has been sold pursuant to a levy, any person (other than the person against whom is assessed the tax out of which levy arose) who claims an interest in or lien on such property and that such property was wrongfully levied upon may file a claim with the state Board of Claims or with the Davidson County Chancery Court. It shall be incumbent upon the person filing such a claim to show that he has an interest in, or a lien on, such property which is senior to the interest of the state and that such property was wrongfully levied upon by the state. If such claim is based solely upon a failure of the state to have filed a notice of its lien for taxes the claim shall not be recognized unless the claimant produces evidence of a lien recorded prior to the date of levy.

History

Authority: T.C.A. §§ 67-1-1434 and 67-1-1439.
Administrative History: Original rule filed June 7, 1974. Amendment filed June 22, 1989; effective September 27, 1989.

Tenn. Comp. R. & Regs. 1320-02-01-.38 SALE OF PERSONAL PROPERTY

(1) Any personal property (except bonds, notes, checks, and other securities) acquired by the state in payment of or as security for debts arising under any provisions of this chapter or the provisions of any prior law or the corresponding provisions of any subsequent law may be sold by the Commissioner or his delegate. Bonds of the State of Tennessee or of the United States shall not be sold by the Commissioner or his delegate but shall be transferred to the Treasurer of the state for redemption. All other bonds, notes, checks, and any other securities shall be disposed of in such manner as the Commissioner may direct.

(2) The time, place, manner, and terms of sale of personal property acquired by the state as prescribed hereinabove shall be as follows:

(a) The personal property may be sold at any time after it has been acquired by the state.

A public notice of sale shall be posted at the county courthouse nearest the place of sale and in at least two other public places. The notice shall specify the property to be sold and the time, place, manner and conditions of sale. In addition, the Commissioner or his delegate may use such other methods of advertising as he believes will result in obtaining the highest price for the property. The place of sale shall, except as provided hereinafter, be within the county where the property was originally acquired by the state. However, if the Commissioner or his delegate believes that a substantially higher price may be obtained, the sale may be held outside such county and at any other place within the state.

(b) The officer conducting the sale may reject any and all bids and withdraw the property from the sale if, in his judgment, the best interest of the state will be served thereby.

Whenever it appears to the officer conducting the sale that an adjournment of the sale will best serve the interest of the state, he may order and announce the sale adjourned from time to time. If the sale is adjourned for more than 30 days in the aggregate, public notice of the sale shall again by given.

(c) In the cue of default in payment of the bid price any amount deposited with the state will be retained as liquidated damages, but the amount thereof shall not exceed $200 unless the actual loss sustained is greater.

(3) The Commissioner or his delegate may, before giving notice of sale, solicit offers from prospective bidders and enter into agreements with such persons that they will bid at least a specified amount in case the property is offered for sale. In such case, the Commissioner or his delegates may also require such persons to make deposits to secure the performance of their agreements. Any such deposit, but not more than $200 thereof unless the actual loss sustained is greater, shall be retained as liquidated damages in case such person fails to bid the specified amount and the property is not sold for as much as the amount specified in such agreement.

(4) The property shall be offered for sale upon whichever of the following terms is fixed by the Commissioner or his delegates in the public notice of sale.

(a) Payment in full upon acceptance of the highest bid, without regard to the amount of such bid, or (b) If the aggregate price of all property purchased by a successful bidder at the sale is more than $200 an initial payment of $200 or 20% of the purchase price, whichever is the greater, and payment of the balance (including all costs incurred for the protection or preservation of the property subsequent to the sale and prior to final payment) within a specified period, not to exceed one month from the date of sale.

(5) The property may be sold at either:

(a) Public auction, at which open competitive bids shall be received, or (b) Public sale under sealed bids.

(6) The following rules, in addition to the other rules provided herein shall be applicable to public sales under sealed bids.

(a) Bids shall be solicited by the Commissioner or his delegates through a public notice of sale.

(b) A bid shall be submitted on a form which will be furnished by the Commissioner or his delegates upon request. The form shall be fully completed in accordance with the instructions appearing thereon.

(c) If the total bid is $200 or less, the full amount of the bid shall be submitted therewith. If the total bid is more than $200, 20% of such bid or $200 whichever is greater, shall be submitted therewith. Such remittance shall be by a certified, cashier’s or treasurer’s check drawn on any bank or trust company incorporated under the laws of the United States or under the laws of the State of Tennessee or by a United States Postal Service, bank, express, or telegraph money order.

(d) Each bid shall be submitted in a securely sealed envelope. The bidder shall indicate in the upper left-hand corner of the envelope his name and address and the time and place of sale as announced in the public notice of sale. A bid will not be considered unless it is received by the officer conducting the sale prior to the opening of the bids.

The bids will be opened at the time and place stated in the notice of sale, or at the time fixed thereafter in the announcement of the adjournment of the sale.

(e) The officer conducting the sale shall have the right to waive any technical defects in a bid. After the opening, examination, and consideration of all bids, the officer conducting the sale shall announce the amount of the highest bid or bids and the name of the successful bidder or bidders, unless in the opinion of the officer a higher price can be obtained for the property than has been bid. In the event the highest bids are equal in amount, the officer conducting the sale shall determine the successful bidder by drawing lots unless in his opinion a higher price can be obtained for the property that has been bid. Any remittance submitted in connection with an unsuccessful bid shall be returned to the bidder at the conclusion of the sale where feasible and in no event later than 30 days thereafter.

(f) A bid may be withdrawn on written or telegraphic request received from the bidder at any time prior to the time fixed for opening the bids. A technical defect in a bid confers no right on the bidder for the withdrawal of his bid after it has been opened.

(7) All payments for property sold pursuant to this section shall be made by cash for by a certified, cashier’s, or treasurer’s check drawn on any bank or trust company incorporated under the laws of the United States or under the laws of the State of Tennessee, or by a United States postal service, bank, express, or telegraph money order. If payment in full is required upon acceptance of the highest bid, the payment shall be made at such time. If payment in full is not made at such time, when required, the officer conducting the sale may forewith proceed again to sell the property in the manner provided in paragraph (e) hereof. If deferred payment is permitted, the initial payment shall be made on or before the date fixed for payment thereof. Any remittance submitted with a successful sealed bid shall be applied toward the purchase price.

(8) The risk of loss shall be on the purchaser of the property upon the acceptance of his bid and notification thereof given the purchaser by the Commissioner or his delegate. Possession of any property shall not be delivered to the purchaser until the purchase price has been paid in full. If payment or part of the purchase price for the property is deferred, the Commissioner or his delegate will retain possession of such property as security for the payment of the balance of the purchase price; and, as agent for the purchaser, he will cause the property to be cared for until the purchase price has been paid in full or the sale is declared null and void for failure to make full payment of the purchase price. In such latter event, all charges and expenses incurred in caring for the property after acceptance of the bill shall be borne by the purchaser.

(9) The officer conducting the sale shall issue a certificate of sale to the purchaser upon payment in full of the purchase price. Such certificate shall transfer to the purchaser all right, title, and interest of the state in and to the property sold.

(10) In the case of the resale of any such property, as prescribed herein, the net proceeds of such resale shall be paid over by the Commissioner and distributed in the same manner as the subject tax and he shall account for the proceeds and all expenses connected therewith.

(11) Notwithstanding the other paragraphs of this rule, the Commissioner or his delegate may, when he deems it advisable and in the best interest of the state to do so, take charge of and assume responsibility for any property to which this section is applicable. In such case, the Commissioner or his delegate shall immediately notify in writing the person to whom such property or rights to property belongs and specify therein the property involved, the reason for the action and his intentions with respect thereto.

History

Authority: T.C.A. §§ 67-1-1435 and 67-1-1439.
Administrative History: Original rule filed June 7, 1974. Amendment filed June 22, 1989; effective September 27, 1989.

Tenn. Comp. R. & Regs. 1320-02-01-.39 ADMINISTRATION OF REAL ESTATE

(1) The Commissioner or his delegate may sell any real estate owned or held by the state under the provisions hereinabove stated, relating to sale of personal property except where the context thereof is specifically inapplicable to real estate.

(2) (a) Upon payment in full of the purchase price, the Commissioner or his delegate shall execute a quit claim deed to the purchaser. Such deed shall be considered and operate as a conveyance of all the right, title, and interest the state had in and to the real property thus sold.

(b) Until real estate is sold, the Commissioner or his delegate may, in the exercise of his discretion and if such action is deemed to be in the best interest of the state, lease such property to the debtor or any other person considered to be an acceptable lessee by the Commissioner or his delegate. The terms of such lease shall be in accordance with instructions issued by the Commissioner, provided that a lease to anyone other than the debtor shall be made subject to the latter’s right of redemption.

(c) In cases where real estate has or may become the property of the state in payment of or as security for a debt and such debt shall have been paid, together with interest and penalties payable thereon, to the state at any time from the date of the acquisition of such real estate to the date of sale of such to another person, the Commissioner or his delegate may release by deed or otherwise convey such real estate to the debtor from whom it was taken, or to his heirs or other legal representatives.

(d) The Commissioner or his delegate shall account for the proceeds of all sales or leases, or releases of the property and for all expenses connected with the maintenance, sale, lease or release of the property, and the net proceeds shall be paid over by the Commissioner and distributed in the same manner as the subject tax.

History

Authority: T.C.A. §§ 67-1-1436 and 67-1-1439.
Administrative History: Original rule filed June 7, 1974. Amendment filed June 22, 1989; effective September 27, 1989.

Tenn. Comp. R. & Regs. 1320-02-01-.40 EXAMINATION OF BOOKS AND WITNESSES

(1) The following Commissioner officers and employees of the Department of Revenue are authorized to issue summons:

(a) The Commissioner of Revenue.

(b) The Deputy Commissioner of Revenue.

(d) General Counsel or Special Counsel for the Department.

(e) The Director, Tax Enforcement Division.

(f) The Director, Motor Vehicle Division.

(g) The Director, Franchise, Excise, and Income Tax Division.

(h) The Director, Petroleum Tax Division.

(i) The Director, Miscellaneous Tax Division.

(j) The Director, Sales and Use Tax Division.

(k) The Director and all special agents, Special Investigations Unit.

(2) The officers and employees designated above may designate any other employee of the Department of Revenue before whom a person summoned pursuant to T.C.A. § 67-1-1437 shall appear. Any such other employee, when so designated in a summons is authorized to take testimony under oath of the person summoned and to receive and examine books, papers, records, or other data produced in compliance with the summons. The authority to issue a summons may not, however, be redelegated by the person to whom it is delegated.

History

Authority: T.C.A. §§ 67-1-1437 and 67-1-1439.
Administrative History: Original rule filed June 7, 1974. Amendment filed June 22, 1989; effective September 27, 1989.

Tenn. Comp. R. & Regs. 1320-02-01-.41 SUMMONS

(1) A summons shall be served by an attested copy delivered in hand to the person to whom it is directed, or left at his last and usual place of abode. The certificate of service of the summons, signed by the person serving it, shall be evidence of the facts it states on the hearing of an application for the enforcement of the summons. When the summons requires the production of books, papers, records, or other data, it shall be sufficient if such books, papers, records, or other data are described with reasonable certainty.

The commissioned officers and employees of the Department of Revenue authorized to issue a summons are also authorized to serve a summons issued under such section. While the

authority to issue a summons may not be redelegated, the authority to serve a summons may be redelegated by any officer or employee who is authorized to issue a summons. However, the authority to serve a summons may be redelegated only to such employees of the Department of Revenue who are duly commissioned as officers or employees thereof by the Commissioner of Revenue and have authority to perform all duties conferred upon such officers under all laws and regulations administered by the Department of Revenue, including the authority to investigate, and to require and receive information as to all matters relating to such laws and regulations. It is recommended, but not required, that all such officers display their commission or credentials to any person upon whom a summons is served by them.

(2) The time and place of examination shall be such time and place as may be fixed by any commissioned officer or employee of the Department of Revenue as are reasonable under the circumstances. The date fixed for an appearance before an officer of the department shall be not less than 10 days from the date of service of the summons. No taxpayer shall be subjected to unnecessary examinations or investigations. Only one examination of a taxpayer’s books of account shall be made for each taxable year with respect to any one specific tax liability unless the taxpayer requests otherwise or unless an authorized officer of the department, after investigation, determined there is a compelling reason therefore and notifies the taxpayer in writing that an additional examination with respect to any one or more tax liabilities is necessary and states the reason in the notification. There shall, however, be no review of the decision of the examining or investigating officer except that which may be afforded informally by the Commissioner of Revenue in his discretion or in a formal manner as may otherwise be required by law.

(3) Whenever any person summoned hereunder neglects or refuses to obey such summons, or to produce books, papers, records, or other data, or to give testimony, as required, the Commissioner through his attorneys may apply to the chancery court for the division within which the person so summoned resides or is found for an attachment against him as for a contempt.

It shall be the duty of the chancellor to whom application is made, as provided hereinabove, to hear the application, and, if satisfactory proof is made, to issue an attachment, directed to some proper officer, for the arrest of such person and upon his being brought before the court to proceed to a hearing of the case. Upon such hearing the chancellor shall have power to make such orders as he shall deem proper, not inconsistent with the law for the punishment of contempt, to enforce obedience to the requirements of the summons and to punish such person for his default or disobedience.

Any commissioned officer or any employee of the Department of Revenue may, in the performance of his official duty, enter in the daytime any building or any place where any articles or objects subject to tax are made, produced, kept or distributed, or where records relating thereto are kept, so far as it may be necessary for the purpose of examining said articles or objects or the records relating thereto; and may also enter at night any such building or place, while open, for a similar purpose.

History

Authority: T.C.A. §§ 67-1-1437 and 67-1-1439.
Administrative History: Original rule filed June 7, 1974. Amendment filed June 22, 1989; effective September 27, 1989.

Tenn. Comp. R. & Regs. 1320-02-01-.42 REPEALED

History

Authority: T.C.A. § 67-1-1439.
Administrative History: Original rule filed June 7, 1974. Repeal filed June 22, 1989; effective September 27, 1989.

Tenn. Comp. R. & Regs. 1320-02-01-.43 ASSESSMENT BY COMMISSIONER

The directors of each of the tax administration divisions within the Department of Revenue who are charged with the responsibility for collecting specific taxes imposed under the revenue laws of the state and made collectible by the Commissioner of Revenue are authorized and required to make all inquiries necessary to the determination and assessment of all taxes referred to hereinabove and to make the determinations of such taxes and the proposed assessments of such taxes that may become final only pursuant to T.C.A. § 67-1-1438.

History

Authority: T.C.A. §§ 67-1-102, 67-1-1438, and 67-1-1439.
Administrative History: Original rule filed June 7, 1974. Amendment filed June 22, 1989; effective September 27, 1989. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-02-01-.44 REPEALED

History

Authority: T.C.A. § 67-1-1439.
Administrative History: Original rule filed June 7, 1974. Repeal filed June 22, 1989; effective September 27, 1989.

Tenn. Comp. R. & Regs. 1320-02-01-.45 REPEALED

History

Authority: T.C.A. §§ 67-1-1439 and 67-1-1440.
Administrative History: Original rule filed June 7, 1974. Repeal filed June 22, 1989; effective September 27, 1989.

Tenn. Comp. R. & Regs. 1320-02-01-.46 REPEALED

History

Authority: T.C.A. §§ 67-1-1439 and 67-1-1441.
Administrative History: Original rule filed June 7, 1974. Repeal filed June 22, 1989; effective September 27, 1989.

Chapter 1320-03-01 Repealed

Tenn. Comp. R. & Regs. 1320-03-01-.01 REPEALED

History

Authority: T.C.A. §§67-101 and 67-1-102.
Administrative History: Original rule certified June 7, 1974. Repeal filed March 9, 1990; effective April 23, 1990.

Chapter 1320-03-02 Income Tax Rules

Tenn. Comp. R. & Regs. 1320-03-02-.01 INCOME

(1) Income is considered to be received for the purpose or the law when:

(a) It is actually paid in cash;

(b) Check or other negotiable instrument, or equivalent, is mailed to taxpayer, regardless of date received;

(d) When payment is made in merchandise or other commodities of intrinsic value.

History

Authority: T.C.A. §§67-1-102 and 67-2-113.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-03-02-.02 EXEMPTION

Accrued dividends or interest received by a seller of stocks, bonds, notes, or mortgages shall be reported by him for taxation: but such accrued interest or dividends thus advanced by the purchaser will be held taxable to the purchaser unless he filed with the Department the name or names of the seller and amounts so accrued, to obtain this exemption. The fact that an obligation is past due does not remove the interest thereon from taxation under the Code.

History

Authority: T.C.A. §§67-1-102 and 67-2-113.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-03-02-.03 LIQUIDATING DIVIDENDS

Dividends paid to any person by corporations will not be recognized as liquidating dividends unless the corporation is actually undergoing liquidation. No authority is contained in the Code by which depletion dividends can be regarded as non-taxable.

History

Authority: T.C.A. §§67-1-102 and 67-2-113.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-03-02-.04 FIDUCIARY RELEASED

Before a fiduciary can be released and a final accounting made of the estate of trust in his charge, all taxes reflected under the provisions of the Code upon the fiduciary, which have become due, must have been paid; and taxes which may become due must have been secured by a bond, deposit or otherwise, and said fiduciary must file with the Department the names and addresses of the beneficiaries of the estate and trust, together with a statement of the amount and character of the wealth going to each.

History

Authority: T.C.A. §§67-1-102 and 67-2-113.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-03-02-.05 AMOUNT OF INCOME NOT TAXABLE

Any person having a legal domicile in Tennessee or maintaining a place of residence in Tennessee for more than six (6) months in the tax year and receiving income in the form of dividends from stock or interest on bonds in a gross amount greater than $1250 for an individual return or $2500 for a joint return must file a Tennessee income tax return, notwithstanding that such income may be subject to the exemptions provided in T.C.A. §67-2-104.

History

Authority: T.C.A. §§67-1-102, 67-2-107, and 4-5-225.
Administrative History: Original rule certified June 7, 1974. Amendment filed February 17, 1988; effective May 29, 1988. Repeal by Public Chapter 502; effective June 30, 1989. New rule filed February 23, 1990; effective April 9, 1990.

Tenn. Comp. R. & Regs. 1320-03-02-.06 BLINDNESS

For the purpose of T.C.A. §67-2-104, an individual is blind only if his central visual acuity does not exceed 20/200 in the better eye with correcting lenses or that the widest diameter of the visual field subtends an angle no greater than 20 degrees.

History

Authority: T.C.A. §§67-1-102 and 67-2-113.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-03-02-.07 REPORT REQUIRED

No person shall be excused from making the complete report required by law because of the failure of the Commissioner or his representative to send or give out forms to him.

History

Authority: T.C.A. §§67-1-102 and 67-2-113.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-03-02-.08 RESIDENCE CHANGES

A person moving into the State during the year is liable for the tax on income received from the date of moving into the State. A person moving out of the State during the year is liable for the tax on income received from January 1st to date of change in residence.

History

Authority: T.C.A. §§67-1-102 and 67-2-113.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-03-02-.09 STOCK OF ANOTHER CORPORATION

When a corporation gives stock of another corporation as a dividend, the value of the stock is fully taxable; unless such distribution is made pursuant to decrees ordering divestiture of stock in enforcement of anti-trust statutes.

History

Authority: T.C.A. §§67-1-102 and 67-2-113.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-03-02-.10 CAPITAL GAIN DIVIDENDS

All dividends from Investment Trusts, including so-called capital gain dividends, are fully taxable whether taken in cash or additional stock.

History

Authority: T.C.A. §§67-1-102, 67-1-102(a), and 67-2-113.
Administrative History: Original rule certified June 7, 1974. Amendment filed May 14, 2003; effective July 28, 2003.

Tenn. Comp. R. & Regs. 1320-03-02-.11 REPEALED

History

Authority: T.C.A. §§67-1-102, 67-1-102(a), and 67-2-113.
Administrative History: Original rule certified June 7, 1974. Repeal filed May 14, 2003; effective July 28, 2003.

Tenn. Comp. R. & Regs. 1320-03-02-.12 REPEALED

History

Authority: T.C.A. §§67-1-102, 67-1-102(a), and 67-2-113.
Administrative History: Original rule certified June 7, 1974. Repeal filed May 14, 2003; effective July 28, 2003.

Tenn. Comp. R. & Regs. 1320-03-02-.13 CHARITABLE REMAINDER TRUSTS

(1) Charitable remainder trusts, as defined in §664 of the Internal Revenue Code, are taxable in the following manner:

(a) Income earned by such a trust shall be taxable up to the amount of such income distributed to the income beneficiary whether such income is earned in the tax year or is undistributed income from prior years.

(b) The amount distributed to the income beneficiary shall be considered paid from the trust income or corpus in the following order:

Income subject to the 6% tax rate under T.C.A. § 67-2-102(a) which is earned in the tax year or is undistributed income of the trust for prior years.
Income not subject to the tax which is earned in the tax year or is undistributed income of the trust for prior years 3. Trust corpus.

History

Authority: T.C.A. §§67-1-102, 67-1-102(a), and 67-2-113.
Administrative History: Original rule filed November 29, 1976; effective December 29, 1976. Amendment filed May 14, 2003; effective July 28, 2003.

Tenn. Comp. R. & Regs. 1320-03-02-.14 EXEMPT SHORT-TERM INTEREST

(1) For the purpose of T.C.A. §67-2-101, which provides that the term "bond" shall not include ordinary commercial paper, trade acceptance, etc., maturing in six (6) months or less from the date of issuance, the six (6) month period shall be calculated as follows:

(a) By excluding the date of issuance and counting forward one hundred and eighty-two (182) days, and if the one hundred and eighty-second day falls on a Saturday, a Sunday, or a legal holiday, by including the next following day; or (b) By beginning on the date of issuance and including the corresponding date in the sixth (6th) succeeding month, except where the sixth (6th) succeeding month does not have a corresponding date, in which case the corresponding date shall be deemed to be the last date of the sixth (6th) succeeding month; whichever is greater.

History

Authority: T.C.A. §§67-1-102, 67-2-101, and 67-2-113.
Administrative History: Original rule filed March 1, 1983; effective June 15, 1983. Amendment filed May 11, 1990; effective August 29, 1990.

Chapter 1320-04-01 Beer and Alcoholic Beverages of Not More Than Five Percent by Weight and Wholesale Tax Act

Tenn. Comp. R. & Regs. 1320-04-01-.01 SURETY BOND

A distributor or a brewery may file with the Department a bond in an amount exceeding his minimum requirements in order to eliminate the necessity of adjusting bonds annually because of increased business as disclosed by periodic review.

History

Authority: T.C.A. § 67-1-102.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-04-01-.02 REPEALED

History

Authority: T.C.A. §§ 57-5-206 and 67-1-102 and 1985 Tennessee Public Acts, Chapter 315.
Administrative History: Original rule certified June 7, 1974. Repeal filed June 27, 1990; effective August 11, 1990.

Tenn. Comp. R. & Regs. 1320-04-01-.03 DEDUCTION FOR BEER EXPORTED, DAMAGED, LOST, STOLEN OR

DESTROYED.

(1) With respect to the tax levied pursuant to Part 2 of Chapter 5 of Title 57 of the Tennessee Code Annotated, it shall be determined that the taxable incident attaches when such beer has come to rest at the wholesaler’s premises or warehouse. Provided, however, that a deduction from receipts and purchases shall be allowed persons subject to the tax on their monthly beer tax report submitted in accordance with rule 1320-04-01-.12, with respect to all beer or ale that, within that same monthly period in which said beer or ale has been received or purchased, has been exported from the state. Said deduction shall likewise be available for all beer or ale that has been damaged, lost, stolen, destroyed or otherwise become unsalable while in transit, by either common carrier or wholesaler’s own transport equipment, prior to being stored in the wholesaler’s warehouse. This is not to be construed to preclude said deduction for beer or ale that has been damaged or become unsalable in transit to the wholesaler’s warehouse, when such damage or unsalability was not detected until after the beer was stored in the wholesaler’s warehouse or as a matter of expediency and convenience such damaged or unsalable beer was temporarily stored in the wholesaler’s warehouse until it could be destroyed or returned to the brewery. Said deduction may not be allowed on beer or ale that has been lost, stolen, damaged or rendered unsalable while in the wholesaler’s storage or while in the course of trade after the product has left such wholesaler’s storage.

(2) Provided further, that said deduction may be disallowed if said monthly beer tax report is not accompanied with proper proof, satisfactory to the Commissioner of Revenue, showing that the said beer has been exported from the state of Tennessee; or damaged, lost, stolen, destroyed or otherwise become unsalable.

History

Authority: T.C.A. § 67-101.
Administrative History: Original rule certified June 7, 1974. Repeal and new rule filed February 7, 1983; effective May 16, 1983.

Tenn. Comp. R. & Regs. 1320-04-01-.04 DEDUCTION FOR BEER SOLD TO GOVERNMENTAL INSTRUMENTALITIES

(1) With respect to T.C.A. § 57-5-208, the exemption of tax shall be effectuated by the Department of Revenue allowing persons subject to the tax, duly licensed in Tennessee, to deduct from receipts and purchases on their monthly beer tax report submitted in accordance with Tennessee Administrative Compilation 1320-04-01-.12 all receipts and purchases sold, within that same monthly period, to post exchanges, ship service stores, commissaries and messes operated and controlled by the United States armed forces, and which are instrumentalities of the United States government.

(2) Said deduction shall be allowed to wholesalers and breweries only if the following conditions are met:

(a) The commanding officer of a qualified military installation has furnished the Commissioner of Revenue a letter designating a commissioned officer of his command as the person authorized to sign invoices acknowledging receipt of such beverages.

The signature of such designated officer shall be filed at the same time with the Department as a matter of record.

(b) The officer designated in each instance, as provided in subparagraph “(a)” above, has signed each invoice acknowledging receipt of the beer, and also signed a certificate, either on a separate sheet or written on the face of the invoice, certifying that the beer was sold to, and delivered to a post exchange, ship service store, commissary, mess or other such exempt agency, by a Tennessee wholesaler or brewery, and that said beer will be sold by such instrumentality of the government for consumption within the geographical boundaries of the government installation subject to regulations by the commanding officer of such installation.

History

Authority: T.C.A. § 67-101.
Administrative History: Original rule certified June 7, 1974. Repeal and new rule filed February 7, 1983; effective May 16, 1983.

Tenn. Comp. R. & Regs. 1320-04-01-.05 REPEALED

History

Authority: T.C.A. §§ 67-101 and 67-1-102.
Administrative History: Original rule certified June 7, 1974. Repeal filed October 30, 2025; effective January 28, 2026.

Tenn. Comp. R. & Regs. 1320-04-01-.06 REPEALED

History

Authority: T.C.A. §§ 67-101 and 67-1-102.
Administrative History: Original rule certified June 7, 1974. Repeal filed October 30, 2025; effective January 28, 2026.

Tenn. Comp. R. & Regs. 1320-04-01-.07 INTERSTATE SHIPMENTS

Interstate shipments of beer or other such beverages into or through the State of Tennessee, other than by a common carrier as contemplated by either Sections 57-230 or 57-231, Tennessee Code Annotated, must be accompanied and supported by an invoice, bill of sale, or bill of lading showing the true name and complete address of the consignor and the true name and complete address of the licensed consignee showing his street and number, rural route or other postal address. Such invoices, bills of sale, or bills of lading shall show the dates of shipment or purchase, invoice or bill of lading number, the number of cases, cartons or containers, the number of such containers to the case, carton or container, and the brand name of the beer or other such beverages. Such invoices, bills of sale or bills of lading shall show, if purchased from a consignor having more than one location, the exact name and address of the consignor where purchased or loaded. Any such shipments invoiced to a consignee who is not licensed to sell beer or other such beverages, whether within or without Tennessee, shall be deemed to be contraband and subject to seizure. Any official authorized to enforce the provisions of the beer tax law under Section 57-5-101, et seq., of the Tennessee Code Annotated, shall be authorized to hold without warrant all such shipments of beer or other such beverages until such time as it can be determined whether or not the consignee listed on the invoice in possession of the transporter is duly licensed to sell beer at the address shown on the invoice.

History

Authority: T.C.A. § 67-1-102.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-04-01-.08 ANNEXATION

Cities or incorporated municipalities annexing territory by extension of corporate limits in which licensed beer retailers are located shall notify this Department and distributors selling beer within the annexed territory of the annexation, the effective date, and furnish such distributors with the name and location of licensed beer retailers located therein.

History

Authority: T.C.A. § 67-1-102.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-04-01-.09 RECORD OF SALES

It shall be incumbent upon each and every wholesale beer dealer doing business within the State of Tennessee to keep accurate and adequate delivery tickets and records of each delivery of beer or other such beverages to individual retailers and other persons purchasing over five gallons of beer at a particular time. Such delivery tickets and records shall reflect the date that such merchandise was delivered, the name and address of the purchaser, date of sale, and the quantity, size, brand and price of each container sold. Each recipient of such merchandise, or his agent, shall sign as a receipt therefor a bill of sale or delivery ticket which shall be retained by the seller for at least two years subject to audit by agents of the Department of Revenue. Each and every wholesale beer dealer shall also keep an accurate daily record of each delivery of beer or other such beverages to persons purchasing less than five gallons of beer at a particular time. Such records shall reflect the daily quantity, size, brand and price of each container sold and shall also be retained by the wholesaler for a period of two years for inspection by agents of the Department of Revenue.

History

Authority: T.C.A. § 67-1-102.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-04-01-.10 DESTRUCTION OF BEER

Any beer or other such beverage of not more than five percent (5%) by weight held by a licensed brewery, wholesaler or distributor in his inventory, or in transit by any means within this state, which becomes unsalable for any reason, or is damaged, and which is to be destroyed must be destroyed under the supervision of the Commissioner of Revenue or his authorized representative. Any person having beer to be destroyed must retain this beer in his possession until a minimum of fifty 24/12 oz. cases of beer, or its equivalent, has been accumulated and submit a list of such beverages stating the quantity, size of container and package and the reason for the requested destruction to the Commissioner of Revenue 10 days prior to the date on which such beer is to be destroyed. Provided, however, any person having beer to be destroyed in a quantity less than fifty 24/12 oz. cases, or its equivalent, may likewise have the beer destroyed under the supervision of the Commissioner of Revenue or his authorized representative. However, the expense incurred by the Department in so doing shall be borne by the person requesting the destruction and such person shall make payment for such expense to the Department of Revenue promptly upon being billed. Otherwise such destroyed beer may not be included in any inventory reduction in determining tax due under provisions of Section 57-6-101, et. seq., Tennessee Code Annotated.

History

Authority: T.C.A. § 67-1-102.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-04-01-.11 ADJUSTMENTS FOR BREAKAGE

Claims for credit because of breakage for purposes of reducing inventory in determining tax due under provisions of T.C.A. §§ 57-6-101 et seq. are to be made monthly. Adjustments to secure compliance with provision of said sections will be made by a representative of the Department on completion of periodic audits.

History

Authority: T.C.A. § 67-101.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-04-01-.12 MONTHLY REPORTS

(1) All persons subject to tax under T.C.A. §§ 57-5-201 et seq. and T.C.A. §§ 57-6-101 et seq. must file reports with the Department of Revenue not later than the twentieth (20th) of each month covering all transactions of the previous month, at the same time paying any tax which may be due.

(2) Such reports must be filed on forms provided or approved by the Department of Revenue.

Reports must be prepared in a manner so as to be reasonably subject to audit by the Department of Revenue. Reports not filed and prepared in accordance with the provisions of this rule will not be accepted as timely filed.

(3) All delinquent reports and/or payments shall be subject to penalty as provided at T.C.A. § 67- 1-804.

History

Authority: T.C.A. §§ 57-5-206, 57-6-105, 67-101, 67-1-102, and 67-1-804.
Administrative History: Original rule certified June 7, 1974. Repeal and new rule filed June 27, 1990; effective August 11, 1990.

Tenn. Comp. R. & Regs. 1320-04-01-.13 REPORT OF SEIZURES

Any duly authorized representative of the Commissioner, highway patrolman, Sheriff, or other peace officer, shall promptly report in writing to the Commissioner the circumstances of the seizure of any contraband property under the provisions of Chapter 3, Title 57, Tennessee Code Annotated, and furnish a copy of the receipt given the person from whom seized along with copy of all other pertinent documents. Any beer, other such beverages or vehicles so seized shall be delivered promptly to the Department of Revenue for storage and/or disposition.

History

Authority: T.C.A. § 67-1-102.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-04-01-.14 OUT OF STATE BREWERS

Out of state brewers and/or importers engaged in interstate commerce only shall be allowed the same privileges of qualification, domestication, registration and payment of all applicable taxes as are required of Tennessee brewers. Such out of state brewers and/or importers so desiring to qualify in this state will be unconditionally liable for any and all taxes, fees and charges imposed by statute upon Tennessee brewers.

History

Authority: T.C.A. § 67-1-102.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-04-01-.15 DEFINITION OF IMPORTER

The term “importer,” as used in Tennessee Code Annotated, Chapters 3 and 4 of Title 57, shall mean a person, firm, corporation, joint-stock company, syndicate or association who brings beer manufactured or brewed in a foreign county from that country into the United States for the purpose of distribution within the United States, with the prior written authorization to do so from the brewer or manufacturer of such products and whosoever does so shall: be registered, be bonded, file monthly reports be permitted to pay barrelage taxes due thereon and be permitted to appoint wholesalers as required by T.C.A. § 57-6-104, all in the same manner as presently required of domestic brewers or manufacturers.

History

Authority: T.C.A. §§ 57-5-206, 57-6-105, and 67-1-102.
Administrative History: Original rule filed October 15, 1975; effective November 14, 1975.

Chapter 1320-04-02 Sales of Alcoholic Beverages for Consumption on the Premises

Tenn. Comp. R. & Regs. 1320-04-02-.01 DEFINITIONS

(1)The term “alcoholic beverage” shall mean and include alcohol, spirits, liquor, wine, and every liquid containing alcohol, spirits, wine and capable of being consumed by a human being, other than patented medicine, beer or wine. where the latter two (2) contain alcoholic content of five percent (5%) by weight, or less.

(2)The term “alcoholic beverage tax” shall mean the gross receipts tax levied upon licensees for sales of alcoholic beverages for consumption on the premises by Chapter 211 of the Public Acts of 1967.

(3)The term “Commission” shall mean the Alcoholic Beverage Commission of the State of Tennessee.

(4)The term “Commissioner” shall mean the Commissioner of Revenue of the State of Tennessee.

(5)The term “Department” shall mean the Department of Revenue of the State of Tennessee.

(6)The term “licensee” shall mean any person authorized by the Commission or the Commissioner to sell alcoholic beverages for consumption on the premises.

(7)The term “Sales Price” shall mean the total price for which an alcoholic beverage is sold and shall include, but not be limited to, the alcoholic beverage tax, applicable sales tax, both State and Local, and the cost of any services required to process the beverage for sale without any deductions therefrom on account of the cost of the beverage, the cost of the materials used, losses, or any other expenses whatsoever.

(8)The term “sale” in addition to its usual meaning and except as otherwise provided by these rules, shall mean any use, transfer, exchange, barter, gift or disposition in any manner or by any means whatsoever except authorized returns to wholesalers.

(9)The term “sale” shall not include the use of wine or distilled spirits which are consumed in the preparation of food.

History

Authority: T.C.A. §§67-1-102, 67-6-402, 67-6-102, and Memphis Country Club v. Tidwell, 503 S.W.2d 919 (Tenn. 1973).
Administrative History: Original rule certified June 7, 1974. Amendment filed November 29, 1976; effective December 29, 1976. Amendment filed June 27, 1990; effective August 11, 1990. Amendment filed January 31, 1992; effective March 16, 1992.

Tenn. Comp. R. & Regs. 1320-04-02-.02 ANNUAL TAX AND BOND OF LICENSEE

(1)(a)Every licensee permitted to do business in the state shall, as a condition precedent to the granting of a license to sell alcoholic beverages for consumption on the premises, post security with the Commissioner of Revenue in the form of one of the following: 1.a corporate surety indemnity bond; 2.a cash deposit; 3.a bond properly secured by a certificate of deposit.

Such security shall be conditioned upon and be posted to insure the proper payment of all taxes administered by the commissioner of revenue and incurred in connection with the sale of alcoholic beverages for consumption on the premises for which the license applicant may become liable, including sales taxes on the sale of alcoholic beverages for consumption on the premises. All bonds must be filed on forms provided by the commissioner of revenue.

(b)For all licensees other than restaurants selling wine only the amount of such initial security shall be $10,000.

(c)For restaurants selling wine only the amount of such initial security shall be $2,000.

(2)After monthly reports pursuant to rule 1320-4-2-.05(2) have been received by the commissioner of revenue which cover the initial three (3) full months of a licensee’s operating experience and upon request in writing by the licensee the required security will be adjusted to an amount equal to four (4) times the average monthly tax liability established during the initial three (3) full months operating experience of the licensee. The amount of security required may not be reduced to an amount which is less than $1,000.

(3)At any time following the completion of the licensee’s initial three (3) months of operating experience, the commissioner may determine that the required security be adjusted to reflect four (4) times the average monthly tax liability. Additional security must then be posted in the form of a rider to a corporate surety bond, additional cash deposit or new or additional certificate of deposit, as may be appropriate.

(a)In the case of any such determination made based on the licensee’s initial three (3) months of operating experience, any additional security required to be posted shall secure and be subject to any taxes, penalty and interest connected with the sale of alcoholic beverages for consumption on the premises, including applicable sales taxes, accruing against the principal(s) since the beginning of the effective period of the license.

(b)In all other cases, any additional security required to be posted shall secure and be subject to those taxes, penalty and interest connected with the sale of alcoholic beverages for consumption on the premises accruing against the principal(s) prospectively only.

(4)Any security posted with the commissioner shall not be released unless and until the commissioner has made a determination, through audit of the licensee, that all liability secured by the security has been paid or unless and until the applicable statute of limitations on the assessment of such liability has run, whichever occurs first.

(5)Failure to post security as required by the commissioner prior to any licensing period shall cause any application for a new or renewal license to be denied.

(6)The forfeiture or cancellation of all or any part of any security required to be posted, for any reason whatsoever, shall cause the license of a licensee to be automatically revoked.

(7)(a)All the provisions of this rule shall apply to “wine only” restaurant licensees licensed under the provisions of T.C.A. §57-4-101(n), except that after monthly reports pursuant to rule 1320-4- 2-.05(2) have been received by the Commission of Revenue covering the initial three (3) full months of such licensees operating experience, a “wine only” restaurant licensee may request in writing that the required surety be adjusted to an amount equal to twenty percent of four (4) times the average monthly liability established during the initial three (3) full months operating experience of such licensee, if such average monthly tax liability is determined by the Commissioner of Revenue to warrant an adjustment to a maximum penal sum of less than $2,000.00. The amount of security required of a “wine only” restaurant licensee may not be reduced to an amount which is less than twenty percent of $1,000.00.

(b)At any time following the completion of the “wine only” restaurant licensees’ initial three (3) months of operating experience, the commissioner may determine that the required security be adjusted to reflect twenty percent of four (4) times the average monthly tax liability. Financial security must than be posted in accordance with paragraph three (3) above.

History

Authority: T.C.A. §§67-1-102 and 57-4-302.
Administrative History: Original rule certified June 7, 1974. Amendment filed November 29, 1976; effective December 29, 1976. Amendment filed December 31, 1977; effective January 16, 1978. Amendment filed June 27, 1990; effective August 11, 1990. Amendment filed May 7, 1992; effective August 29, 1992. Amendment filed February 5, 1993; effective May 29, 1993.

Tenn. Comp. R. & Regs. 1320-04-02-.03 COMPUTATION OF TAX

(1)The amount of alcoholic beverages tax and sales tax due monthly or during an accounting period shall be computed by dividing the sum of the alcoholic beverage tax rate and the applicable sales tax rate, plus 100%, into the total sales price of all alcoholic beverages sold during each calendar month or accounting period. The resultant figure shall then be used as a taxable base to which the alcoholic beverages tax rate shall be applied to arrive at the amount of alcoholic beverages tax due, and the figure to which the applicable sales tax shall be applied to arrive at the amount of sales tax due on alcoholic beverages only.

Example: Based on sales price of alcoholic beverages in the amount of $1,500. 100 % Normal Sales Price without tax 15 % Alcoholic Beverage tax rate 7.75 % State and Local Sales tax rate 122.75% (5.5% state rate and 2.25% local rate, if local rate is different, adjust accordingly) 1500.00 = 1222.00 taxable base 1.2275 $1222.00 Taxable base$1222.00 Taxable base .15 Alcoholic Beverage tax rate .0775 State and Local sales tax rate $ 183.30 Total alcoholic beverage tax $ 94.71 Total sales tax liability on liability alcoholic beverages only

History

Authority: T.C.A. §§67-1-102 and 57-4-302.
Administrative History: Original rule certified June 7, 1974. Amendment filed November 29, 1976; effective December 29, 1976. Amendment filed June 27, 1990; effective August 11, 1990.

Tenn. Comp. R. & Regs. 1320-04-02-.04 RESTRICTIONS ON DISPOSITION OF ALCOHOLIC BEVERAGE

(1)A licensee shall not make any disposition of liquor except through sales by the drink for consumption on the premises and shall not make any disposition of wine except through sales for consumption on the premises.

(2)A licensee may be permitted to reduce his inventory by the amount of any alcoholic beverages lost due to theft, breakage or acts of nature only if proper proof of loss is supplied the department as follows:

(a)As soon as practicable after a loss of alcoholic beverages due to the theft occurs, provide the Department with proof that the theft was reported to the proper law enforcement agency and that the insurer who has insured the goods has paid the claim for their loss. A certificate from the department will be provided the licensee upon receipt of the required proof. A copy of said department certification shall be retained by the licensee for a period of three years as evidence of proper authorization for such inventory reduction.

(b)As soon as practicable after a loss of alcoholic beverages due to breakage or acts of nature occurs, obtain the assistance of, a department agent to observe the loss and furnish a certificate stating the quantity and brand of the liquor on which the identification stamp remains identifiable with the federal strip stamp intact, and with reference to wine, the agent must be able to determine the quantity and brand of wine on which the crown, cap, seal, or cork remain intact and unbroken. In instances where containers are not broken but the beverage is declared unsalable by the Pure Food and Drug Administration or other appropriate authority the licensee may be allowed inventory reduction if the products are destroyed by or in the presence of a department agent and so certified. A copy of said certificate shall be retained by the licensee as evidence of proper authorization for a period of three years for such inventory reduction.

(3)Wine or distilled spirits to be used and consumed in the preparation of food shall be stored separately from those alcoholic beverages sold by the drink for consumption on the premises. The wine or distilled spirits shall be used and consumed exclusively in the preparation of food. If any portion of the contents of a bottle of wine or distilled spirits is sold by the drink for consumption on the premises, the licensee shall be liable for liquor-by-the-drink tax on the total disposition, as if the entire contents of the bottle had been sold by the drink.

History

Authority: T.C.A. §§67-1-102 and 57-4-302.
Administrative History: Original rule certified by the Department of Revenue June 7, 1974. Amendment filed November 29, 1976; effective December 29, 1976. Amendment filed June 27, 1990; effective August 11, 1990.

Tenn. Comp. R. & Regs. 1320-04-02-.05 REPORTS OF LICENSEES

(1)(a)Each licensee shall post with the commissioner, on prescribed forms, price schedules of alcoholic beverages offered for sale, and show thereon the regular sales price of each drink listed, including applicable sales tax and alcoholic beverage tax. When drinks as listed on the posted schedule are sold at prices other than regular sales prices, i.e. happy hour etc., the schedule shall reflect the event or activity and its duration as to hours per day and days per week along with the special price at which drinks are sold.

(b)These schedules must be posted with the department prior to entering business and when any change is made in any information contained on a price schedule as posted with the commissioner, a revised schedule must be forwarded to the department prior to the effective date of such change.

(c)The licensee must base his sales price and other information required to be stated on the price schedule upon the type and quality of alcoholic beverages ordinarily sold by him.

(2)(a)Each licensee reporting on a monthly basis shall, on or before the fifteenth (15th) day of each month, make and deliver to the commissioner a tax report for the preceding calendar month upon such forms as may be prescribed by the commissioner, verified by the official agent making such tax report. The tax report shall be filed for each calendar month, or fraction thereof, during which a licensee is authorized to sell alcoholic beverages. A separate tax report shall be filed monthly for each established place of business.

(b)Upon written request the commissioner may, in his discretion, authorize a taxpayer to file returns on an accounting period basis as provided at T.C.A. §67-1-106. Each licensee reporting on an accounting period basis shall, on or before the fifteenth (15th) day immediately following the close of the accounting period, make and deliver to the commissioner a tax report for the preceding accounting period upon such forms as may be prescribed by the commissioner, verified by the official or agent making such tax report. The tax report shall be filed for each accounting period, or fraction thereof, during which a licensee is authorized to sell alcoholic beverages. A separate tax report shall be filed each accounting period for each established place of business.

(3)At the time of submitting the tax report described herein, the licensee shall pay any alcoholic beverage tax required to be paid to the commissioner.

(4)The commissioner may, for good cause shown, grant an extension of time, not to exceed thirty days, for a licensee to file his tax report and pay the tax due. Requests for such extensions must state why the extension is desired, must be made in writing, signed by the licensee and be made before the due date of the tax report and tax.

History

Authority: T.C.A. §§67-1-102, 67-1-106, and 57-4-302.
Administrative History: Original rule certified by the Department of Revenue June 7, 1974. Amendment filed November 29, 1976; effective December 29, 1976. Amendment filed June 27, 1990; effective August 11, 1990.

Tenn. Comp. R. & Regs. 1320-04-02-.06 RECORDS OF LICENSEES

(1)All licensees shall have available for use by all customers menus which clearly indicate the sales price of alcoholic beverages, both liquor and wine, and that the sales price includes the applicable rate of alcoholic beverage tax and sales tax.

(2)All licensees shall keep and preserve adequate and complete records to determine any tax due on the sales of alcoholic beverages. Such records shall include at least the following:

(a)A daily record of all sales which shall at least consist of daily cash register tapes and/or daily guest checks. Summary totals of sales will not be acceptable by the department for audit purposes unless supported by cash register tapes or guest checks for the corresponding sales activity period. Entries on guest checks evidencing sales of alcoholic beverages must not be commingled with entries evidencing sales of food, beer and other items. Entries evidencing sales of alcoholic beverages must either be made on a separate document or on the bottom or reverse of any guest check showing sales of other items. The document showing sales of alcoholic beverages must separate liquor and wine sales. If cash registers are used to record sales, alcoholic beverage sales must be keyed separately from sales of food, beer and other items. The sales of alcoholic beverages must further be keyed to identify liquor sales separate from wine sales. If the sales of liquor and wine, as shown by the books of the licensee, do not bear a markup over purchases approximately the same as the average markup shown by the price schedule, the commissioner will consider the books of the licensee insufficient to show the proper tax liability.

(b)Receipts derived from alcoholic beverages sold at other than regular sales prices as posted with the department on the price schedule, i.e., happy hour sales, etc., must be clearly recorded on cash register tapes or guest checks showing each sale at other than regular prices during each particular period or activity. Where adequate records are not maintained by the licensee to substantiate sales at other than posted selling prices, the licensee shall be liable for tax on the total disposition as though all sales were made at regular prices.

(c)A record of all merchandise purchased for resale, including all invoices, delivery tickets, bills of lading and copies of purchase orders. (The purchase date shall be considered to be the date of the purchase invoice issued to the licensee by a licensed wholesaler of alcoholic beverages.)

(d)An itemized statement of inventory, by brand name, size, and dollar value of alcoholic beverages on hand the last day of each month. Upon written request, the commissioner may allow inventory statements to be maintained on a basis other than a calendar month basis if the accounting period of the licensee is other than a calendar month period.

(3)Licensees shall retain all books and records provided for herein for a period of at least four years, unless earlier destruction is authorized by the commissioner. Where both guest checks (sales tickets) and cash register tapes are used concurrently to evidence sales of alcoholic beverages such guest checks may be destroyed 60 days following date of sale.

(4)Books and records other than those specified in paragraph (3) may be used to determine tax liability if it is established to the satisfaction of the commissioner that such books and records accurately document the sales activity, including happy hour sales, in a manner such that tax liability can be properly determined.

(5)The filing of false tax reports or the failure on the part of any licensee to file required reports or schedules or to maintain adequate and accurate records to account for the purchase and distribution of alcoholic beverages and by which the true tax liability may be established will be cause for the commissioner or his authorized representative to determine the tax liability of such licensee from whatever source of information may be available to him. An assessment made by the commissioner pursuant to this authority shall be binding as if made upon the sworn statement or tax report of the licensee liable for the payment of alcoholic beverage tax and any such assessment which is lawfully made against such licensee shall be presumed accurate unless adequate records are submitted evidencing otherwise.

History

Authority: T.C.A. §§67-1-102 and 57-4-302.
Administrative History: Original rule certified by the Department of Revenue June 7, 1974. Amendment filed November 29, 1976; effective December 29, 1976. Amendment filed December 15, 1977; effective January 16, 1978. Amendment filed June 27, 1990; effective August 11, 1990.

Tenn. Comp. R. & Regs. 1320-04-02-.07 TIPS, GRATUITIES, AND SERVICE CHARGES

(1)The term “tip” means a monetary gift or gratuity given by a customer to a server in a bar or restaurant or similar establishment. Tips are not normally includable in the sales price of alcoholic beverages sold.

(2)(a)Tips will, however, be included in the sales price of alcoholic beverages if the tips are either mandatory on the part of the purchaser or if the tips are not returned to the persons performing the service.

(b)A charge which is automatically added to the customer’s bill by the seller shall be considered mandatory, whether styled by the seller as a tip, gratuity or otherwise. This presumption may be overcome by an affirmative showing by the seller by a preponderance of the evidence that the prevailing practice was that payment of such charge was not required.

History

Authority: T.C.A. §§67-1-102, 67-6-402, 67-6-102, and Memphis Country Club v. Tidwell, 503 S.W.2d 919 (Tenn. 1973).
Administrative History: Original rule filed January 31, 1992; effective March 16, 1992.

Tenn. Comp. R. & Regs. 1320-04-02-.08 TRANSFER OF OWNERSHIP OF BUSINESS

(1)(a)Any person who purchases or otherwise obtains ownership of a business engaged in sales of alcoholic beverages for consumption on the premises shall not make sales of alcoholic beverages prior to receiving a license from the Alcoholic Beverage Commission and registering for sales and alcoholic beverage taxes with the Department.

(b)Any person who purchases or otherwise obtains ownership of a business engaged in sales of alcoholic beverages for consumption on the premises and who makes sales of alcoholic beverages will be held liable for tax on those sales, notwithstanding that such person has failed to properly obtain an alcoholic beverage license and/or tax registration or has operated illegally under another person’s license and/or tax registration.

(2)(a)Any person who sells, transfers or otherwise terminates his ownership of a business engaged in sales of alcoholic beverages for consumption on the premises shall provide notice of such sale, transfer or termination to the Department within fifteen days of the date of such sale, transfer or termination. For the purpose of this rule, “notice” means direct written notice to the Department of Revenue as part of the final alcoholic beverage tax return and final sales tax return of the business and surrender of the alcoholic beverage license to the Alcoholic Beverage Commission.

(b) Any person who upon sale or transfer of his business allows or permits the new owner or operator to remit tax, make wholesale purchases or conduct business in any manner using the seller’s or transferor’s alcoholic beverage license or tax registration shall be jointly and severally liable with the owner or operator for any unpaid taxes accrued by virtue of sales of alcoholic beverages for consumption on the premises during the period of such operation.

(c)Any person who fails to provide notice to the Department as required by this rule with the result that the business continues to operate under the seller’s or transferor’s alcoholic beverage license and/or tax registration shall be presumed to have allowed or permitted such operation.

History

Authority: T.C.A. §§57-4-201, 57-4-301, 57-4-303, and 67-1-102.
Administrative History: Original rule filed January 31, 1992; effective March 16, 1992.

Chapter 1320-04-03 Unfair Cigarette Sales Law and Tobacco Tax Rules

Tenn. Comp. R. & Regs. 1320-04-03-.01 AFFIXING AGENT-APPOINTMENT OF

(1)The Commissioner of Revenue may, upon receipt of application and appropriate bond, appoint licensed manufacturing distributors and wholesale dealers and jobbers as affixing agents for the

purpose of purchasing and affixing cigarette tax stamps to cigarettes and paying tax on cigars and other tobacco products as required by law, except as hereinafter provided tax on cigars and other tobacco products as required by law, except as hereinafter provided.

(2)The Commissioner may, in his discretion, refuse to appoint a manufacturing distributor or wholesale dealer and jobber as an affixing agent if there is evidence that such applicant or any other individual having a controlling interest is said applicant's business, has, prior to his application, had his license revoked or suspended for violating the Tennessee Tobacco Tax Law or Rules and Regulations promulgated pursuant thereto, or has been found guilty in a court of law of violating the tobacco laws of the State of Tennessee or is delinquent in the payment of the tobacco tax. The Commissioner may also revoke or suspend any appointment as an affixing agent previously made by him after a show cause hearing held pursuant to T.C.A. §67-4-1021.

(3)Wholesale dealers and jobbers, manufacturing distributors and any other licensee appointed as agent to purchase and affix cigarette tax stamps or pay tax in other prescribed manner shall execute and file with the Commissioner a tobacco tax stamp affixing agent's bond for each separate location or place of business in the amount of $100.00 for each $10,000.00 of fraction thereof, of the tax liability on an average month's purchases of tobacco products by a Tennessee domiciled licensee and on an average month's sales of tobacco products in Tennessee by a non-resident licensee. The minimum bond shall be $2,000.00. A surety bond in the penal sum of $20,000.00 is required prior to licensing a tobacco manufacturer's warehouse.

History

Authority: T.C.A. §§67-3108 and 67-101.
Administrative History: Original rule filed certified June 7, 1974. Amendment filed April 30, 1975; effective May 30, 1975. Amendment filed April 15, 1987; effective July 29, 1987.

Tenn. Comp. R. & Regs. 1320-04-03-.02 CIGARETTE TAX STAMPS-PURCHASE AND USE OF

(1)Agents appointed to affix cigarette tax stamps shall purchase such stamps only from the Commissioner or his authorized agents, and in no instance shall they be permitted to sell stamps not affixed to packages of cigarettes. The act of bartering, loaning, giving away, purchasing, or acquiring unaffixed cigarette tax stamps by and means other than as set out herein is strictly prohibited.

(2)Affixing agents desiring to purchase cigarette tax stamps on a deferred payment plan may do so only from the main office of the Department or one of its regional offices, the office from which stamps may be purchased by each agent to be approved in advance by the Commissioner.

(3)Only licensed manufacturing distributors and wholesale dealers and jobbers may be eligible to purchase cigarette tax stamps at the discount rates set by the Commissioner as authorized by T.C.A. §67-4-1009, provided such licensee is complying with the provisions of the law and the rules and regulations promulgated in accordance therewith.

(4)Any person using a machine to affix cigarette tax stamps shall so supervise the use of the machine that each and every stamp affixed to a package of cigarettes shall be completely legible and identifiable as a valid stamp. Packages of cigarettes bearing illegible or mutilated cigarette tax stamps shall be deemed to be unstamped and shall be subject to confiscation. Violation of this section shall also be grounds for revocation of license upon proper show cause hearing.

(5)Persons purchasing unstamped confiscated cigarettes and other tobacco products from the state shall purchase sufficient cigarette tax stamps from the Commissioner and affix same to such cigarettes and pay the applicable tobacco tax on cigars and other tobacco products. Applicable tax on cigars and other tobacco products shall be paid by the purchaser directly to the Commissioner at time of delivery to the purchaser.

(6)Cigarette tax stamps evidencing payment of the applicable tax shall be applied to the bottom of each individual standard package of twenty (20) cigarettes. However, in those instances where the package of twenty (20) cigarettes is of such dimensions it cannot be processed by the stamping machine, the cigarette tax stamp may be affixed to the side of the package.

(7)Agents appointed by the Commissioner to affix cigarette tax stamps shall, under the provisions of T.C.A. §67-4-1019, be permitted to perform a service for other licensees by affixing such stamps to cigarettes and/or paying tax on other tobacco products where such cigarettes and other tobacco products belong to such other licensees. Such affixing agents shall issue in duplicate invoices indicating the name and address of the licensee for whom stamps were affixed and the quantity of such stamps. Likewise, affixing agents paying tax on other tobacco products belonging to other licensees shall issue duplicate invoices indicating the name and address of the licensee for whom tax was paid, the date tax was paid and the quantity and type by brand name of such products. One copy of such invoices shall be retained by the affixing agent and one copy shall be given to the licensee for whom cigarette tax stamps were affixed and/or tax was paid on other tobacco products.

History

Authority: T.C.A. §§67-1-102, 67-4-1002, 67-4-1006, 67-4-1010, 67-4-1011, and 67-4-1019.
Administrative History: Original rule certified June 7, 1974. Amendment filed April 30, 1975; effective May 30, 1975. Amendment filed April 15, 1987; effective July 29, 1987.

Tenn. Comp. R. & Regs. 1320-04-03-.03 UNSTAMPED TOBACCO PRODUCTS

(1)The term "unstamped tobacco products" shall be defined to mean any package of cigarettes subject to the tax imposed under the provision of the Tennessee Tobacco Tax Law which does not bear an official Tennessee cigarette tax stamp that is completely legible and identifiable as a valid tax stamp.

Such term shall also include cigarettes bearing tax stamps of another state, as well as cigars and other tobacco products subject to tax on which applicable tax has not been paid.

(2)Before a license may legally stock any unstamped cigarettes, he shall make application to the Commissioner for permission to stock, warehouse, distribute, sell and/or dispose of such products.

Such application shall be by certified statement setting forth his ordinary requirements as defined herein. The quantity approved by the Commissioner hereunder shall be shown on the license issued or in a supplemental letter if a larger quantity is allowed under provisions contained herein.

(3)Stocks of unstamped cigarettes which include those bearing cigarette tax stamps of other states shall be stacked separate and apart from Tennessee stamped stock. The act of persons intermingling unstamped products with stamped products shall be grounds for revocation of license and agency appointment upon proper show cause order.

(4)Licensees who have qualified with the Commissioner will be permitted to stock unstamped cigarettes for exclusive export purposes and for sale to authorized armed forces installation, government hospitals or to qualified retailers domiciled in another state in such quantity to cover the licensees'

"ordinary requirements" for such purposes.

(5)The term "ordinary requirements" shall mean a specified number of cigarettes which shall not exceed one-twelfth (1/12) of the total quantity of such unstamped products sold during the preceding calendar year. Should a licensee's requirements later exceed the maximum quantity allowance as established under the provisions herein, the Commissioner may at his discretion grant a larger quantity upon written supplemental application.

(6)In no instance shall a licensee have in his possession for a period greater than 72 hours unstamped cigarettes greater than the quantity established and approved hereunder. Quantities of such unstamped stock in excess of the maximum allowable quantity shall be grounds for revocation of license upon proper show cause hearing. The tax applicable to sales of unstamped cigarettes in excess of the maximum stock allowance shall be assessed against the seller.

History

Authority: T.C.A. §§67-3-108 and 67-101.
Administrative History: Original rule filed June 7, 1974. Amendment filed April 30, 1975; effective May 30, 1975.

Tenn. Comp. R. & Regs. 1320-04-03-.04 SALES OF UNTAXED TOBACCO PRODUCTS

(1)All sales of untaxed or tax-exempt tobacco products shall be invoiced by licensees. Copies of all invoices and/or bills of lading must accompany all shipments of untaxed or tax exempt tobacco products and must be available for inspection by representatives of the Department. Records of shipments or deliveries of untaxed or tax-exempt products must be maintained by licensees through copies of invoices, receipts, delivery tickets, or bills of lading, and such records shall be made available for inspection by representatives of the Department. Failure to maintain such documentary evidence of sales of untaxed or tax-exempt tobacco products shall void any claim for tax credit on such sales for which the licensee may otherwise be eligible. These records shall be retained for a period of three years unless destruction is sooner authorized by the Commissioner.

(2)Licensed tobacco dealers domiciled in another state may purchase and transport within the boundaries of Tennessee cigarettes and other tobacco products on which the applicable tax is paid by the affixing agent to the state in which such products are to be sold, provided that products are obtained from a Tennessee appointed affixing agent. Prior to acquiring such products, written application shall be made to the Commissioner requesting authorization to purchase cigarettes and other tobacco products on which the Tennessee tobacco tax has not been paid. This application should contain the following information: Tobacco license number with reproduced copy of the license; the name and address of the Tennessee affixing agent from whom such products will be purchased; the state in which the products are to be sold; the estimated quantity of cigarettes and monetary value of cigars and other tobacco products, shown separately, anticipated to be purchased during a monthly period; and the frequency of trips to be made into Tennessee for the purpose of acquiring such products. It shall be incumbent upon those persons making sales of tobacco products upon which no Tennessee tax has been paid to verify with the Department of Revenue the eligibility of the purchaser of such tobacco products to receive and possess the products. Tennessee licensees shall furnish the qualified out-ofstate purchaser invoices which shall show the date of sale, the purchaser's name and address, the quantity, type and brand of products and any applicable tax paid thereon. All invoices must be available for inspection, as well as the Commissioner's authorization for possession of such products, during the entire time any cigarettes or other tobacco products on which the Tennessee tax has not been paid are being transported or possessed within this state by the qualified out-of-state tobacco dealer.

(3)A Tennessee tax affixing agent may not sell cigarettes upon which a Tennessee cigarette tax stamp or a tax stamp of another state has not been affixed except to authorized tax-exempt agencies or through a drop shipment plan where such shipment originates from without the state. Sales of cigarettes bearing tax stamps of another state shall be made only to qualified persons as specified by law.

Tennessee sales of tobacco products, other than cigarettes, upon which Tennessee tax has not been paid shall be made only to other Tennessee tax affixing agents, armed forces installation and Veterans Administration hospitals. However, after qualifying with and receiving written authorization from the Commissioner, a Tennessee tobacco licensee may, for the purpose of servicing customers in another state, purchase from an authorized Tennessee appointed and bonded tax affixing agent tobacco products upon which applicable tax of such other state has been paid.

(4)Interstate and intrastate shipments of untaxed tobacco products shall be accompanied by itemized invoices or manifests of shipment, showing the quantity, origin, and the destination of the products while in transit. Such records shall be made available for inspection by representatives of the Department. Common carriers transporting tobacco products shall preserve their records of a shipment for a period of three (3) years, unless destruction is sooner authorized by the Commissioner, and shall make them available to agents of this Department at any reasonable time or place.

(5)Licensees may make sales of unstamped cigarettes or other untaxed tobacco products within the geographical boundaries of a fort, base, camp, or post of the armed forces of the United States, to post exchanges, ship-service stores, commissaries and open messes operated by the United States Armed Forces, and to government hospitals where such products are sold only to patients registered and admitted therein. The commanding officer of each armed forces installation or the head of each government hospital entitled to purchase such tobacco products shall notify the Commissioner in writing of this eligibility indicating the agency name, location, and the rate, rank or title of the agency personnel authorized to sign invoices acknowledging receipt of such products. The authorized personnel shall in each instance as provided herein sign the invoices acknowledging receipt of the tobacco products, and shall also sign a certificate, either on a separate sheet or written on the invoice, certifying that the tobacco products were purchased by and delivered to an authorized installation and that such tobacco products will be sold by such authorized installation subject to regulation by the commanding officer thereof and in compliance with official Army, Navy or Air Force regulations or other official directives. The licensee shall secure the signed invoice and certificate as provided in this paragraph and retain in his file the invoice or a duplicate copy of such with the certificate of the receiving officer in verification of unstamped products so sold and delivered. Sales of unstamped tobacco products to armed forces installations or government hospitals shall be allowed only after the licensee has verified through the Commissioner the eligibility of the purchaser to receive such products. Other than under provisions set out in paragraph (2) of this rule, licensees shall make no sale, transfer, distribution or delivery of unstamped cigarettes or other untaxed tobacco products to any persons in Tennessee except to qualified armed forces installations and government hospitals.

Actual physical delivery of all unstamped cigarettes or other untaxed tobacco products shall be made by licensee's own conveyance or by duly authorized common carrier.

(6)National Guard personnel, reservist or other personnel who are not permanent active duty but who engage in brief drill periods from time to time may not lawfully possess untaxed tobacco products.

(7)The Commissioner may regulate quantities of unstamped cigarettes or other untaxed tobacco products sold to authorized agencies upon ascertaining that said agency is indiscriminately selling same to unauthorized individuals, (8)Cigarettes shall not be sold in a quantity less than that of the manufacturer's standard package.

History

Authority: T.C.A. §§67-1-102, 67-4-1010, 67-4-1011, 67-3045, and 67-101.
Administrative History: Original rule filed June 7, 1974. Amendment filed April 30, 1975; effective May 30, 1975. Amendment filed June 5, 1989; effective September 27, 1989.

Tenn. Comp. R. & Regs. 1320-04-03-.05 RECORDS AND REPORTS

(1)Manufacturing distributors, wholesale dealers and jobbers and tobacco distributors must keep and preserve such adequate and complete records as are necessary to substantiate the payment of all Tennessee tobacco taxes imposed by law. Such records shall include but not necessarily be limited to the following: A receiving record of all such merchandise received during the month or accounting period which shall indicate the date, invoice number, quantity, brand, from whom received, and in the case of cigarettes whether stamped or unstamped or other untaxed tobacco products, or other evidence or records as specified in T.C.A. §1320-4-3-.04. Any licensee failing to maintain adequate records to fully substantiate the receipt ant disposition of all tobacco products handled by him shall be unconditionally liable for tobacco taxes on all such products for which proper accounting cannot be made.

(2)Affixing agents shall keep a record and inventory of all cigarette tax stamps used, and the number of stamps on hand at the end of the month. Every license shall permit an authorized agent of the Department to inspect at any reasonable time, at all locations, including any conveyance for delivery, all tobacco products, invoices, books, papers and memoranda including the general books, both operating and proprietary ledgers, pertaining to the sale, purchase, storage and distribution of tobacco products.

(3)Manufacturing distributors, wholesale dealers and jobbers and tobacco distributors must maintain and preserve for a period of three (3) years all reports of receipt, purchase, sale and distribution of tobacco products and cigarette tax stamps and make same accessible to the Department for inspection at all reasonable times. Any person operating a tobacco manufacturer's warehouse shall maintain and preserve for a period of three (3) years all reports of receipt and distribution of tobacco products and make same accessible to the Department for inspection at all reasonable times. The Commissioner upon written application may, in his discretion, grant permission for the destruction of records in a lesser period of time.

(4)(a)Manufacturing distributors and wholesale dealers and jobbers shall submit to the Commissioner a report upon such forms as may be prescribed by the Commissioner. Reports shall be filed on or before the 15th day after the end of the licensee's preceding month's accounting period. An accounting is required of all cigarettes, cigars and other tobacco products handled during the accounting period covered by the report. The payment of tax applicable to all tobacco products other than cigarettes shall accompany the report by wholesale dealers and jobbers. Manufacturing distributors shall be required to report any pay tax on all tobacco products distributed as samples, gifts, etc., and on Tennessee sales to other than licensed Tennessee wholesale dealers and jobbers, such rate of tax being 6 1/2 mills on each cigarette and 6% of the purchaser's cost price of other tobacco products. Failure to file the report and pay such taxes within the time prescribed may result in the assessment of penalty and interest.

(b)The Commissioner may at his discretion require other dealers in tobacco products to submit reports of their purchase, sale, and distribution of such products, the reports to be submitted for such period and to contain such information as the Commissioner may require. Incomplete, delinquent, false of fraudulent reports shall be grounds for revocation or suspension of the tobacco license. Direct or indirect assistance in the evasion of the payment of the tobacco tax or in the violation of the Tobacco Tax Law or any rule and regulation promulgated pursuant thereto, will be grounds for revocation or suspension of license.

(5)It shall be the duty of every wholesaler and retailer, as those terms are defined in T.C.A. §47-25-302, to keep and preserve for a period of three (3) years suitable records of all sales and purchases and such other books of account as may be necessary to determine compliance with the Unfair Cigarette Sales Law, T.C.A. §47-25-301 et seq. Such records and other books of account shall include but not be limited to all invoices, bills of lading, pertinent records whether stored electronically or otherwise, papers and memoranda reflecting sales and purchases, operating and proprietary ledgers, and any other document of information that may be required by the Commissioner, and all such books and records shall be open to examination at all reasonable hours to the Commissioner or any of his authorized agents.

History

Authority: T.C.A. §§67-3108 and 67-101.
Administrative History: Original rule certified June 7, 1974. Amendment ruled April 30, 1975; effective May 30, 1975. Amendment filed April 15, 1987; effective July 29, 1987.

Tenn. Comp. R. & Regs. 1320-04-03-.06 LICENSES-REQUIREMENT FOR

(1)Applicable licenses must be secured for each established place of business where tobacco products are handled or sold for resale and for each automobile, truck or other vehicle from which tobacco products are peddled for resale. Provided, however, separate tobacco licenses shall not be required for automobiles, trucks or other vehicles used by any licensee for the sole purpose of delivering tobacco products in fulfillment of orders previously taken and from which no direct sales are made.

(2)The sale of manufactured tobacco products through vending machines will not be permitted unless such vending machines are so constructed as to permit representatives of the Department to readily determine whether the tobacco products being sold through such machines have the necessary cigarette tax stamps properly affixed to such products. Tobacco products vending machines shall have as a minimum visibility feature a glass covered opening of such dimensions as to permit visibility of not less than two (2) packages of cigarettes and/or other tobacco products in each column. No tobacco products vending machine shall hereafter be put into use in this state that does not meet such minimum visibility requirement. Any tobacco products vending machine placed on location shall have securely attached to the front of each machine the name and address of the owner and/or servicing agent.

(3)Persons from without the state selling or delivering tobacco products within Tennessee shall be privileged to obtain licenses, purchase and affix cigarette tax stamps, obtain statutory discounts on cigarette tax stamps purchased and perform all other acts relating thereto in like manner and under the same conditions as Tennessee licensees.

History

Authority: T.C.A. §§67-1-102, 67-4-1002, 67-4-1006, 67-4-1009, 67-4-1010, 67-4-1015, and 67-4-1020.
Administrative History: Original rule certified June 7, 1974. Amendment filed April 30, 1975; effective May 30, 1975.

Tenn. Comp. R. & Regs. 1320-04-03-.07 MANUFACTURER-SAMPLE OF GIFT TAX REPAYMENT

(1)Manufacturers of cigarettes and other tobacco products will be allowed to package and distribute their own products as samples or gifts and remit the tax due thereon direct to the Department of Revenue.

Each sample or gift package so distributed shall have printed thereon the inscription “State Tax Paid” and/or other inscriptions such as "Complimentary", "Sample", "Gift", or "Not For Sale". On or before the fifteenth (l5th) of the month following the month in which such distribution is made the manufacturer shall submit to the Commissioner a copy of each invoice designating shipment of such sample or gift products and pay the tobacco tax applicable to the quantity so distributed. The records of the manufacturer relative to the distribution of sample tobacco products must be retained for a period of three (3) years and be subject to audit by agents of the Department. Destruction of such records may be made with a lesser period of time upon application to and approval by the Commissioner.

History

Authority: T.C.A. §§67-3108 and 67-101.
Administrative History: Original rule certified June 7, 1974. Amendment filed April 30, 1975; effective May 30, 1975.

Tenn. Comp. R. & Regs. 1320-04-03-.08 REFUNDS

(1)A refund equal to the face value, less the discount received will be made on all unused or mutilated, but identifiable, cigarette tax stamps purchased within a two (2) year period prior to filing of the claim. Unused stamps for which a refund is desired shall be returned to the Department accompanied by a properly executed claim for refund. Likewise, stamps inadvertently affixed to carton flaps shall accompany the claim for refund, however, a representative of the Department must witness the stamping of the packages contained in such cartons and certify to this effect. It will be incumbent upon the affixing agent to retain such cartons containing the cigarette packages and the stamped carton flaps intact until such inspection and certification may be made.

(2)Licensees filing a claim for refund for cigarette tax stamps on unsalable products to be returned to the manufacturer shall make application to the Department for such refund under oath. There shall be attached:

(a)A copy of the bill of lading or similar document covering such goods, under which the goods were returned to the manufacturer: and (b)A certificate from the manufacturer to whom the goods were returned setting forth: 1.The quantity of products received by him; 2.The condition of the cigarette tax stamps affixed thereto; 3.That credit has been issued to the distributor for such products; and 4.That the cigarette tax stamps have been or will be destroyed.

Any person making oath to a false statement under this rule or attaching any document or certificate which shall be known to be false, with intent to receive a refund in excess of the amount to which the licensee is entitled, shall be guilty of the crime of perjury and punished therefor under the statutes of this state fixing the penalty for the crime of perjury.

(3)Upon satisfactory receipt by the Department of Revenue of all documents as required in Paragraph (2) of this Rule, the cigarette tax stamps will be deemed to have been canceled by an agent appointed by the commissioner, and proper notation of such will be made thereof on the books and records of the Department of Revenue.

(4)All claims for refund shall be completed to the satisfaction of the Commissioner and shall, among other things, show on the face or an appended paper the quantity of cigarette tax stamps, the denomination, and the extended total value. Any applicable discount shall be deducted from the total face value of all stamps. Any extraordinary cost incurred by the Department for the inspection, cancellation, and/or destruction of stamps and/or products to which stamps are affixed shall be paid to the Department by the licensee for whom such stamps are inspected or cancelled.

History

Authority: T.C.A. §§67-3108 and 67-101.
Administrative History: Original rule certified June 7, 1974. Amendment filed April 30, 1975; effective May 30, 1975. Amendment filed October 30, 1980; effective January 28, 1981.

Tenn. Comp. R. & Regs. 1320-04-03-.09 COMBINATION SALE

In most advertisements by a distributor or a dealer, offers for sale or sales involving two or more items, at least one of which items is cigarettes, at a combined price, or otherwise in combination, all price discounts, rebates, free goods, advertising allowances, or concessions of any nature whatsoever, promised, allowed or given by the distributor or dealer shall be deemed to apply pro rata, in terms of monetary value to all items included within the sale, including cigarettes. Whether a given set of facts constitutes one or more sales shall be determined under the existing case and statute law of Tennessee.

History

Authority: T.C.A. §§69-411 and 67-101.
Administrative History: Original rule certified June 7, 1974. Amendment filed April 30, 1975; effective May 30, 1975.

Tenn. Comp. R. & Regs. 1320-04-03-.10 PREMIUMS

(1)Manufactures may award discounts, concessions, coupons, or any other premium directly to consumers as sales promotions of their own products, if such sales promotions:

(a)are not part of a scheme to give a particular retailer or wholesaler a competitive advantage over retailers and wholesalers generally; and (b)operate evenly among either retailers or wholesalers or both of them generally.

(2)Any manufacturer engaging in a sales promotion as described in (1) above on the premises of a retailer or wholesaler shall either conduct the promotion through the manufacturer's own employee or place advertisements on the premises plainly stating that the promotion is conducted by the manufacturer.

History

Authority: T.C.A. §§67-1-102 and 47-25-311.
Administrative History: Original rule certified June 7, 1974. Amendment filed April 30, 1975; effective May 30, 1975. Amendment filed April 15, 1987; effective July 29, 1987.

Tenn. Comp. R. & Regs. 1320-04-03-.11 INVOICES

All invoices evidencing transactions governed by the provisions of the Unfair Cigarette Sales Law must show the selling price of cigarettes separately. The selling price of cigarettes shall include all applicable charges without any itemization of such charges.

History

Authority: T.C.A. §§69-411, 67-101, 67-1-102, 47-25-303, and 47-25-311.
Administrative History: Original rule certified June 7, 1974. Amendment filed April 30, 1975; effective May 30, 1975. Amendment filed April l5, 1987; effective July 29, 1987.

Tenn. Comp. R. & Regs. 1320-04-03-.12 MINIMUM SALES PRICE

(1)Minimum sales prices established by a wholesaler and/or a retailer in compliance with the provisions of T.C.A. §§47-25-301 through 47-25-312, shall apply to, as the case may be, a sale or offer for sale to or by any person, distributor, dealer, wholesaler, subjobber, or vending machine operator regardless of the quantity purchased. In establishing minimum selling price per carton of cigarettes at both wholesale and retail levels the statutory formula shall be applied to the basic cost, as defined in T.C.A. §§47-25-302. Minimum selling price of individual packages shall be determined by dividing the minimum carton selling price by the number of packages in a carton. Minimum selling prices so established shall be absolute minimum prices and the products may not be sold below such prices. Fractional cents may be advanced to the next highest cent but fractional cents, regardless of denomination, may not be lowered.

History

Authority: T.C.A. §§67-1-102 and 47-25-311.
Administrative History: Original rule certified June 7, 1974. Amendment filed April 30, 1975; effective May 30, 1975. Amendment filed April 15, 1987; effective July 29, 1987. Amendment filed January 29, 1988; effective April 27, 1988.

Tenn. Comp. R. & Regs. 1320-04-03-.13 VOLUME DISCOUNTS

If any distributor or dealer offers price discounts based on the volume of items purchased, and if cigarettes are included in those items purchased, the selling price of the cigarettes shall not used to determine the volume of items purchased for purposes of calculating volume discounts.

History

Authority: T.C.A. §§69-411, 67-101, 67-1-102, 47-25-303, and 47-25-311.
Administrative History: Original rule certified June 7, 1974. Amendment filed April 30, 1975; effective May 30, 1975. Amendment filed April 15, 1987; effective July 29, 1987.

Chapter 1320-04-04 General Revenue Law

Tenn. Comp. R. & Regs. 1320-04-04-.01 SALES OF MIXED DRINKS OR SETUPS

(1)The term "gross receipts" as set forth in Chapter 41, Title 67, Tennessee Code Annotated, for the

purpose of determining the tax base, shall mean the total price for which mixed drinks or setups for mixed drinks are sold and shall include, but not be limited to, the cost of any services required to process the beverage for sale without any deductions therefrom on account of the cost of the beverage, the cost of materials used, losses, cost of entertainment, or any other expenses whatsoever. "Gross receipts" is further defined to be the price of the beverage listed on any menu, or wine or liquor lists, sold by any establishment selling mixed drinks or setups for mixed drinks. If the cost of entertainment is to be passed to the consumers of such beverage, it shall be in the form of a cover or admission charge separate and apart from the charge made for such beverages, and shall not be included in the price charged for such beverage. If any entertainment costs are included in the listed price of such beverages they shall be included in the gross receipts reported to this Department and be subject to the tax levied by said Chapter 41.

(2)In addition to the 15% gross receipts tax levied by said Chapter 41 upon mixed drinks or setups for mixed drinks, such drinks or setups shall likewise be subject to any applicable sales tax, both State and Local.

History

Authority: T.C.A. §§67-101 and 67-4302.
Administrative History: Original Rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-04-04-.02 QUARTERLY PAYMENT OF TAX

Any person desiring to exercise the option of paying his tax on a quarterly installment basis under provisions of Section 67-4318, Tennessee Code Annotated, shall make timely payment of the first installment on or before the first day of August and failing to make such timely payment, together with any unpaid gross receipts privilege tax due for a prior period, shall not have the option of paying his tax on a quarterly installment basis, but shall be required to pay the entire amount of the annual tax, plus a penalty of ten percent (10% ) of the annual tax, together with interest thereon at the applicable rate provided by law or as certified by the Commissioner of Revenue in accordance with Public Chapter No. 693, Acts of 1974 upon the amount of the tax payable.

History

Authority: T.C.A. §§67-101 and 67-4302.
Administrative History: Original Rule certified June 7, 1974. Amendment filed October 1, 1974; effective October 31, 1974.

Tenn. Comp. R. & Regs. 1320-04-04-.03 PRIVILEGE TAX ON VENDING MACHINES

(1)Each vending machine operator who has elected to pay privilege tax under the option afforded in Item 65(c) (1) of Section 67-4203, Tennessee Code Annotated, who first commences business after July 1 of any given year, shall within 30 days following the effective date of business registration with the Department of Revenue, and each 30 days thereafter remove all monies from each and every vending machine and report the aggregate of all such monies to the Commissioner of Revenue, and shall pay tax measured by such gross receipts at the rate specified in the appropriate taxing item. This tax shall be paid not later than the 10th day of the following month. On or before August 1 following the effective date of business registration he shall pay the annual tax for the year commencing on the next prior July 1. The measure of the tax shall be ascertained by multiplying such person's gross receipts by the ratio which the period during which he has engaged in business bears to an entire year, but he shall not thereafter make monthly payments.

(2)Any person required to file monthly reports during the initial tax year who fails to remove all monies from each and every vending machine and report the aggregate of all such monies to the Commissioner of Revenue in the manner prescribed above, shall be arbitrarily assessed on the basis provided under T.C.A. §67-4322.

History

Authority: T.C.A. §§67-101 and 67-4302.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-04-04-.04 REPEALED

History

Authority: T.C.A. §§67-101 and 67-4302.
Administrative History: Original rule certified June 7, 1974. Repealed by Public Chapter 575; effective July 1, 1986.

Tenn. Comp. R. & Regs. 1320-04-04-.05 CREDITS FOR PAYMENT OF FRANCHISE AND EXCISE TAX

(1)Any corporation having filed its final franchise and excise tax return and paid such taxes for its most recently completed fiscal year prior to filing its annual gross receipts privilege tax return, and no later than August 1 of any tax year, may claim appropriate franchise and excise tax credit against certain gross receipts privilege tax payments covering corresponding tax base periods.

(2)Any corporation with its fiscal period ending after August 1 of any year, or with due date for franchise and excise taxes falling after such date or which has been granted an extension of time in which to file its final franchise and excise tax return at a date subsequent to August 1, shall not be allowed credit for such taxes against gross receipts privilege taxes until such time as final return and payment has been made for such franchise and excise taxes.

(3)If final return and tax payment of franchise and excise taxes has not been made on or before August 1 of any year, a corporation paying gross receipts privilege taxes shall pay all such gross receipts privilege taxes due by August 1 without credit whatsoever for any estimated quarterly payments of franchise and excise taxes made prior to such date. In order to receive credit for franchise and excise taxes when final payment is made subsequent to August 1 of any year against gross receipts privilege taxes paid on or before the prior August 1, it will be necessary that the taxpayer file, within the statutory period, an amended gross receipts privilege tax return covering corresponding tax base periods and claim credit for appropriate franchise and excise tax payments. If such amended return discloses an over payment of gross receipts privilege taxes previously paid due to deduction of the franchise and excise tax credit, then such amount shall be refunded to the taxpayer by the Department.

History

Authority: T.C.A. §§67-101 and 67-4302.
Administrative History: Original rule filed June 23, 1976; effective July 23, 1976.

Chapter 1320-04-05 Business Tax Rules and Regulations

Tenn. Comp. R. & Regs. 1320-04-05-.01 ACCOMMODATION SALES AND OTHER SIMILAR TRANSACTIONS

(1) The term "accommodation sales" means occasional and incidental sales for resale by persons regularly engaged in the business of making sales of the type of property so sold to other persons similarly engaged in the business of selling such property, provided the following condition is met: The amount paid by the buyer to the seller does not exceed the amount paid by the seller to his vendor in the acquisition of the article, but to which may be added the cost of freight, in storage cost, and transportation cost incurred in the transfer from the seller to the buyer. Receipts from a bona fide accommodation sale shall not be deemed to be taxable under the Business Tax Act and may be deducted from the gross sales in determining the tax base, provided such sales have been included in the gross sales reported on the Business Tax Return.

(2) Where a person transfers property to another for resale on a memorandum basis, and in turn receives property in kind for the property transferred, there is deemed to be no sale and no Business Tax payable on the transaction.

History

Authority: T. C.A. §§ 67-5822 and 67-101.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-04-05-.02 BROKERS

(1) A person who acts as a broker or an agent for another in making sales of tangible personal property or services without maintaining a stock of merchandise or taking title to any such property and who receives a commission or fee for his service is performing a taxable service and, with the exception of a food broker, is taxable under classification 3 at the retail service rate on his total commissions and fees. A food broker is taxable under classification 1 also on his commissions and fees.

(2) A person who makes sales of tangible personal property or services without acquiring possession thereof, but who acquires title thereto, is a wholesaler or retailer, and is liable for the Business Tax as a vendor.

(3) A person, who, as a part of his normal business activities, buys and sells intangible personal property or real property is not liable for the business tax on receipts from such sales.

History

Authority: T.C.A. §§ 67-5822 and 67-101.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-04-05-.03 BUSINESS TAX-NATURE AND APPLICATION

The Business Tax is a privilege tax imposed upon persons engaged in various businesses and activities in the state. If a dealer invoices the business tax as a separate item and passes it on to his customer, then the tax shall be added to the gross receipts and be used in determining the tax base for both Business Tax and Sales and Use Tax purposes.

History

Authority: T.C.A. §§ 67-1-102, 67-4-702, 67-4-703, 67-4-704 and 67-4-705.
Administrative History: Original rule certified June 7, 1974. Amendment filed April 28, 1987; effective July 29, 1987.

Tenn. Comp. R. & Regs. 1320-04-05-.04 REPEALED

History

Authority: T.C.A. §§ 67-1-102 and 67-4-703.
Administrative History: Original rule certified June 7, 1974. Repeal filed June 28, 2000; effective September 11, 2000.

Tenn. Comp. R. & Regs. 1320-04-05-.05 CASUAL AND ISOLATED SALES

(1) The Business Tax does not apply to casual and isolated sales by persons who are not engaged in the business of selling tangible personal property or furnishing any of the services subject to the Business Tax. Likewise, the tax does not apply to sales of tangible personal property or services not normally sold by a wholesaler or retailer and which, if property, has been used by the dealer prior to the sale. These exemptions, however, do not apply to any sales of tangible personal property or taxable services bought for resale by those persons who hold themselves out as engaged in business, notwithstanding the fact that the sales may be few and infrequent.

(2) Manufacturers, processors, wholesalers, or jobbers engaged in the business of distributing tangible personal property or furnishing services subject to the Business Tax are not deemed to be making casual and isolated sales when they sell such tangible personal property or services to purchasers for use or consumption, notwithstanding the fact that such sales may comprise a small fraction of their total business. (See 1320-04-05-.16(1)(c) and 1320-04-05- .29(3).)

(3) Persons regularly engaged in the recurring sale of tangible personal property at antique malls, flea markets, craft shows, antique shows, gun shows and auto shows and antique malls, flea markets, crafts shows, antique shows, gun shows and auto shows regularly engaged in the recurring sale of tangible personal property shall not be considered to be making casual and isolated sales. It shall be the burden of such persons and businesses to prove that their sales are actually casual and isolated in order to qualify for the exemption.

History

Authority: T.C.A. §§ 67-5822 and 67-101.
Administrative History: Original rule certified June 7, 1974. Amendment filed October 11, 1983; effective January 16, 1984.

Tenn. Comp. R. & Regs. 1320-04-05-.06 CEMETERIES AND MEMORIAL GARDENS

Income derived from interment charges made by cemeteries, memorial gardens, etc., is taxable under the Business Tax Act. In cases where no deed or certificate of ownership is given, charges for burial in lots, crypts, etc., will be deemed to be charges made for the right of sepulcher and the entire gross income therefrom is taxable without any deduction for amounts set aside for perpetual care. The sale of boxes, urns, markers, vases, plants, shrubs and other tangible personal property are also taxable under the Business Tax Act.

History

Authority: T.C.A. §§ 67-5822 and 67-101.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-04-05-.07 COMMISSION AGENTS AND FACTORS

(1) Persons operating as a commission agent or as a factor, such as an oil company bulk station or any other type of business that does billing in the name of the supplier they represent while using their own employees or agents and their own equipment and supplies in operating their business, shall use the gross commissions received by them as a basis for computing their Business Tax liability. Such persons shall obtain a separate license in their own name even though the principal they represent may have obtained a license for reporting sales made by the commission agent or factor.

(2) Persons operating as a commission agent or as a factor but who make sales in their own right, e.g., as a jobber, or in a similar capacity, are taxable as sellers.

History

Authority: T.C.A. §§ 67-5822 and 67-101.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-04-05-.08 COMPUTATION OF TAX

(1) "Sales Price" means the total amount for which tangible personal property is sold or the amount charged for any of the things or services taxable under the Business Tax Law, including any services required to process the property or taxable services for sale, and without any deductions therefrom on account of the cost of the property or taxable services sold, the cost of materials used, losses, or any other expenses whatsoever, except cash discounts allowed on sales. It does not include finance charges, carrying charges, time price differential, or interest from credit extended on sales of tangible personal property under installment sales contracts, conditional sale contracts, or other contracts providing for deferred payments of the purchase price, if the amount of such finance charges, carrying charges, time price differential, or interest is in addition to the usual or established cash selling price, and provided that it is:

(a) Segregated on the taxpayer's invoice or bill of sale, or (b) Billed separately to customers.

(2) The business tax is computed upon the sales price of items subject to the tax and is based upon the actual consideration passing, or agreed to be passed, between the purchaser and the vendor, less any deductions allowed by law. Wholesalers and retailers making charge sales must report business tax due on such sales for the period in which the sale is made.

History

Authority: T.C.A. §§ 67-5822 and 67-101.
Administrative History: Original rule certified June 7, 1974. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-04-05-.09 CONSTRUCTION CONTRACTORS AND EXTERMINATORS

(1) Contractors, as defined at T.C.A. § 67-4-708, Classification 4, shall be liable for business tax regardless of whether the contract is on a lump sum or cost-plus basis.

(2) A contractor shall pay tax under Classification 4 of the Business Tax Act upon all receipts without any deductions except as specifically provided. Tax is due upon all progress payment charges billed pursuant to the contract and received by the contractor and any charges for renting or leasing equipment to others for use in constructing, or making improvements or additions, or repairing buildings or other structures on real property when the equipment is operated by the lessor. Additionally, tax is due at the end of the contract period on the difference between the progress payment charges as billed and the payments received by the contractor. Amounts actually paid during the business tax period to subcontractors or other persons for the services enumerated in T.C.A. § 67-4-711(a)(5) may be deducted provided the contractor adequately identifies such persons by supplying the names and addresses of the subcontractors or other persons and the amounts subcontracted. For contracts issued on or after October 1, 2009, the contractor may deduct only amounts paid to a subcontractor holding a business license or who is licensed by the state board for licensing contractors for work described in T.C.A. § 67-4-708(4)(A) and must also supply the subcontractor’s business license or license number issued by the board for licensing contractors. The contractor must maintain in its books and records a copy of the subcontractor’s business license or contractor’s license.

(3) A contractor shall obtain a license from the appropriate local officer and shall be liable for the initial business license fee in each county and/or municipality in which he receives more than $50,000 from contracts during any taxable period. The contractor must also file a business tax return and pay the business tax on such receipts for each such location. A contractor shall also obtain a license and shall be liable for the initial business license fee in the county and/or municipality in which his business is located and will pay business tax on his gross receipts derived in the state, less any amounts reported for counties and/or municipalities in which his contracts exceed $50,000, during any taxable period. If a contractor does not have a domicile or place of business in the state, he will not owe the tax imposed by T.C.A. § 67-4- 705 in a particular jurisdiction if his total receipts from contracts performed in that jurisdiction are less than $50,000 during any taxable period. “Receipts” used herein mean taxable receipts.

(4) Sales of tangible personal property and services to a contractor who in the course of performing his contract installs the property as a component part of an addition or improvement to or repair of real property are sales to a user and a consumer, and such sales are considered retail sales unless the sales are exempt by specific provisions of the Business Tax Act and rules and regulations construing the Act.

(5) If a contract is performed within the jurisdiction of more than one (1) governmental entity, any business tax on receipts due shall be attributed to each such governmental entity proportionately based upon the amount of work actually performed within each governmental entity.

History

Authority: T.C.A. §§ 67-1-102, 67-4-703, 67-4-708, 67-4-709, 67-4-711, 67-4-714, and 67-4-717.
Administrative History: Original rule certified June 7, 1974. Amendment filed May 18, 1978; effective August 14, 1978. Amendment filed June 3, 1980; effective September 29, 1980. Amendment filed March 18, 1983; effective June 15, 1983. Amendment filed June 14, 1988; effective September 28. 1988. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-04-05-.10 CONTAINERS, WRAPPING AND PACKAGING-MATERIALS AND RELATED

PRODUCTS.

(1) Persons making sales of nonreturnable containers or wrapping and packaging materials to retailers for use in containing property sold at retail or for use in connection with services rendered at retail are making retail sales of such property.

(2) Persons making sales of returnable containers or wrappings and packaging materials to either retailers or to anyone else for use in connections with sales of tangible personal property or services are making retail sales of such property.

(3) Persons making sales of paper napkins, toilet tissue, drinking straws, wooden spoons and other items of a similar nature, to a purchaser who uses such items in connection with the conduct of his business, and not for resale, are making retail sales of such property.

History

Authority: T.C.A. §§ 67-1-102 and 67-4-703.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-04-05-.11 REPEALED

History

Authority: T.C.A. §§ 67-1-102 and 67-4-703.
Administrative History: Original rule certified June 7, 1974. Amendment filed August 28, 1974; effective September 27, 1974. Amendment filed March 18, 1983; effective June 15, 1983. Repeal filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-04-05-.12 DEDUCTIONS FROM GROSS SALES

(1) Amounts representing the following transactions may be deducted from gross sales, prior to computing tax liability, provided such amounts have been included in the gross sales reported on the business tax returns:

(a) Cash discounts allowed and taken by customers on sales. (See Rule 1320-04-05-.04)

(b) Returned merchandise or allowances or credits given to customers for specific sales.

(See Rule 1320-04-05-.45)

(d) Repossession to the extent allowed. (See Rule 1320-04-05-.44)

(e) Contractor payments to subcontractors. (See Rule 1320-04-05-.09(2))

(f) Sales in bona fide interstate commerce. (See Rule 1320-04-05-.33(2))

(g) Receipts for services rendered by nonprofit institutions and financial institutions and for accounting, insurance, and other services, all as provided for by law. (See Rule 1320- 04-05-.16 and 1320-04-05-.32)

(h) Accommodation and casual and isolated sales. (See Rules 1320-04-05-.01 and 1320- 04-05-.05)

(i) Bad debts arising from receipts on which the business tax is imposed and paid as provided for by law.

(j) Any other deductions authorized by the Business Tax Act or by rules and regulations pertaining thereto.

(2) Except as indicated in paragraph (1) of this rule, and as may otherwise be allowed by law, no other amounts attributable to any other transactions may be deducted from gross sales.

(3) Any person claiming deductions from his gross sales must maintain sufficient invoices and other documents to substantiate his claims; otherwise, the deduction will not be allowed.

History

Authority: T.C.A. §§ 67-1-102, 67-4-703, 67-4-711.
Administrative History: Original rule certified June 7, 1974. Amendment filed May 18, 1978; effective August 14. 1978. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-04-05-.13 DEFINITIONS – GENERAL

As used in these Rules and Regulations, the following terms, wherever used, shall have the following meanings:

(1) "Act" shall mean the Business Tax Act, being part 7, Chapter 4, Title 67, T.C.A., as amended.

(2) "Commissioner" shall mean the Commissioner of Revenue of the State of Tennessee, or any of his duly authorized assistants.

(3) "Department" shall mean the Department of Revenue of the State of Tennessee.

(4) "Local Officers” shall mean County Clerks and the duly designated municipal officers responsible for licensing of local businesses.

(5) "Lease or Rental” means the leasing or renting of tangible personal property and the possession or use of the property by the lessee or renter for a consideration, without transfer of the title of such property, and such shall be considered as a taxable transaction within the meaning of the Business Tax Act.

(6) "Return" shall mean the report of a person liable for business tax showing gross sales, deductions, credits, tax computations, and such other information as may be required by the Commissioner.

(7) "State" shall mean the State of Tennessee.

(8) "Tax" shall mean the business tax imposed by the Business Tax Act.

(9) "Manufacturer" shall mean those persons engaged in the businesses described in Division D of the Standard Industrial Classification Index of 1987, as amended.

History

Authority: T.C.A. §§ 67-1-102, 67-4-702, and 67-4-703.
Administrative History: Original rule certified June 7, 1974. Amendment filed March 18, 1983; effective June 15, 1983. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-04-05-.14 DISTRIBUTION FROM OWN WAREHOUSE OR OTHER CENTRAL LOCATION

(1) Sales of tangible personal property and services by a licensed wholesaler or retailer from a central warehouse or other distribution point other than his principal place of business shall be subject to the appropriate wholesale or retail tax, and persons making such sales shall be liable for the business tax for that location.

(2) Where a person merely stores property in a warehouse or other place for eventual delivery to one or more places of business operated by him from which sales are made, he shall not be deemed to be making sales at that location as contemplated by this Rule and Regulation.

History

Authority: T.C.A. §§ 67-1-102 and 67-4-703.
Administrative History: Original rule certified June 7, 1974. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-04-05-.15 DOMINANT BUSINESS ACTIVITY DEFINED FOR CLASSIFICATION PURPOSES

For purposes of business tax, both wholesale and retail businesses are classified according to their dominant business activity. The item comprising the largest proportion of taxable gross sales of the business when compared with other items sold determines its classification. Only one classification (of Classifications 1, 2, 3, or 4) shall apply. The fact that sales may be made at both wholesale and retail shall have no effect in determining the dominant business activity.

History

Authority: T.C.A. §§ 67-1-102, 67-4-703, and 67-4-708.
Administrative History: Original rule certified June 7, 1974. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-04-05-.16 EXCLUSIONS

(1) Generally, the receipts attributable to the following transactions, unless otherwise prohibited in the Business Tax Act, may be excluded in reporting gross sales on the Business Tax Returns:

(a) Consumer taxes such as those passed on to the purchaser under the provisions of the Sales and Use Tax Law (Chapter 6, Title 67, T.C.A.) and the Liquor by the Drink Law (Chapter 1, Title 57, T.C.A.).

(b) Receipts derived from medical and allied health services to human beings, except services of persons engaged in the business of making dentures and artificial teeth; religious, charitable, legal, educational, domestic, accounting services, architecture, engineering, surveying, and veterinary services; services rendered by non-profit membership organizations for the promotion of the interest of the members; educational and research agencies; public utilities as defined by T.C.A., §65-4-10; banks, building and loan associations, mortgage bankers, and other similar organizations; insurance companies and holding companies; operators of residential and non-residential buildings other than hotels, motels, or rooming houses; persons operating camps and trailer parks where charges are made for rental only of real property are exempt from the tax, but persons renting trailers to transients, or selling tangible personal property, or making separate charges for specific services furnished are not exempt; lessors of agricultural, forestry, mining, oil, public utility and airport properties.

(c) Receipts from sales of tangible personal property which is either manufactured by or, if not manufactured by, is incidental to the primary operation of a manufacturer who is subject to the ad valorem tax imposed under Chapter 5 of Title 67, T.C.A., and is sold either at the manufacturing location or any other manufacturing location operated by it within the same county.

(d) Receipts of the producer from sales of livestock, poultry and other farm products directly from the farm, including catfish farmers.

(e) The cost of sales of livestock; poultry or other farm products, other than those excluded as sales directly from the farm by the producer, to the end result that the Business Tax imposed shall apply only to the amount of all commissions, fees, margins or other charges received from such sales.

(f) Receipts of persons which are subject to gross receipts tax for their engaging in the business of operating as bottlers and manufacturers of soft drinks and soft drinks substitutes; gas, water, and electric current companies; telephone and telegraph companies; theaters, motion picture and vaudeville shows; establishments selling mixed drinks or setups for mixed drinks; and vendors of tangible personal property through vending machines, all of which persons are liable for or elect to pay the gross receipts tax to the state under the provisions of Chapter 4 parts 4 and 5, Title 67, T.C.A.

(g) Receipts of owners, or others having similar interests, from the sale or rental of real property; but this exclusion shall not include the receipts of brokers or agents as commissions' for the sale or rental thereof.

(h) Receipts from rental of films to theaters which pay the tax imposed by T.C.A. §67-6- 212.

(i) Receipts from rental of films, transcriptions and recordings to radio or television stations operating under a certificate from the Federal Communications Commission.

(2) Any other amounts attributable to the exclusions authorized by the Business Tax Act, or rules and regulations pertaining thereto, may also be excluded. (See Rule 1320-04-05-.36)

History

Authority: §§ 67-1-102, 67-4-703, and 67-6-212.
Administrative History: Original rule certified June 7, 1974. Amendment filed March 18, 1983; effective June 15, 1983. Amendment filed March 17, 1987; effective June 29, 1987.

Tenn. Comp. R. & Regs. 1320-04-05-.17 FOOD

Food is defined to include all material which is used for animal as well as for human consumption to sustain physical growth, repair tissues, maintain vital processes and to furnish energy.

History

Authority: T.C.A. §§ 67-5822 and 67-101.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-04-05-.18 FREIGHT AND DELIVERY CHARGES

Freight, delivery, or other like transportation charges are subject to the Business Tax if title to the property being transported passes to the vendee at the destination point. Where title to the property being transported passes to the vendee at the point or origin, the freight or other transportation charges are not subject to the Tax. It is immaterial whether the vendor or vendee actually pays for any charges made for transportation, whether the charges are actually paid by one for the other, or whether a credit or allowance is made or given for such charges. In cases where a vendor makes a separate charge for delivering tangible personal property in his own vehicle, or makes arrangements for delivering tangible personal property other than by a common carrier, the delivery charges shall be considered a part of the selling price subject to the Tax.

History

Authority: T.C.A. §§ 67-5822 and 67-101.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-04-05-.19 FUNERAL DIRECTORS

(1) Persons engaged in business as a funeral director shall be liable for the Business Tax as determined by the manner in which they indicate the billing to their customers.

(a) In the case of a "unit price," (such as where there is one stated price for the casket, burial vault, and all services furnished) the transaction shall be regarded as a sale of tangible personal property and taxed under Classification 2 of the Business Tax Act.

(b) In the case of a "functional price," or "itemization," (such as where there is a segregation of the price of the casket, burial vault and other tangible personal property sold and charges for services rendered) the tax rate shall be determined by the classification comprising the dominant business activity, either Classification 2 or Classification 3.

(2) In cases where a funeral director makes "cash advances" for opening graves, transportation, newspaper notices, telephone calls and other similar services, and furnishes items such as flowers and clothing, acting as an agent for his customer and making a charge for reimbursement for the advances without adding any profit to the charges for himself, such charges shall be included in the gross sales of the funeral director but may be deducted on the Business Tax Return in computing the Business Tax due and payable.

History

Authority: T.C.A. §§ 67-5822 and 67-101.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-04-05-.20 HOSPITALS, CONVALESCENT, AND REST HOMES, ETC

Hospitals and persons rendering allied health services to human beings, including convalescent and rest home care, are rendering services, and are the users and consumers of products sold to them. Sales to the State, or other governmental agencies, and institutions exempt from paying Sales and Use Tax under the provisions of T.C.A. § 67-6-322, are deemed to be wholesale sales. Sales to all other institutions, etc., not otherwise exempt from sales and use tax under T.C.A. § 67-6-322, are deemed to be retail sales.

History

Authority: T.C.A. §§ 67-1-102, 67-4-702 and 67-4-703.
Administrative History: Original rule certified June 7, 1974. Amendment filed April 28, 1987; effective July 29, 1987.

Tenn. Comp. R. & Regs. 1320-04-05-.21 INSTALLATION SALES

(1) Tangible personal property which is sold and attached to real property, but which is ordinarily removed by the owner or tenant, such as window air conditioning units, curtain and drapery rods, gasoline pumps, etc., shall be deemed to be personal property. Charges for installing tangible personal property as a part of and in connection with the sale of tangible personal property are subject to the business tax if the property continues to be personal property after installation. The tax is due from the person making the sale of personal property regardless of whether the property is installed by that person or by another person acting for him. The tax shall be computed based on the dominant business activity of the person making the sale of the personal property. Persons making charges for installing personal property not as a

part of and in connection with the sale of the tangible personal property shall be taxed under classification four (4) of the business tax.

(2) Charges made for installing tangible personal property which becomes a part of real property, and which is not ordinarily removed by the owner or tenant, such as carpeting, electrical wiring, etc., shall be deemed to be made by a contractor, and the person installing such property shall pay the appropriate Business Tax as a contractor.

History

Authority: T.C.A. §§ 67-5822 and 67-101.
Administrative History: Original rule certified June 7, 1974. Amendment: filed May 18,1978, effective August 14, 1978.

Tenn. Comp. R. & Regs. 1320-04-05-.22 INSTALLMENT AND CREDIT SALES

Persons making conditional, charge, or installment sales must report the total selling price of such sales and pay the appropriate Business Tax due thereon in the reporting period in which the contracts of sale are entered into.

History

Authority: T.C.A. §§ 67-5822 and 67-101.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-04-05-.23 LAY-AWAY SALES

Lay-away, lay-by, and/or will-call sales shall be included in the Business Tax base for the taxable period in which the delivery is made. Where the property is returned to inventory because of nonpayment for the merchandise and any previously made payments are forfeited because the sale is not completed, the amount forfeited shall be included in the Business Tax base at that time.

History

Authority: T.C.A. §§ 67-5822 and 67-101.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-04-05-.24 LEASE OR RENTAL

(1) Leases and rentals of tangible personal property are deemed sales of tangible personal property and subject to the Business Tax. When real property and tangible personal property are leased or rented, that portion of the charges made for or properly attributable to lease or rental of tangible personal property shall be considered as sales subject to the Business Tax. The tax shall apply to all leases of tangible personal property delivered to a lessee or rentee in this state, regardless of where the property may be taken or used, whether within or without the state, and the tax will apply to whatever charges are made.

(2) Persons engaged in the business of leasing or renting tangible personal property to users or consumers are taxable as retailers and persons leasing or renting tangible personal property to persons who in turn will lease or rent the property to others are taxable as wholesalers.

History

Authority: T.C.A. §§ 67-5822 and Section 67-101.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-04-05-.25 LEASED DEPARTMENTS

Persons operating leased departments or concessionaires are not permitted to include their tax liability on the returns of the lessor or grantor of the concession but must file separate returns and pay applicable taxes imposed by the Business Tax Law, including the initial and minimum license fees.

History

Authority: T. C.A. §§ 67-5822 and 67-101.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-04-05-.26 LIVESTOCK, POULTRY, AND OTHER FARM PRODUCTS

"Livestock, poultry and other farm products," as used in Classification 4 of the Business Tax Act, shall mean those in the same or raw form as that delivered by a farmer without any form of processing or manufacturing whatsoever having been made upon the products.

History

Authority: T.C.A. §§ 67-5822 and 67-101.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-04-05-.27 LOCAL ADOPTION OF BUSINESS TAX

(1) Affirmative action must be taken by municipal governments in order to implement the business tax in their respective jurisdictions. The business tax may be levied only by passage of a resolution or ordinance by the appropriate governing body.

(2) Upon adoption or amendment of the business tax by any municipal government, a certified copy of the resolution or ordinance adopting or amending the business tax must be furnished to the Department.

(3) Municipal governments that adopt the business tax after December 31, 2013, must levy the tax at the rates provided in T.C.A. § 67-4-709. If the business tax was adopted by a municipal government prior to January 1, 2014, then it may continue to levy the tax at the same rate that was in effect as of January 1, 2014. Municipal governments may not reduce the tax rates, but they may repeal the business tax by ordinance.

History

Authority: T.C.A. §§ 67-1-102, 67-4-703, 67-4-704, 67-4-705, and 67-4-709.
Administrative History: Original rule certified June 7, 1974. Amendment filed April 28, 1987; effective July 29, 1987. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-04-05-.28 LOCATIONS AND OUTLETS – OPERATIONS IN OTHER LOCALITIES

(1) A business which engages in business activity in several places, in different locations and through different outlets, must obtain a license from and pay the initial license fee to the appropriate local officer and must pay at least the minimum business tax to the Department for each place, location or outlet; and it must report gross sales and tax due for each separate location. The fact that a business has several outlets in a single county or city is immaterial. Such business may upon request submit a consolidated report to cover all such outlets in one county or city; however, a breakdown of sales by each outlet must accompany such consolidated report.

(2) Subject to the exceptions enumerated hereinafter, persons subject to business tax operating from an established place of business in one county or city who extend their operations into other counties and/or cities without establishing an office, headquarters or other place of business therein shall not be subject to the filing and registration requirements for such other counties and/or cities. Tax on total receipts from all taxable sales shall be attributed to the county and city, if any, in which the established place of business is located.

(3) Excepted from the rule as stated in subparagraph (2) are:

(a) Contractors subject to Rule 1320-04-05-.09.

(b) A property management company or an individual providing rentals lasting less than 180 days must have a county and/or city business tax license and registration for each county and/or city in which it has rental properties, if the property management company’s or individual’s taxable gross receipts are ten thousand dollars ($10,000) or more in a particular county and/or city where it does business. If a property management company or individual manages multiple locations within one county and/or city, the property management company or individual shall be required to register only one location per county and/or city and report all gross receipts in that county and/or city to the registered location. The property management company or individual will be subject to business tax at the local rate for the jurisdiction in which each rental property is located, and the taxes from such shall be attributed to the county or city in which the rental property is located.

History

Authority: T.C.A. §§ 67-5822, 67-101, 67-1-102, 67-4-703, 67-4-706, 67-4-723, and 67-4-724.
Administrative History: Original rule certified June 7, 1974. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-04-05-.29 MANUFACTURERS AND PROCESSORS

(1) Sales of industrial materials and services to manufacturers and processors who further process, manufacture or convert such materials as a component part of articles of tangible personal property, or use the services in preparing such a product for sale or resale, are considered to be sales at wholesale and, therefore, are subject to the Business Tax.

(2) Sales of machinery and supplies and services, other than those in (1) above to manufacturers or processors, are retail sales, unless the property or services are shown by the manufacturer or processor to be for resale, in which case the sales are wholesale sales subject to the wholesale tax.

(3) Sales of tangible personal property manufactured or processed by a manufacturer or processor, who is subject to the ad valorem tax under Part 5 of Chapter 5 of Title 67, T.C.A., are exempt from the Business Tax if made at the manufacturing or processing location within this state. Sales of such property which is not manufactured or processed by a manufacturer or processor but which is incidental to the operation of such manufacturer or processor are also exempt from the Business Tax if made at the manufacturing or processing location or outlet that is subject to the ad valorem tax under provisions of said Chapter.

(4) Sales of tangible personal property manufactured or processed by a manufacturer or processor from locations other than the manufacturing or processing location where the ad valorem tax is paid are subject to the Business Tax. Such sales are taxable at either the retail or wholesale tax rate, whichever is applicable.

(5) A manufacturer or processor who is subject to ad valorem tax under the provisions of Part 5 of Chapter 5 of Title 67, T.C.A., and who also sells tangible personal property which he has manufactured outside the state, or has brought tangible personal property or services for resale, shall be liable for the ad valorem and personal property taxes as follows:

(a) All property used exclusively in the manufacturing or processing operation shall be subject to the tax imposed by Part 5 of Chapter 5 of Title 67, T.C.A..

(b) All property used exclusively in the sales of property manufactured by him outside the state, or tangible personal property or services bought for resale, shall be exempt; from the provisions of Part 5 of Chapter 5 of Title 67, T.C.A., and personal property taxes.

(c) The value of property used partially in connection with manufacturing operations exempt from the Business Tax and partially in connection with sales subject to the Business Tax shall be prorated.

Such proration shall be as determined by the ratio of sales of property manufactured in this state subject to the tax imposed by Part 5 of Chapter 5 of Title 67, T.C.A., and receipts from other sales subject to the Business Tax. The portion of the value applicable to property used in connection with manufacturing operations shall be subject to the ad valorem tax imposed by Part 5 of Chapter 5 of Title 67, T.C.A., and that portion of the value applicable to other sales activities shall be exempt from the provisions of Part 5 of Chapter 5 of Title 67, T.C.A., and personal property taxes.

History

Authority: T.C.A. §§ 67-1-102, 67-4-702, 67-4-703, 67-4-704, and Part 5 of Chapter 5, Title 67, T.C.A.
Administrative History: Original rule certified June 7, 1974. Amendment filed April 28, 1987; effective July 29, 1987.

Tenn. Comp. R. & Regs. 1320-04-05-.30 TAX DUE DATE-DELINQUENCY-TAX PERIODS

(1) The business tax provided for in T.C.A. § 67-4-709 is an annual tax for the privilege to engage in any of the business activities made subject to business tax.

(2) Pursuant to the authority in T.C.A. § 67-4-715(g), the business tax return is due on the 15th day of the fourth month following the end of the taxpayer’s fiscal year. For example, if a taxpayer’s fiscal year ends on December 31, then its return will be due on April 15.

History

Authority: T.C.A. §§ 67-1-102, 67-4-703, 67-4-709, 67-4-715, 67-4-717, 67-4-719 and 67-4-720.
Administrative History: Original rule certified June 7, 1974. Amendment filed April 28, 1987; effective July 29, 1987. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-04-05-.31 MOTOR VEHICLE, TRAINER, AND/OR SIMILAR RENTALS

(1) Persons engaging in the business of motor vehicle and/or trailer rentals, or having contracts with service stations or other business entitles to act as their agent for the rental of such equipment to customers, are liable for the Business Tax imposed on rentals in their counties and/or municipalities at each location where such vehicles are maintained and rented, including their own locations as well as those of their agents. Agents operating the service stations or other business locations where such rentals are made are liable for the Business Tax on the commissions they receive for the services performed.

(2) Payments by service stations or other businesses in regard to the tax shall be made to the locality where the customers pay for the rental of the equipment.

(3) Deposits made by customers and which are refundable when a motor vehicle, trailer, and/or similar rentals are left at the destination, and which are actually refunded to the customer, may be deducted from the gross receipts in determining the Business Tax.

History

Authority: T.C.A. §§ 67-5822 and 67-101.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-04-05-.32 NONPROFIT MEMBER ORGANIZATIONS

Organizations operating on a nonprofit membership basis for promotion of interest of the members shall be exempt from the Business Tax on services rendered. The sale of food, beverages or other tangible personal property, shall constitute a taxable activity, and such organizations shall pay tax under the appropriate classification.

History

Authority: T.C.A. §§ 67-1-102, 67-4-703 and 67-4-708.
Administrative History: Original rule certified June 7, 1974. Amendment filed April 28, 1987; effective July 29, 1987.

Tenn. Comp. R. & Regs. 1320-04-05-.33 NON-RESIDENT PURCHASES

(1) Deliveries of tangible personal property and services to customers in the State of Tennessee are sales subject to the Business Tax. It is immaterial that the property may thereafter be transported outside the state.

(2) Deliveries of tangible personal property or services to customers outside the State of Tennessee by a person subject to the Business Tax or by a common carrier before a customer obtains possession are sales exempt from the Business Tax.

History

Authority: T.C.A. §§ 67-1-102, 67-4-703 and 67-4-712.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-04-05-.34 PATRONAGE DIVIDENDS OF COOPERATIVE ASSOCIATIONS

The amount of cash and other patronage dividends, declared by cooperative selling associations or corporations are paid to or credited to a member's account from the earnings of such association or corporation, may be taken as a deduction from gross sales for the tax period in which the distributions and credits are made.

History

Authority: T.C.A. §§ 67-1-102 and 67-4-703.
Administrative History: Original rule certified June 7, 1974. Amendment filed March 18, 1983; effective June 15, 1983.

Tenn. Comp. R. & Regs. 1320-04-05-.35 PERSON-DEFINED

The term "person" shall mean any individual, partnership, corporation, receiver, trust, trustee, or any other legal entity engaged in any of the business activities made subject to the business tax by the Business Tax Act. The term "person," however, does not include the United States of America, the State of Tennessee or political subdivisions thereof, or any of the agencies thereof, nor does the term include utility districts organized under the provisions of Chapter 26 of Title 6, T.C.A., or electric membership corporations or cooperatives organized under the provisions of Chapters 24 and 25 of Title 65, T.C.A., to the extent that such political or quasipolitical entity may be the seller or furnisher of the goods or services which would otherwise be taxable under the Business Tax Act.

History

Authority: T.C.A. §§ 67-1-102 and 67-4-703.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-04-05-.36 PERSONS EXEMPT FROM BUSINESS TAX

(1) Persons making occasional and isolated sales or transactions who do not hold themselves out as engaged in business.

(2) Persons having a total value of sales of less than $10,000 per year.

(3) Certain blind persons.

(4) Certain disabled veterans.

(5) Newspaper route carriers and newspaper peddlers.

(6) Farmers making sales of farm products direct from the farm and produced by themselves, including catfish farmers. (See Rule 1320-04-05-.16)

(7) Persons employed by another who work for wages or salary and who are under the direction and control of the employer in the performance of their duties.

(8) Charitable or religious institutions making sales of donated items and articles produced from donated items.

(9) Certain persons conducting shows, displays, or exhibits sponsored by a nonprofit organization of gun collectors.

(10) Certain persons whose only business activity during the tax period is conducted at the Tennessee state fair or a county fair.

(11) Movie theaters qualifying for the exemption under T.C.A. § 67-6-309.

History

Authority: T.C.A. §§ 67-1-102, 67-4-702, 67-4-703, and 67-4-712.
Administrative History: Original rule certified June 7, 1974. Amendment filed April 28, 1987; effective July 29, 1987. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-04-05-.37 REPEALED

History

Authority: T.C.A. §§ 67-1-102 and 67-4-703.
Administrative History: Original rule certified June 7, 1974. Repeal filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-04-05-.38 PUBLIC WAREHOUSING AND STORAGE

(1) Persons engaged in the business of warehousing and storage of any tangible personal property belonging to others for a charge or fee are rendering services and are taxable under the Business Tax Act. Gross sales shall include all charges made for such service and shall include charges for crating, boxing, and packaging used in the performance of these services. Receipts from the sale of any tangible personal property made by the warehouseman to satisfy a warehouseman's lien on account of storage or service charges shall likewise be included in gross receipts in establishing the Business Tax base. This Rule applies also to persons operating grain elevators, tobacco warehouses and like facilities where charge is made for services rendered.

(2) Persons operating a warehouse and, in addition, leasing space within the warehouse without furnishing any services to the lessee of the space may exclude the receipts for such leases from the gross sales subject to the Business Tax, or deduct them from the gross sales if the receipts are included in the gross sales reported on the Business Tax return.

History

Authority: T.C.A. §§ 67-1-102 and 67-4-703.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-04-05-.39 PUBLISHERS OR PRINTERS OF NEWSPAPERS AND OTHER PERIODICALS

(1) Persons engaged in the business of publishing or printing newspapers, other periodicals, and other printed matter, shall be deemed to be manufacturers who are subject to ad valorem tax imposed in Chapter 5, Title 67, T.C.A., and shall be exempt from the Business Tax in the same manner as are other manufacturers.

(2) Publishers or printers of newspapers or other periodicals engaged in any other activity made taxable under the Business Tax Act shall be liable for the appropriate tax on such activity.

(3) Activities engaged in that are incidental to the manufacturing portion of the business shall not, however, be subject to the tax.

History

Authority: T.C.A. §§ 67-1-102 and 67-4-703.
Administrative History: Original rule certified June 7, 1974. Amendment filed March 18, 1983; effective June 15, 1983.

Tenn. Comp. R. & Regs. 1320-04-05-.40 RADIO AND TELEVISION STATIONS

(1) Persons operating radio and television stations under authority of a certificate from the Federal Communications Commission are not liable for the Business Tax.

(2) Persons who operate cable television services are subject to the tax.

History

Authority: T.C.A. §§ 67-1-102 and 67-4-703.
Administrative History: Original rule certified June 7, 1974. Amendment filed March 18, 1983; effective June 15. 1983.

Tenn. Comp. R. & Regs. 1320-04-05-.41 REAL ESTATE SALES AND RENTALS

(1) Persons who receive monies or other consideration for the sale or rental of real property belonging to them, not including rentals lasting less than 180 days, are not liable for business tax on such sales or rentals.

(2) Persons receiving or entitled to receive commissions, fees, service charges, or other income, credits or property value in money for services rendered concerning the sale or rental of real or personal property belonging to others are liable for business tax on such receipts.

(3) The employing unit, whether designated as a real estate firm, broker, agency, partnership, or corporation which owns or conducts a real estate business, but not the employees thereof, is liable for business tax. The tax shall be paid on the total receipts (as enumerated in paragraph (2) above) which are due and payable. It is immaterial, with regard to tax liability, whether the total receipts are divided between the employing unit and the employee, salesman, or other representative of the employing unit or whether the division is made by the employing unit or by the owner, purchaser or other party in interest. In any event the tax is payable on the total amount of receipts due and payable for services rendered.

(4) The business tax is due and payable to the Department for each county and city, if any, where the employing unit maintains an office or place of business, regardless of the location of the property involved in the sale or rental or the place where a contract for the sale or rental of the property is entered.

(5) Where receipts, as enumerated herein, are divided, or split, between bona fide real estate agents or brokers, as distinguished from a division between an agent or broker and one of his employees, that portion of the receipts retained or received by each business shall become a

part of its gross receipts subject to business tax.

History

Authority: T.C.A. §§ 67-1-102 and 67-4-703.
Administrative History: Original rule certified June 7, 1974. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-04-05-.42 RECORDS - PRESERVATION OF

(1) Every person liable for business tax shall keep and preserve sufficient and complete records for a period of at least three years to determine the amount of business tax for which he may be liable. It is advisable, however, that such records be kept and preserved for a period of six years. Such records shall include and show the following:

(a) A daily record of all cash and credit sales, including sales under any type of financing or installment plan in use;

(b) A record of the amount of all merchandise purchased, including all bills of lading, invoices, and copies of purchase orders;

(c) A record of all exclusions, deductions and exemptions allowed by law and/or claimed in filing business tax returns; and, (d) A true and complete inventory of the value of the stock on hand taken at least once yearly. All of the records required to be kept and preserved shall be open for examination at any time by the Commissioner or local collecting officers, or their duly authorized representatives.

(2) If a proposed assessment has been made and an appeal therefrom has been made to the Commissioner or to a court, all books and records, as above specified, relating to the period covered by such proposed assessment must be preserved until the final disposition of the appeal.

History

Authority: T.C.A. §§ 67-1 -102 and 67-4-703.
Administrative History: Original rule certified June 7, 1974. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-04-05-.43 REPAIR SERVICES

The total charges made by those engaged in the business of repairing tangible personal property, including parts, labor, and any other charges, shall be deemed to be service charges and taxable at either the wholesale rate or retail rate, whichever is applicable.

History

Authority: T.C.A. §§ 67-1-102 and 67-4-703.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-04-05-.44 REPOSSESSIONS

(1) Except as otherwise provided in this rule, a wholesaler or retailer may not deduct the unpaid amounts on repossessed tangible personal property from their gross proceeds of sales in submitting their reports.

(2) In cases where a wholesaler or retailer sells any article of personal property on a security agreement, or any other instrument whereby he retains title to the property, and he repossesses or enforces his lien against the said property and there is an unpaid principal balance of more than five hundred dollars ($500) the dealer may deduct, in reporting his gross receipts, an amount equal to the unpaid balance minus five hundred dollars ($500).

The unpaid balance to be considered in this calculation is only that amount which constitutes principal, and shall not include interest, carrying charges or any similar charges. Any wholesaler or retailer claiming such a deduction or deductions shall preserve, as a part of the official records of his business, full information concerning the sale and subsequent repossession of the subject item of personal property; and such information shall include identification of parties and items involved, the dates of the sale and repossession, the amount of the original price to the purchaser upon which the Business Tax was due to be paid, and the amount of unpaid balance which forms the basis for the deduction.

(3) A bank or other financial institution purchasing contracts without recourse from wholesalers or retailers relating to tangible personal property which was sold by the latter under a security agreement or other title-retained instrument may not claim any deduction or credit for any unpaid balances remaining due on any such contracts following repossessing of the property or any other action to enforce the lien.

History

Authority: T.C.A. §§ 67-5822 and 67-101.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-04-05-.45 RETURNED MERCHANDISE AND ALLOWANCES

In the event a person subject to the Business Tax gives credit to a customer for tangible personal property voluntarily returned to him or gives a credit or allowance to a customer as an adjustment or otherwise with respect to a specific sale, whether or not the property is returned, the amount of credit or allowance actually given or credited to the customer's account may be deducted from the gross sales subject to the Business Tax.

History

Authority: T.C.A. §§ 67-5822 and Section 67-101.
Administrative History: Original rule certified June 7, 1974. 1320-04-05.46 SALES BY OUT-OF-STATE VENDOR. Sales of tangible personal property or services made by a Tennessee dealer to an out-of state vendor who directs that the dealer act as his agent to deliver or ship such property or services to his customer in Tennessee shall be deemed to be a sale by the Tennessee vendor and subject to the Business Tax. Authority: T.C.A. §§ 67-5822 and 67-101.

Tenn. Comp. R. & Regs. 1320-04-05-.47 SALES FOR RESALE

(1) Sales for resale include those whereby a supplier of materials, supplies, equipment and services makes such tangible personal property or services available for further processing as a component part of a product to legitimate dealers engaged in and actually reselling or leasing such property or services to a user or consumer. Sales to a manufacturer or processor for future processing, manufacture or conversion into articles of tangible personal property for resale where such industrial materials become a component part of the finished product are likewise considered sales for resale.

(2) Sales of tangible personal property and services to a retailer who may make further distributions from a central warehouse or other distribution point to others for resale shall be deemed to be wholesale sales.

(3) Sales for resale made by a wholesaler to another wholesaler shall not be subject to business tax.

(4) The price charged by the vendor for tangible personal property or services or the quality of such property or services is immaterial in determining whether or not a sale is one for resale.

The controlling factor is what the vendee does with his purchase.

(5) Sales to a contractor who in the course of performing his contract installs property or uses services in a structure, as a component part thereof, are retail sales to a user or consumer.

History

Authority: T.C.A. §§ 67-101, 67-5822, 67-1-102, 67-4-702, and 67-4-703.
Administrative History: Original rule certified June 7, 1974. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-04-05-.48 SALES OF SERVICES AND TANGIBLE PERSONAL PROPERTY

(1) A person exempt under the provisions of T.C.A. § 67-4-708, classification 3, from paying the tax on receipts from services rendered is, nevertheless, liable for the tax on receipts from sales of tangible personal property.

(2) A person engaged in the business of selling tangible personal property is liable for the Business Tax even though he may call his business a service.

History

Authority: T.C.A. §§ 67-1-102, 67-4-703, and 67-4-708.
Administrative History: Original rule certified June 7, 1974. Amendment filed April 28, 1987; effective July 29, 1987. Amendment filed June 28, 2000; effective September 11, 2000.

Tenn. Comp. R. & Regs. 1320-04-05-.49 SALES TO EMPLOYEES

Sales to employees shall be included in the Business Tax base. The tax shall be based upon sales price of the property or service sold, or upon the cost price of property or service furnished to the employee as part of his compensation without a specific charge being made for such property or service furnished.

History

Authority: T.C.A. §§ 67-5822 and 67-101.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-04-05-.50 SALES TO USERS EXEMPT FROM PAYING OTHER TAXES

Sales of tangible personal property to the State of Tennessee or any county or municipality or subdivision thereof, or the sale to any religious, educational or charitable institution as defined in §67-3014, T.C.A., shall be deemed to be wholesale sales and taxable at the appropriate wholesale taxable rate. Such sales made to the Federal Government shall likewise be deemed to be wholesale sales.

History

Authority: T.C.A. §§ 67-5822 and 67-101.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-04-05-.51 SPECULATIVE BUILDERS

(1) Persons building houses or other structures on their own property from their own plans and not under contract and offering them for sale are not considered to be selling tangible personal property or rendering a taxable service and are not taxable under the Business Tax Act.

(2) If, during the course of construction of a house or other structure a builder agrees to sell the property and alters the plans to the specifications of the buyer, he shall be deemed to be a contractor and liable for the appropriate business tax on the total receipts over and above the price for which the property would otherwise be sold.

(3) A builder is subject to the provisions of paragraph (2) if:

(a) He contracts to sell a building and lot prior to completion of the construction of the building and, (b) He alters the building plans to the specifications of the buyer.

Both of the conditions in subparagraphs (a) and (b) must be present in order for builder to be subject to the provisions of paragraph (2).

History

Authority: T.C.A. §§ 67-1-102 and 67-4-703.
Administrative History: Original rule certified June 7, 1974. Amendment filed March 18, 1983: effective June 15, 1983.

Tenn. Comp. R. & Regs. 1320-04-05-.52 REPEALED

History

Authority: T.C.A. § 67-1-102 and 67-4-703.
Administrative History: Original rule certified June 7, 1974. Amendment filed March 18, 1983; effective June 15, 1983. Repeal filed June 28, 2000; effective September 11, 2000.

Tenn. Comp. R. & Regs. 1320-04-05-.53 TAXPAYERS' RETURNS AND RECORDS

(1) All persons liable for business tax shall make complete reports of all sales and other business receipts and list any deductions which they are entitled to make for each separate place, location, or outlet in the State, and submit them on their business tax returns as provided for in the Business Tax Act and the Rules and Regulations relating thereto. Sales and receipts which are excludable, as provided for in the Act and these Rules and Regulations, shall not be included in the gross sales reported; but allowable deductions shall be included in the gross sales reported and listed as a deduction on the business tax return and so treated in computing and paying business tax due.

(2) Persons with two or more business locations in a city and/or county may, upon request to and approval by the Commissioner, file consolidated tax returns, provided only, however, that such businesses are taxable under the same classification and at the same tax rate. Such person must maintain in its books and records information necessary to determine tax liability at each location.

History

Authority: T.C.A. §§ 67-1-102 and 67-4-703.
Administrative History: Original rule certified June 7, 1974. Amendment filed May 18, 1978; effective August 14, 1978. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-04-05-.54 TRADE-INS

(1) When an item of tangible personal property is taken in trade as a credit or part payment on the sale of new or used articles, the Business Tax shall be computed on the difference between the sales price of the new or used article sold and any credit actually given for the used article accepted in the trade.

(2) A credit will not be allowed for trade-ins unless the item so traded is of a like kind and character of that which is purchased and indicated as a trade-in by model and serial number, where applicable, on an invoice given to the customer.

History

Authority: T.C.A. §§ 67-1-102 and 67-4-703.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-04-05-.55 TRADING STAMPS

(1) Persons engaged in the business of redeeming trading stamps which have been given by other dealers shall be deemed to be a dealer and shall be liable for the Business Tax on the retail value of the merchandise given for the stamps. This value shall be deemed to be the value which is assigned to the book of stamps.

(2) The sale of trading stamps to concerns who give them to customers in exchange for purchases in their stores is not taxable under the Business Tax Act.

History

Authority: T.C.A. §§ 67-1-102 and 67-4-703.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-04-05-.56 TRAILER PARKS OR CAMPS

Persons operating trailer parks or camps where charges are made only for rental of real property are exempt from the business tax, but persons renting trailers to transients for occupancy at the trailer park location for a period of 90 days or less, or selling tangible personal property, or making separate charges for specific services furnished are liable for the business tax under the appropriate classification. (See 1320-04-05-.16.)

History

Authority: T.C.A. §§ 67-1-102 and 67-4-703.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-04-05-.57 TRANSFER OF LICENSE

(1) The license, required pursuant to T.C.A. § 67-4-723, may neither be transferred from one person to another person nor from one business location to another business location, except as provided for under T.C.A. § 67-4-721.

(2) A license may be transferred from one location in a municipality to another location within the same municipality one time during any tax year if the licensee notifies the local collecting officer at least five (5) days prior to the last day of business at the old location and pays to such local collecting officer the fee as set forth in T.C.A. § 8-21-701.

History

Authority: T.C.A. §§ 67-1-102 and 67-4-703.
Administrative History: Original rule certified June 7, 1974. Amendment filed March 18, 1983; effective June 15, 1983. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-04-05-.58 TRANSPORTATION COMPANIES

Persons other than carriers or other public utilities as defined in Section 65-401, T.C.A., engaged in the business of furnishing transportation services or carrying or hauling passengers or personal property for a consideration, are liable for the Business Tax based upon all intrastate receipts. Each station, terminal or other central location shall be considered as a separate place of business.

History

Authority: T.C.A. §§ 67-1-102 and 67-4-703.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-04-05-.59 VENDING MACHINES

(1) All persons making sales of tangible personal property through coin-operated vending machines and electing to pay the Gross Receipts Tax imposed in Item 65(c)(1), T.C.A. § 67- 4-503, shall pay such tax in lieu of the Business Tax. If a person who is otherwise engaged in business and pays Business Tax on all taxable receipts and, as an incident thereto, sells merchandise through his own or leased vending machine and does not elect to pay the Gross Receipts Tax under said § 67-4-503, he is not liable for the per-machine privilege tax imposed in § 67-4-503, but shall be required to include receipts from such machine in the base for his Business Tax (2) If a vending machine operator sells tangible personal property by any means other than through vending machines, or makes charges for servicing coin-operated machines other than those he owns, he is subject to, and must pay, the appropriate Business Tax applicable to such other activities.

History

Authority: T.C.A. §§ 67-1-102 and 67-4-703.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-04-05-.60 REPEALED

History

Authority: T.C.A. §§ 67-5822 and 67-101.
Administrative History: Original rule certified June 7, 1974. Amendment filed August 28, 1974; effective September 27, 1974. Amendment filed March 18, 1983; effective June 15, 1983. Repeal filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-04-05-.61 ANTIQUE MALLS, FLEA MARKETS, CRAFT SHOWS, ANTIQUE SHOWS, GUN

SHOWS AND AUTO SHOWS

(1) Promotions conducted by non-profit organizations shall refer to cases where the promoter is a non-profit association, corporation, or organization, and shall not depend on whether or not the individual booth owner or renter is a non-profit entity. However, individual booth owners or renters who are non-profit entities shall be exempt from the tax.

(2) A booth shall be any area or space for which a promoter charges a separate fee.

History

Authority: T.C.A. §§ 67-5822, 67-1-102, 67-4-703, and 67-4-710.
Administrative History: Original rule filed October 11, 1983; effective January 16, 1984. Amendments filed June 28, 2016; effective September 26, 2016.

Chapter 1320-04-06 Local Option Liquor Rules

Tenn. Comp. R. & Regs. 1320-04-06-.01 REPEALED

History

Authority: T.C.A. §§ 57-132, 57-136, 57-3-303, 57-3-307, 67-101, and 67-1-102.
Administrative History: Original rule certified June 7, 1974. Repeal and new rule filed January 29, 1985; effective April 16, 1985. Repeal filed October 30, 2025; effective January 28, 2026.

Tenn. Comp. R. & Regs. 1320-04-06-.02 TAX LIABILITY

(1) The tax rates as set out at T.C.A. § 57-131 shall, for the purpose of paying tax on alcoholic beverages measured by the metric system of capacity measurement, be as follows:

(a) $.2906 per liter of wine.

(b) $1.0567 per liter of spirits.

(2) Tax liability shall be based upon adjusted gross sales, other than sales or returns to wholesalers and/or suppliers, for the preceding calendar month and payment thereof shall be made on or before the fifteenth (15th) day following such month.

(3) Adjusted gross sales shall mean total disposition of alcoholic beverages, less the following:

(a) Sales to other wholesalers.

(b) Returns to distillers or other suppliers, or exports authorized by suppliers to other than distillers.

(c) Damaged or deteriorated merchandise which has been destroyed as otherwise provided herein and house breakage on wines and on distilled spirits on which identification stamps remain identifiable and federal strip stamp is intact.

(d) Sales, gifts or distribution of any wine used solely for sacramental purposes.

(e) Beverages accidentally damaged or destroyed on business premises by fire or other acts of nature beyond his control or other accountable losses.

(f) Sales to qualified military installations of the federal government.

(4) Restrictions on classifying adjusted gross sales. The following procedure shall be observed in handling and accounting for tax exempt disposition of alcoholic beverages:

(a) Before tax free sales to other wholesalers may be consummated, the consignor’s records must properly indicate sales invoices and the consignee’s records must indicate receipt of such merchandise.

(b) Before a wholesaler may be relieved of tax liability for products returned to distillers or other suppliers, or exports authorized by suppliers, it shall be the responsibility of any such wholesaler to furnish the Department of Revenue with:

Documentary evidence of authorization from the supplier for return or export of the specific products by such wholesaler;
A copy of the bill of lading or similar document regarding such products return or export;
An affidavit from the person or firm receiving the returned or exported products which includes:

(i) The kind, quality and size or the products received; and (ii) For distilled spirits, that the identification stamps upon those products have been or will be destroyed or obliterated.

Documentary evidence from the supplier that credit has been afforded the wholesaler for the products described in “(3)” above.

The documentation for any returned products or exports for which tax relief is claimed, during any tax reporting month, shall be attached to a tax return and submitted to the Department of Revenue as part of that return. No wholesaler may be relieved of tax liability for any products returned or exported during any month until all required documentation applicable to such returns or exports is attached to a single tax return and received by the Department of Revenue.

(c) Before a wholesaler may be relieved of tax liability for house breakage, it shall be his responsibility to obtain the assistance of one Department of Revenue representative who will observe the broken containers for which exemption is being sought and furnish a certificate stating the quantity and size containers of distilled spirits on which the identification stamp remains identifiable with the federal strip stamp or manufacturer’s seal intact, and, with reference to wine, furnish a certificate stating the quantity and size containers on which the crown, cap, seal or cork remain intact and unbroken. Under no conditions may credit be claimed or given for tax applicable to broken containers of distilled spirits when the identification stamp is not identifiable and the federal strip stamp or manufacturer’s seal is not intact; nor shall credit be allowed in any instance when the size of the original container cannot be definitely determined. In the event the wholesaler shall have unsalable merchandise to remove from inventory, tax credit may be given only when one Department of Revenue representative witnesses the complete destruction of the contents and the bottles, and makes certification as required herein for other breakage.

(d) Before tax-free sales of wine for sacramental purposes may be made, sales invoices applicable to such sales must be signed by an authorized person designated by a letter from an official of the church or synagogue receiving the wine and such authorized person’s signature must be filed at the same time with the Department of Revenue as a matter of record.

(e) Before a wholesaler may be relieved of tax liability for beverages accidentally damaged or destroyed on business premises by fire or other acts of nature beyond his control or other accountable losses, the wholesaler shall be required to furnish documentary evidence by which the Department of Revenue may reasonably determine that a specific loss has occurred.

(f) Before a wholesaler may be relieved of tax liability for products sold to a fort, base, camp or post of the armed forces of the United States or post exchange, ship-service store, commissary or mess operated by the US. armed forces, the following conditions shall be required:

The commanding officer of a qualified military installation has furnished the Commissioner of Revenue a letter designating an officer or civilian employee who possesses managerial authority over the post exchange, ship service store, commissary or mess as a person authorized to sign invoices acknowledging receipt of such products within the military installation with respect to which alcoholic beverages tax credit is being sought and such letter has been signed by the commanding officer. The signature of such designated officer or civilian employee shall be filed at the same time with the Department of Revenue as a matter of record;
The officer or civilian employee designated in each instance, as provided in “(1)” above, has signed each invoice acknowledging receipt of the products and also signed a certificate as prescribed by the Commissioner of Revenue summarizing all receipts of such products during a given month and certifying that the products were sold to, and delivered to a post exchange, ship-service store, commissary, mess or other such exempt agency, by a Tennessee wholesaler and that said products will be sold by such instrumentality of the government for consumption within the geographical boundaries of the government installation subject to regulations by the commanding officer of such installation;
A copy of all such sales invoices and the applicable certificate both duly signed as required in “(2)” above, shall accompany the monthly report to substantiate any credit being sought, otherwise the wholesaler shall be liable for tax applicable to such products.

(5) Each Tennessee licensed wholesaler must include in his inventory merchandise in an amount equal only to that merchandise which was actually received. In such instances where a shipment received is less than the stated amounts on the invoice, an exception report from the common carrier shall be filed with the monthly report to substantiate any difference in actual receipt quantities and stated invoice quantities. Inventories may be adjusted accordingly contingent upon the wholesaler furnishing the Department within ninety days from date of receipt of shipment evidence of payment for such shortage by the carrier or insurance company. Otherwise, the wholesaler shall be liable for tax applicable to total invoiced quantities.

History

Authority: T.C.A. §§ 57-3-303, 57-3-307, and 67-1-102.
Administrative History: Original rule certified June 7, 1974. Amendment filed June 4, 1974; effective July 4, 1974. Amendment filed November 2, 1978; effective January 1, 1979. Amendment filed August 31, 1979; effective October 15, 1979. Amendment filed January 29, 1985; effective April 16, 1985. Amendment filed June 27, 1990; effective August 11, 1990.

Tenn. Comp. R. & Regs. 1320-04-06-.03 BOND AND REPORTS REQUIRED

(1) Bond of Wholesaler - Any wholesaler beginning business on or after July 1, 1970, shall be required to file with the Commissioner of Revenue a cash or surety bond with a solvent company qualified to do business in this state, in an amount no less than $75,000 for an initial period of four (4) months and at the end of such period, the bond shall be adjusted for the balance of the twelve (12) month period or until the following July 1, whichever occurs first, in an amount no less than one hundred ten percent (110%) of the average monthly tax liability incurred during the initial four (4) full months period engaged in business. If at July 1, following beginning of business any wholesaler shall have engaged in business for less than twelve (12) full months, he shall ascertain the amount of his renewal bond for the ensuing year by dividing his total tax liability incurred during such period by the number of months he has engaged in business to arrive at his monthly average tax liability. This amount shall then be multiplied by one hundred ten percent (110%) to arrive at the amount of bond to be posted for the ensuring year.

(2) Wholesaler Reports.

(a) Each wholesaler on or before the 15th day of each month shall file with the Tennessee Department of Revenue a recapitulation of all business transacted for the preceding month on forms prescribed by the Department. Incomplete or altered returns shall be deemed to be delinquent and susceptible to statutory penalty the same as failure to make a return.

All returns, as required in (a) above, shall state amounts of all alcoholic beverages in terms of the metric system of capacity measurement as follows:

(i) 1.000 milliliters = 1 liter 2. All alcoholic beverages in containers having a capacity measured only in U.S. measure which are disposed of after the effective date of this rule shall be converted to metric capacity measurement for the purpose of reporting the disposition of such beverages to the Department of Revenue and paying tax thereon.

(i) In order to convert an amount of alcoholic beverages disposed of from U.S. capacity measure to metric capacity measure for the purpose of reporting such disposition to the Department of Revenue, the amount of alcoholic beverages requiring conversion which are disposed of during a reporting period shall first be converted to gallons and the resulting number of gallons, or portion thereof, shall then be multiplied by the conversion factor of 3.7854.

All alcoholic beverages in containers either having a capacity measured both in U.S. capacity measure and metric capacity measurement or having a capacity measured only in metric capacity measurement which are disposed of after the effective date of this rule shall be reported and taxed on the basis of the metric capacity measurement indicated on the container.
All amounts required to be entered on returns submitted to the Department of Revenue shall be computed to four (4) decimal places. The actual payment of the amount of tax shown to be due on the return, however, should be rounded to the nearest cent.

(b) Each wholesaler on or before the 15th day of each month shall file with the Tennessee Department of Revenue a report covering the sale of alcoholic beverages made by him during the preceding month and enclose payment of tax at the rate of l5¢ per case required by T.C.A. § 57-6-201. For purpose of assessing the tax, a case is deemed as set out in rule 1320-04-06-.04 following. Incomplete or altered returns shall be deemed to be delinquent and susceptible to statutory penalty the same as failure to make a return.

History

Authority: T.C.A. §§ 57-3-303, 57-3-307, and 67-1-102.
Administrative History: Original rule certified June 7, 1974. Amendment filed November 2, 1978; effective January 1, 1979.

Tenn. Comp. R. & Regs. 1320-04-06-.04 WHOLESALE CASE TAX

(1) For the purpose of reporting and paying the tax set out at T.C.A. § 57-706, the following amounts will constitute a case of alcoholic beverages:

(a) The following amounts constitute a case of distilled spirits:

Three (3) containers with a capacity of more than 64 ounces each but not exceeding 128 ounces each.
Six (6) containers with capacity of more than 32 ounces each but not exceeding 64 ounces each.
Twelve (12) containers with a capacity of more than 25.6 ounces each but not exceeding 32 ounces each.
Twelve (12) containers with a capacity of more than 16 ounces each but not exceeding 25.6 ounces each.
Twenty-four (24) containers with a capacity of more than 12.8 ounces each but not exceeding 16 ounces each.
Twenty-four (24) containers with a capacity of more than 8 ounces each but not exceeding 12.8 ounces each.
Forty-eight (48) containers each with a capacity of 8 ounces.
One hundred twenty (120) containers each with a capacity of 1.6 ounces or less.
Six (6) containers each with a capacity of 1.75 liters.
Twelve (12) containers each with a capacity of 1 liter.
Twelve (12) containers each with a capacity of 750 milliliters.
Twenty-four (24) containers each with a capacity of 500 milliliters.
Forty-eight (48) containers each with a capacity of 200 milliliters.
One hundred twenty (120) containers each with a capacity of 50 milliliters.

(b) The following amounts constitute a case of wine:

Four (4) containers with a capacity of more than 64 ounces each but not exceeding 128 ounces each.
Six (6) containers with a capacity of more than 32 ounces each but not exceeding 64 ounces each.
Twelve (12) containers with a capacity of more than 25.6 ounces each but not exceeding 32 ounces each.
Twelve (12) containers with a capacity of more than 16 ounces each but not exceeding 25.6 ounces each.
Twenty-four (24) containers with a capacity of more than 12.8 ounces each but not exceeding 16 ounces each.
Twenty-four (24) containers with a capacity of more than 8 ounces each but not exceeding 12.8 ounces each.
Forty-eight (48) containers each with a capacity of 8 ounces or less.
Four (4) containers each with a capacity of 3 liters.
Six (6) containers each with a capacity of 1.5 liters.
Twelve (12) containers each with a capacity of 1 liter.
Twelve (12) containers each with a capacity of 750 milliliters.
Twenty-four (24) containers each with a capacity of 375 milliliters.
Forty-eight (48) containers each with a capacity of 187 milliliters.
Sixty (60) containers each with a capacity of 100 milliliters.
The number of any containers with a capacity of 2 liters or with a capacity of more than 3 liters necessary to equal 12 liters of wine.

(2) Cases will be determined on a fractional basis of the amounts specified above (for example, two-thirds (2/3) of a case of fifths with one-third (1/3) case of pints constitute a case or twothirds (2/3) of a case of fifths with one-third (1/3) case of five hundred (500) milliliter containers constitute a case).

(3) Cases may be of assorted sizes and brands of alcoholic beverages. Distilled spirits and wine may not, however, he mixed in the same case.

History

Authority: T.C.A. §§ 57-132, 57-136, and 67-101.
Administrative History: Original rule certified June 7, 1974. Amendment filed November 2, 1978; effective January 1, 1979.

Tenn. Comp. R. & Regs. 1320-04-06-.05 DEFINITIONS-BRAND REGISTRATION

(1) Unless otherwise provided, definitions of terms used in these rules shall be as set out at T.C.A. Section 57-3-101.

(2) Each and every distilled spirits or wine product bearing a distinct “brand name” or “trade name” shall be considered a separate “brand” for purposes of these regulations. Brand name or trade name shall mean:

(a) For domestic wine - The name of the bottler or packer required to appear on the container label by the regulations of the Bureau of Alcohol, Tobacco and Firearms, Department of the Treasury.

(b) For imported wine - The name of the permittee who is the importer, agent, sole distributor, or other person responsible for the importation, whose name is required to appear on the container label by the regulations of the Bureau of Alcohol, Tobacco and Firearms, Department of the Treasury.

(c) For distilled spirits bottled in the United States - The name or trademark of the product appearing on the container label.

(d) For imported distilled spirits not bottled in the United States - The name or trademark of the product appearing on the container label.

(e) Within the group or line of wine or distilled spirits products bearing a distinct brand name or trade name as defined above, products which fall within separate classes and subclasses as defined in the standards of identity of the several classes of wine and distilled spirits promulgated by the Bureau of Alcohol, Tobacco and Firearms, Department of the Treasury, shall be considered separate brands for purposes of these regulations. The separate brands for wine and distilled spirits shall be designated as follows:

For Wine - (i) Grape Wine (I) Table Wine (II) Dessert Wine (ii) Sparkling Grape Wine (I) Champagne (II) Champagne Style (III) Crackling Wine (iii) Carbonated Grape Wine (iv) Citrus Wine (I) Citrus Table Wine (II) Citrus Dessert Wine (III) Other Citrus Wine (v) Fruit Wine (I) Fruit or Berry Table Wine (II) Fruit or Berry Dessert Wine (III) Other Fruit Wine (vi) Wine from other agricultural products (I) Table Wine from other agricultural products (II) Dessert Wine from other agricultural products (III) Raisin Wine (IV) Sake (V) Wine from miscellaneous other agricultural products (vii) Aperitif Wine (I) Aperitif Wine (II) Vermouth (viii) Imitation and Substandard Wine (I) Imitation Wine (II) Substandard Wine (ix) Retsina Wine 2. For Distilled Spirits (i) Neutral Spirits or Alcohol (I) Vodka (II) Grain Spirits (ii) Whiskey (I) Bourbon Whiskey (II) Whiskey distilled from bourbon (III) Light Whiskey (IV) Blended Whiskey (V) Blended Straight Whiskey (VI) Spirit Whiskey (VII) Scotch Whiskey (VIII) Irish Whiskey (IX) Canadian Whiskey (iii) Gin (iv) Brandy (I) Fruit Brandy (II) Cognac (III) Dried Fruit Brandy (IV) Lees Brandy (V) Pomace Brandy (VI) Residue Brandy (VII) Neutral Brandy (VIII) Substandard Brandy (v) Blended Applejack (vi) Rum (vii) Tequila (viii) Cordials and Liqueurs (I) Sloe Gin (II) Rye or Bourbon liqueurs (III) Rock and rye or rock and bourbon or rock and brandy (IV) Dry cordials or liqueurs (ix) Flavored Distilled Spirits (x) Imitations (xi) Geographical Designations (xii) Products without geographical designations but distinctive of a particular place (f) A change in the size of a label or principal display panel or change in the designated fluid contents on containers with varying fluid capacity shall not constitute separate brands.

(g) A change in the wording on a label or panel designating alcoholic content shall no constitute a separate brand.

(h) A change in the wording label or panel on a container of wine designating; vintage year shall not constitute a separate brand.

(i) Any brands of distilled spirits, as listed in (2)(e)2.(ii) and the items under such subpart, may be further divided into additional brands if any products within a brand name possess, according to trade and consumer understanding, marketing images separate and distinct from other products within the brand name.

(3) Importer - A person who brings, or causes to he brought, alcoholic beverages, manufactured in a foreign country, from a foreign country into the United States.

History

Authority: T.C.A. § 57-3-301.
Administrative History: Original rule filed January 15, 1980; effective February 29, 1980.

Tenn. Comp. R. & Regs. 1320-04-06-.06 TAX ON INTRODUCTION OF BRANDS

(1) Every domestic manufacturer and every importer of any brand of alcoholic beverage sold in this state shall, as a condition precedent to the introduction or sale of a brand of alcoholic beverage in this state, pay proper tax on all brands distributed by him in this state file all required documents with the Department of Revenue and meet all other requirements of these rules for registration of brands sold by him.

(2) The privilege tax year shall be from June 1 through May 31 each year. Payment of proper tax and filing of all required documents for registration shall be due May 1 of each year and shall be delinquent after May 31 each year.

(3) Every manufacturer or importer distributing brands of alcoholic beverages in this state as of May 22, 1979, shall, on or before 30 days after these rules become effective, pay the proper amount of brand registration tax to the Department of Revenue and properly register each brand distributed by them. Such initial registration and tax payment shall be effective for the privilege of distributing alcoholic beverages in this state during the privilege tax year of June 1, 1979 through May 31, 1980. The amount of this initial tax payment shall be based on the number of cases of each manufacturer’s or importer’s brand sold at wholesale in this state during the twelve (12) months immediately preceding June 1, 1979.

(4) After the initial tax payment and registration as set out in paragraph (3), each manufacturer or importer distributing registered brands in this state shall, on or before May 31 of any calendar year, register and pay the applicable amount of tax to the Department of Revenue for the privilege of distributing brands of alcoholic beverages in this state during the next subsequent privilege tax year. In addition to any other penalty provided by law, any manufacturer or importer deficient or delinquent in the payment of any tax on any brand for any tax year shall not be allowed to distribute in this state any brand(s) manufactured or imported by him until such deficiency or delinquency is paid.

(a) Manufacturers and importers distributing registered brands of alcoholic beverages in this state and desiring to cease such distribution shall, in order to avoid additional tax liability, remove, prior to September 1 of the succeeding tax year, to a point outside the state, all containers of such brand(s) held by licensed wholesale distributors in this state. If any containers of any brand(s) of alcoholic beverages are held by Tennessee licensed wholesalers on or after September 1 of any privilege tax year, the privilege of distribution of that brand in this state, upon which the tax is based, shall be deemed to have been exercised, and the tax shall be due. If a manufacturer or importer properly ceases to distribute his brand(s) of alcoholic beverages in this state by removing all containers of such brand(s) from Tennessee licensed wholesalers on or after September 1 of any privilege tax year, no proportional refund of tax paid for the privilege of operating during such year shall be made.

(b) No licensed wholesale distributor in this state shall order, receive, accept or offer for sale any brand of alcoholic beverages in this state unless such brand has been properly registered and proper tax paid to June 1 of any year. Provided, however, any licensed wholesale distributor in this state selling a properly registered brand of alcoholic beverages, which the manufacturer or importer of such brand desires to discontinue in this state, may continue to sell, through June 30 of the succeeding tax year, any containers of such brand in his possession as of June 1 of such year.

(c) Any containers of alcoholic beverages, on which tax has not been paid or which are not allowed to be distributed in this state because of a deficient or delinquent tax payment, not sold or removed from the state as provided above are contraband and shall be seized and sold by the Department of Revenue pursuant to the provisions of T.C.A. §§ 12-2-201 through 12-2-209. Applicable brand registration tax shall be added to the price of any such goods sold.

(5) Any manufacturer or importer desiring to introduce a brand(s) of alcoholic beverage in this state which has not previously been distributed in this state, shall register such brand(s) and pay tax of $250 for each brand to be registered. The $250 tax payment due on the initial introduction of a brand(s) in this state shall, however, be prorated on the basis of 1/12 of the tax amount for each month or portion thereof remaining in the privilege tax year subsequent to the date of registration.

(a) Any such manufacturer or importer paying a prorated tax amount on his initial registration of a brand(s) in this state shall, for his subsequent first full privilege tax year, pay tax based on the average monthly number of cases of his brand(s) sold at wholesale in this state during his initial partial privilege tax year times twelve (12).

(b) The proper amount of tax due from any manufacturer or importer for any privilege tax year subsequent to such manufacturer’s or importer’s first full privilege tax year shall be based on total wholesale sales of such person’s brand(s) during the twelve (12) months immediately preceding the payment of tax.

History

Authority: T.C.A. §§ 57-3-301 and 67-1-102.
Administrative History: Original rule filed January 15, 1980; effective February 29, 1980. Amendment filed October 19, 1987; effective December 3, 1987.

Tenn. Comp. R. & Regs. 1320-04-06-.07 REGISTRATION AND TRANSFER OF BRANDS

(1) In addition to paying applicable tax due each year, any manufacturer or importer distributing brands of alcoholic beverages in this state shall file with the Department of Revenue the following:

(a) Copies of all written contracts or renewal agreements with Tennessee wholesalers making sales of brands of alcoholic beverages distributed in this state by such manufacturer or importer.

(b) Any report or other forms required by the Commissioner of Revenue.

(c) A copy of the label from each brand of alcoholic beverages distributed in this state and copies of the approved ATF-Form 1649 of the Bureau of Alcohol, Tobacco and Firearms. Copies of the labels or forms need not be filed each year but shall be filed upon initial registration of such brand and at any time any change is made in such label or an additional filing is made.

(2) If any manufacturer or importer fails to register or registers improperly any brand, the Department of Revenue shall notify the manufacturer or importer to cease distribution in this state until such brand(s) is registered properly and also shall notify the Alcoholic Beverage Commission to suspend any permit issued to any such manufacturer or importer pursuant to the provisions of T.C.A. §§ 57-3-601 et seq. until such brand is registered properly. The following goods are contraband and shall be seized and sold by the Department of Revenue pursuant to the provisions of T.C.A. §§ 12-2-201 through 12-2-209 with applicable brand registration tax added to the price of any such goods sold:

(a) Any products located in this state of any manufacturer or importer who fails to register or registers improperly any brand(s) that are not disposed of within 30 days of the date of notification as provided above.

(b) Any products of any manufacturer or importer who fails to register or registers improperly any brand(s) that are shipped into this state after the date of notification as provided above.

(3) No manufacturer or importer or any successor to a manufacturer or importer shall be permitted to transfer a brand from one wholesale distributor to another or to terminate a contract prior to the expiration of its term without the written approval of the Commissioner.

Requests for approval of a transfer or termination must be submitted in writing, and a copy of said request must at the same time be sent to the wholesale distributor in whose name the brand is then registered.

(a) Upon receipt from a manufacturer or importer or successor of a request to terminate a contract or to transfer a brand, the Department shall notify the requesting party and the wholesale distributor in whose name the brand is then registered that the parties have thirty (30) days from the date of receipt of the letter in which to cure any deficiencies.

The brand shall remain in status quo during the thirty-day period. If the manufacturer or importer or successor wishes to pursue its request for a termination or transfer at the end of the thirty-day period, it must notify the Department in writing that it wishes to proceed with the termination or transfer request.

(b) Upon receipt of the request to proceed, the Commissioner will make a preliminary determination as to whether sufficient evidence has been offered to establish a prima facie case of good cause, asserted in good faith, to terminate the contract or to transfer the brand.

Upon the Commissioner’s preliminary determination either to approve or disapprove the contract termination or brand transfer, the Department shall so notify the manufacturer or importer or successor, the wholesaler in whose name the brand is then registered, and all other affected parties by letter. The parties shall then have an opportunity to request a hearing before the Department’s decision to approve the determination or transfer becomes final. The parties shall have ten (10) days from the date of receiving notice in which to request a hearing.
(i) If a hearing is requested and held, the termination of contract or transfer of brand will not take effect unless and until a determination is made by the hearing officer to approve the termination or transfer.

(ii) If determination is made by the hearing officer to disapprove the termination or transfer, the brand shall remain in status quo. Thereafter, failure on the part of any manufacturer or importer or successor to ship his wholesale distributor a reasonable amount of the brand sought to be terminated or transferred will be grounds for a revocation of that manufacturer’s or importer’s or successor’s nonresident seller’s permit or winery license.

(iii) Absent a request for a hearing, the Commissioner’s preliminary determination concerning the termination of the contract or the transfer of the brand will become final and will take effect when the ten (10) dayperiod has elapsed.

(c) Approval for a termination of contract or a transfer of brand shall be given by the Commissioner only if it is found by him that the termination or transfer is being proposed in good faith and for good cause and for no other reason.

“Good cause” means:

(i) Failure by a wholesale distributor to comply substantially with the requirements imposed or sought to be imposed upon him by the manufacturer, importer or successor, which requirements are not discriminatory as compared with the requirements imposed on other similarly situated wholesale distributors either by their terms or in the manner of their enforcement, and which requirements are not in violation of any law or regulation;

(ii) The failure by the wholesale distributor to act in good faith and in a commercially reasonable manner in carrying out the terms of the contract;

(iii) Voluntary abandonment of the contract;

(iv) Conviction of the wholesale distributor in a court of competent jurisdiction of an offense punishable by a term of imprisonment in excess of one (1) year;

(v) Any act by a wholesale distributor which substantially impairs the manufacturer’s importers or successor’s trademark or trade name;

(vi) The institution of insolvency or bankruptcy proceedings by or against a wholesale distributor, or any assignment or attempted assignment by a wholesale distributor of the contract or the assets of the distributorship for the benefit of creditors;

(vii) Failure of the wholesale distributor to pay to the manufacturer, importer or successor within thirty (30) days after receipt of notice any uncontested sums past due the manufacturer, importer or successor and relating to the contract; or (viii) Failure of the wholesale distributor to comply with federal, state or local law or regulations applicable and material to the operation of the distributorship, which could reasonably impair the wholesaler distributor’s continued future performance.

“Good faith” means honesty in fact in the conduct or transaction concerned.

History

Authority: T.C.A. §§ 47-25-1503, 57-3-301, 67-1-102, and 67-1-107 and Opinion of the Attorney General No. 90-65.
Administrative History: Original rule filed January 15, 1980; effective February 29, 1980. Amendment filed October 19, 1987; effective December 3, 1987. Amendment filed October 16, 1990; effective November 30, 1990.

Chapter 1320-04-07 Coal Severance Tax

Tenn. Comp. R. & Regs. 1320-04-07-.01 ASSESSMENT OF TAX

(1)The owner of coal products shall become liable for the tax imposed at T.C.A. §67-5902 at the time the coal products are ready for sale, regardless of whether such coal products have been processed prior to sale or not.

(2)The basis for the computation of the tax shall be the total weight of the coal products sold regardless of whether the coal products are sold in their processed or unprocessed state.

(3)In addition to any other information the commissioner may require and for the purpose of ascertaining the amount of tax due, all persons subject to the tax shall maintain, for a period of four (4) years, records showing the total weight of coal products sold from each production unit, and the total weight of coal products severed from the earth at each production unit ant the total amount of any royalties paid on coal products severed from the earth at each production unit. These records shall be open to inspection by the commissioner or his agents at any time during normal business hours.

History

Authority: T.C.A. §67-101.
Administrative History: Original rule filed June 13, 1979; effective October 9, 1979.

Chapter 1320-04-08 Litigation Taxes

Tenn. Comp. R. & Regs. 1320-04-08-.01 MULTIPLE CRIMES AND MULTIPLE DEFENDANTS

(1)For the purpose of collecting the taxes imposed at T.C.A. §40-24-107, multiple defendants convicted of the same crime of any nature at the same trial shall each severally be liable for the payment of the privilege taxes provided for at T.C.A. §40-24-107, as applicable in such court, and the clerk of the court shall collect the applicable privilege tax, as provided for at T.C.A. §40-24-107, from each defendant.

(2)For the purpose of collecting the taxes imposed at T.C.A. §40-24-107, a defendant convicted of multiple crimes of any nature at the same trial shall be liable for the payment of the privilege taxes provided for at T.C.A. §40-24-107, as applicable in such court, for each crime of any nature of which he is convicted. The clerk of the court shall collect an amount of money from any such person equal to the number of crimes of any nature of which he is convicted times the amount of the privilege tax provided at T.C.A. §40-24-107, as applicable in such court.

(3)No litigation tax shall be due or collected, pursuant to this rule, for:

(a)Violations of the motor vehicle laws, unless such violation is covered by the provisions of title 55, chapter 10, part 4 relating to driving while intoxicated or T.C.A. §55-10-205, relating to reckless driving, if such reckless driving was proximately caused by the use of an intoxicant; or (b)Convictions for crimes for which the law imposes as a maximum punishment a fine of less than five hundred dollars ($500) and no imprisonment, provided that this exemption shall not be based on whether the person convicted of such crime actually receives the sentence, but rather shall be based on the maximum possible sentence imposed by the law.

History

Authority: T.C.A. §§40-24-107 and 67-4-203.
Administrative History: Original rule filed February 5, 1980; effective May 29, l980. Amendment filed March 5, 1981; effective June 29, 1981. Amendment filed July 29, 1982; effective October 13, 1982. Amendment filed March 9, 1990; effective April 23, 1990. 1320-4- 8-.02 DEFINITIONS. (1)The term “violations of the motor vehicle laws”, as used in this chapter and in T.C.A. §40-24-107, shall mean any violation of Title 55 of the Tennessee Code Annotated. Authority: T.C.A. §§40-24-107 and 67-4-203.

Chapter 1320-04-09 Privilege Tax on Transfers of Realty

Tenn. Comp. R. & Regs. 1320-04-09-.01 VALUATION OF LIFE ESTATES, RELEASES OF LIFE ESTATES TO OTHER THAN

REMAINDERMEN AND TRANSFERS OF REMAINDERS OR REVERSIONARY INTERESTS.

(1)Any transfer of an interest in property consisting of a life estate, a remainder, a reversionary interest, or the release of a life estate to other than a remainderman, which is subject to taxation pursuant to Item S of T.C.A. §67-4102, is to be valued as follows:

(a)If the interest is the right of a person, for his life, or for the life of another person, to use nonincome producing property, or to receive the income of certain property, the value of the interest is obtained by multiplying the value of the property by the figure in column (3) of Table A (1) or A (2), whichever is appropriate, appearing at 26 C.F.R. §20.2031-10 (f) opposite the number of years nearest to the actual age of the measuring life.

(b)If the interest is the release of the right of a person for his life or for the life of another person to a person other than a remainderman, to use non-income producing property or to receive the value of certain property, the value of the interest is obtained by multiplying the value of the property by the figure in column (3) of Table A (1) or A (2), whichever is appropriate, appearing at 26 C.F.R. 20.2031-10 (f) opposite the number of years nearest to the actual age of the measuring life.

(c)If the interest is a remainder or reversionary interest in property, the value of the interest is obtained by multiplying the value of the property by the figure in column (4) of Table A (1) or A (2), whichever is appropriate, appearing at 26 C.F.R. §20.2031-10(f) opposite the number of years nearest to the actual age of the person whose life measures the preceding estate.

(2)The filing of an instrument evidencing the transfer of an interest in property consisting of a life estate, release of a life estate to a person other than a remainderman, or a transfer of a remainder or a reversionary interest, which is subject to taxation, pursuant to Item S of Section 67-4102, shall be accompanied by an affidavit, made under oath and signed by the grantee, which shall state, as of the date of the filing with the register of the county, the following:

(a)The value of the property;

(b)The number of years nearest to the actual age of measuring life, or the number of years nearest to the actual age of the person whose life estate measures the preceding estate, whichever is appropriate; and (c)The value of the interest transferred.

(3)The failure to file an affidavit as required herein shall create the presumption that the value of the interest in the property consisting of a life estate, release of life estate, remainder or reversionary interest is the same as the value of the property.

(4)Definitions (a)26 C.F.R. §20.2031-10(f) shall mean that regulation as in effect on November 1, 1982.

History

Authority: T.C.A. §§67-101 and 67-4302.
Administrative History: Original rule filed September 7, 1983; effective December 14, 1983.

Chapter 1320-04-10 Coin-Operated Amusement Device Tax Rules

Tenn. Comp. R. & Regs. 1320-04-10-.01 DEFINITIONS

(1)Unless otherwise provided, definition of terms used in these rules shall be as set out at T.C.A. §67-1- 504(a).

(2)The term "coin-operated amusement device" does not include a device such as a blood pressure machine used for health, not amusement, purposes.

(3)A device is "intended for use" if it is in a location open to the public. A device is not "intended for use" if it is in storage, or if the power cord of the device is removed and put inside the device with the coin slot covered.

(4)A device is not "coin-operated" if the coin-mechanism is removed or covered to obstruct the entrance of coins or tokens in such manner as to be apparent to the public that the machine is not a coinoperated device.

(5)Nothing in these rules shall be construed to legalize gambling devices, notwithstanding the payment of the tax provided for in T.C.A. §67-4-504.

History

Authority: T.C.A. §§67-4-203 and 67-1-102.
Administrative History: Original rule filed December 16, 1983; effective January 15, 1984.

Tenn. Comp. R. & Regs. 1320-04-10-.02 REGISTRATION AND RECORDS

(1)Every owner of a coin-operated amusement device which is in use or is intended for use shall register with the Department of Revenue, obtain a taxpayer identification number, and pay the tax specified in T.C.A. §67-4-507 for each device for the privilege of operating, leasing, subleasing or consigning such device in this state.

(2)The tax shall be administered and collected on an annual basis for the year beginning on July l and ending on June 30. The tax shall be paid and a return filed on forms provided by the Department of Revenue on or before July 20 of each year, or any part thereof, in which the privilege is exercised.

The tax shall not be prorated, except as provided by T.C.A. §67-4-507.

(3)The following records shall be maintained by the owner, shall be available for audit and inspection by the Department of Revenue during regular business hours, and shall be retained for a period of four years:

(a)dates of acquisition and disposition of devices;

(b)names and addresses of persons to whom devices are leased, subleased or consigned; and (c)a running inventory of the locations and movements of each device.

History

Authority: T.C.A. §§67-4-203, 67-4-507, and 67-1-102.
Administrative History: Original rule filed December 16, 1983; effective January 15, 1984. Amendment filed November 22, 1989; effective January 6, 1990.

Tenn. Comp. R. & Regs. 1320-04-10-.03 STAMPS

(1)A stamp shall be issued by the Department of Revenue to evidence payment of the tax specified by T.C.A. §67-4-504, for each device. An identifiable whole stamp must be affixed to each device in such a manner as to be clearly visible for inspection.

(2)A stamp shall not be transferred from one owner to another. If a device is sold, the owner must remove the stamp from the device.

(3)In the event any stamp is mutilated or damaged, the owner of the stamp may apply to the privilege tax

section of the Department of Revenue for replacement. Application for the replacement stamp shall be made under oath on a form to be provided by the department and must be accompanied by the mutilated or damaged stamp and a fee of three dollars ($3.00). If the department determines that the person applying for the replacement stamp is the owner of the stamp, and if a sufficiently large portion of the mutilated or damaged stamp is surrendered to allow the department to identify the stamp number, a replacement stamp shall be issued. If a stamp is stolen, lost, or so damaged as to be unidentifiable, a replacement stamp will not be issued and a new stamp must be purchased.

History

Authority: T.C.A. §§67-4-203 and 67-1-102.
Administrative History: Original rule filed December 16, 1983; effective January 15, 1984. Amendment filed November 22, 1989; effective January 6, 1990.

Tenn. Comp. R. & Regs. 1320-04-10-.04 CONFISCATION OF CONTRABAND

(1)In all cases of seizure of any device subject to confiscation under the provisions of T.C.A. §67-4-504, written notice shall be given by the Department of Revenue to the person from whom the confiscation was made, and to all others with a legal interest in the property confiscated who are either made known to the Department of Revenue or who, by a reasonable examination of public records of titles and liens, should have been discovered. If the owner is unknown or cannot reasonably be ascertained, leaving the written notice at the location of the seizure constitutes good and reasonable notice of the confiscation. The notice shall state: a description of the property confiscated, the reason for confiscation, the method for seeking recovery, the time limit for seeking recovery, and the result of failure to seek or obtain recovery by the designated method.

(2)All devices seized and forfeited shall be sold by the Department of General Services pursuant to T.C.A. §§12-2-201 through 12-2-209.

(3)Any money or coins found or recovered in any device which has been seized and forfeited to the State of Tennessee under the provisions of T.C.A. §67-5-504, are likewise forfeited to the State of Tennessee and shall be paid into the state treasury.

(4)Any person claiming an interest in a confiscated device may, within ten (10) days from the date of seizure, file with the Commissioner of the Department of Revenue a claim in writing, requesting a hearing pursuant to T.C.A. §67-1-105 and stating his interest in the articles seized. At any such hearing, the initial burden shall be on the department to show by a preponderance of the evidence that the property in question was of such nature or was used in such manner as to be declared as contraband. Upon meeting that burden the property shall be forfeited unless the claimant shall provide that he is nevertheless qualified to recover the property in question.

(5)The action of the Commissioner of Revenue may be reviewed pursuant to the Uniform Administrative Procedures Act, T.C.A. §5-4-301 et seq.

History

Authority: T.C.A. §§67-4-203 and 67-1-102.
Administrative History: Original rule filed December 16, 1983; effective January 15, 1984. Amendment filed November 22, 1989; effective January 6, 1990.

Chapter 1320-05-01 State Sales and Use Tax Rules

Tenn. Comp. R. & Regs. 1320-05-01-.01 AUCTIONEERS—AGENTS—FACTORS

Every factor, auctioneer, or agent acting for any unknown or undisclosed principal entrusted with any bill of lading, customhouse permit, or warehouse receipt for delivery of tangible personal property, or entrusted with possession of any such personal property for the purpose of sale, shall be deemed the owner thereof, and, upon the sale at retail of such property, shall be required to file a return of the receipts of sales and pay a tax thereon. A sale by such factor, auctioneer or agent, when acting for a known or disclosed principal shall be taxable to the principal. The same rule applies to lien holders, such as storage men, pawnbrokers and artisans.

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-05-01-.02 ARTICLES TAKEN IN TRADE OR “TRADE-INS”

(1) When an item of tangible personal property is taken in trade as a credit or part payment on the sale of new or used articles, the Sales and Use Tax shall be computed and paid on the net difference between the sales price of the new or used article sold and any credit actually given for the used article accepted in trade. In cases where a credit is given for property which is owned to be applied to property which is being leased, the tax will apply to any consideration after the amount of credit given is consumed, and the lessor actually begins making charges for the lease or rental of tangible personal property.

(2) Before any credit may be allowed for items taken in trade or trade-ins, the item so traded must be of a like kind and character of that purchased, and indicated as “trade-in” by model and serial number, where applicable, on an invoice given to the customer.

(3) Any tangible personal property involved in a transaction in which a dealer gives a check or cash for tangible personal property, and where the customer agrees to pay the full purchase price of the property being bought, will not be considered as a trade-in, and no credit may be given or allowed for it. In cases where a credit memorandum is given for tangible personal property which is intended to be traded-in on the purchase of new articles of tangible personal property, the provisions of paragraph (2) of this rule must be complied with.

(4) Any recovery which may be received or allowed as a result of insurance may not be considered as a trade-in, and no credit may be given or allowed for such recoveries.

History

Authority: T.C.A. §§ 67-1-102, 67-6-402, and 67-6-510.
Administrative History: Original rule certified June 7, 1974. Amendment filed June 28, 2000; effective September 11, 2000.

Tenn. Comp. R. & Regs. 1320-05-01-.03 AUTOMOBILES, MOTOR VEHICLES, TRAILERS, MOTOR VEHICLE TRAILER

DEALERS.

(1) The Sales and Use Tax shall be paid on the full amount charged for an automobile, trailer, or other motor vehicle without any deductions for labor or other charges for preparing a motor vehicle for sale, freight, federal excise tax, etc. The tax shall likewise be paid on the full amount charged for any accessories or parts sold with and installed on a motor vehicle. Any installation labor in connection with a sale of accessories, or repair labor involved in installing, replacing or repairing parts on a motor vehicle, is subject to the Sales or Use Tax.

(2) The bill of sale for a motor vehicle or trailer shall determine whether the vehicle is subject to or exempt from, the Sales or Use Tax, regardless of who may be named on the invoice.

Unless the bill of sale indicates that the vehicle is being sold direct to another automobile dealer for resale purposes, or to a vendee exempt from paying the Sales or Use Tax, the dealer shall collect the appropriate Sales or Use Tax, except in cases of bona fide interstate commerce, as provided for in this rule and regulation.

(3) Automobile and other motor vehicle and trailer dealers making deliveries of vehicles in bona fide interstate commerce to a customer out of this State, or making sales to persons who will, within three calendar days of purchase, remove the vehicle to another state where it will be registered and used are not required to collect any Sales Tax on any such sales, provided:

(a) The sale is a bona fide transaction in which the dealer, or one of his employees, actually makes delivery of the vehicle to a point outside the State of Tennessee, or the sale is to one who will remove the vehicle to another state within three days and there is no knowledge or reason to believe that the vehicle will be used or brought back into the State of Tennessee.

(b) The dealer prepares, submits, and maintains supporting evidence of delivery to a customer outside the State, or to a purchaser who will remove the vehicle to another state, in the form of an affidavit prepared at the time of the sale containing the following information:

The name and Sales Tax registration number and invoice number of the dealer.
The name and address of the purchaser.
A description of the vehicle.
The date of the sale.
The place and date of delivery.
The name of the dealer, employee, or salesman, or other person making delivery of the vehicle, if delivered out of state.
The place where the vehicle will be registered.
The trade-in allowance given, and the total sales price of the vehicle.
A statement that no Tennessee tax has been paid.
A statement that the information given is true and correct.

This statement shall be executed in triplicate by both the dealer and purchaser.

(c) The dealer, or the employee making the delivery of the motor vehicle out of the State, shall also make an oath and affidavit within two days of delivery, indicating the date and place of delivery, and the name of the person to whom delivery was made. This statement shall be executed in triplicate. The provisions of this paragraph shall not apply in cases of delivery of a new vehicle or trailer from a factory or another dealer out of this State, but the dealer shall indicate this fact on the affidavit required of him and the customer, as indicated above, and maintain records to show that the delivery was made in that manner.

(d) The original and duplicate copies of each of the affidavits referred to in this sub-section shall be submitted with the Sales Tax return reporting such sales to the Department before any credit shall be given or allowed for sales in bona fide interstate commerce.

(4) A dealer selling an automobile or other motor vehicle to a salesman for use as a demonstrator or for any other purpose shall collect the appropriate Sales Tax due on each sale.

(5) A dealer using an automobile or other property for demonstration purposes is not required to pay Use Tax on property so used, providing it is returned to inventory within one hundred twenty (120) days. Use Tax liability will be incurred by a dealer who uses an automobile or other personal property for demonstration purposes more than one hundred twenty (120) days if, when sold, the price of the property is less than the dealer’s cost. The Use Tax will be due on the amount by which the dealer’s cost exceeds the selling Price.

(6) When a trade-in is involved in the purchase of a motor vehicle which has been imported for use in this State, the vehicle which was traded-in for the new vehicle must have been previously registered in the State of Tennessee in the name of the person importing the new vehicle into the State before any credit may be given for the allowance given for the trade-in.

If the trade-in involved in the transaction was not previously registered in this State in the name of the person importing the second vehicle into the State, the trade-in must be considered a part of the purchase price or fair market value of the vehicle at the time it is imported into the State upon which the Use Tax is due and payable. The provisions of this paragraph shall not apply in computing any Sales Tax due and payable.

History

Authority: T.C.A. §§ 67-3045 and 67-101.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-05-01-.04 ADJUSTMENTS, REPLACEMENTS, AND WARRANTIES

(1) When an item of tangible personal property, or any part thereof, is returned to a dealer pursuant to a sales, warranty, or guarantee agreement for repair or replacement, and no charge is made to the customer for the repair or replacement, there is no Sales or Use Tax due. In the event any charge for labor or a part or parts is made to a customer for the repair or replacement, the charge that is actually made to the customer is subject to the Sales or Use Tax.

(2) Dealers buying and using tangible personal property to fulfill sales, warranty, or guarantee obligations to a customer may purchase and use the tangible personal property without the payment of any Sales or Use Tax.

History

Authority: T.C.A. §§ 67-3045 and 67-101.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-05-01-.05 AUTOMOBILE REFINISHERS AND PAINTERS

(1) Charges made by automobile refinishers and painters for refinishing and painting automobiles are subject to the Sales Tax.

(2) Automobile refinishers and painters may buy the materials which actually accompany the work done for their customers without the payment of Sales and Use Tax. Items which are used by the refinishers and painters, but which do not accompany the work done for the customers, are subject to Sales or Use Tax.

History

Authority: T.C.A. §§ 67-1-102, 67-6-102, and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Amendment filed June 28, 2000; effective September 11, 2000.

Tenn. Comp. R. & Regs. 1320-05-01-.06 ARTISTS AND ART DEALERS

Sales of objects of art are sales of tangible personal property, and are, therefore taxable.

History

Authority: T.C.A. §§ 67-101 and 67-3045.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-05-01-.07 CONTRACTORS, LUMP SUM AND COST-PLUS

(1) Contractors engaged in constructing or improving real property, whether on a lump sum or a costplus basis, are purchasers and consumers of the materials used by them, and are required to pay the Sales or Use Tax on such materials or equipment purchased or imported into this State for use in connection with their contracts.

(2) Sales of materials and supplies to owners of real property to be used by them, their agents, or independent contractors in erecting, altering, improving, or repairing buildings, or other improvements, are sales subject to the Sales or Use Tax.

History

Authority: T.C.A. §§ 67-1-102, 67-6-209, and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Amendment filed May 18, 1984; effective June 17, 1984. Amendment filed June 28, 2000; effective September 11, 2000.

Tenn. Comp. R. & Regs. 1320-05-01-.08 CONTRACTOR-DEALERS

(1) Contractors and sub-contractors engaged in the business of erecting, building or otherwise improving, altering and repairing real property for others, and also engaged in the business of selling building materials and supplies to other contractors, consumers, and users, and who may not be able to segregate that portion of the materials and supplies that they will use or consume in the fulfillment of their contracts from that portion of the materials and supplies that they will sell at retail, may give a resale certificate to the seller of the materials and supplies.

(2) Contractor-dealers making sales of tangible personal property shall report all sales made, and all withdrawals from inventory for use as a contractor each month, and pay any applicable Sales or Use Tax due. Any withdrawal from inventory for use as a contractor shall be reported and the tax due thereon shall be paid with the return for the location of the inventory, regardless of the place of use, either in or out of the state.

(3) Suppliers making sales of materials and supplies to contractor-dealers and delivering such materials and supplies to a job site for use, or tagging or marking particular materials and supplies for a particular job being performed by the contractor-dealer, shall collect the applicable Sales or Use Tax on those sales.

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1984.

Tenn. Comp. R. & Regs. 1320-05-01-.09 CASUAL AND ISOLATED SALES

(1) The Sales Tax does not apply to casual and isolated sales by persons who are not, or who have been deemed by the Commissioner not to be engaged in the business of selling tangible personal property or furnishing any of the services subject to the Sales or Use Tax.

The Sales Tax, likewise, does not apply to sales of tangible personal property or taxable services not normally sold by a dealer and which has been used by the dealer prior to the sale; this exemption however, does not apply to any sales of tangible personal property or taxable services bought upon a resale certificate for resale by those persons who hold themselves out as engaged in business, notwithstanding the fact that the sales may be few and infrequent. The exemption also does not apply to the casual and isolated sale of aircraft, vessels and motor vehicles which are required to be registered by the State of Tennessee or the U.S. Government.

(2) Bona fide residents of other states who move to and become residents of Tennessee, and cause to be imported into Tennessee their personal automobiles, personal effects, and household furniture acquired prior to the change of residence, shall not be liable for the Use Tax on these items. This does not apply to any property imported for business use.

(3) Manufacturers, processors, wholesalers, or jobbers engaged in the business of distributing tangible personal property or furnishing taxable services, who sell primarily other than at retail, are not deemed to be making casual or isolated sales when they sell such tangible personal property or services to purchasers for use or consumption, notwithstanding that sales at retail may comprise a small fraction of their total business.

(4) Irregular sales of tangible personal property or regular sales of tangible personal property made only during a temporary sales period occurring on a semiannual or less frequent basis are casual and isolated sales not subject to tax. If a person other than a public or private school, grades K-12, or school group has or conducts more than two (2) sales periods during a calendar year, such person shall be liable for sales tax on all sales during that calendar year. Public and private schools, grades K-12, and school support groups having or conducting more than two (2) sales periods during a calendar year, having purchased tangible personal property or taxable services without the payment of tax, shall be liable for the use tax based on the purchase price of the items or services purchased during that calendar year. A sales period shall be presumed to be temporary if it is of 30 consecutive days duration or less. Persons making purchases of tangible personal property or taxable services for resale during temporary semiannual or annual sales periods shall provide provide their vendor with a written statement indicating that the items or services will be sold during a semiannual or annual sales period.

History

Authority: T.C.A. §§ 67-1-102(1), 67-6-102(13)(H), and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Amendment filed December 15, 1986; effective January 29, 1987. Amendment filed February 14, 1990; effective April 1, 1990.

Tenn. Comp. R. & Regs. 1320-05-01-.10 REPEALED

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Repeal filed March 3, 1983; effective June 15, 1983.

Tenn. Comp. R. & Regs. 1320-05-01-.11 CONTAINERS, WRAPPING AND PACKING MATERIALS AND RELATED

PRODUCTS.

(1) Items actually accompanying the product sold or shipped, without which the delivery of the product is impracticable on account of the character of the contents, and for which there is no separate charge, are not subject to Sales or Use Tax. These items include such things as containers, packing materials, labels or name plate affixed to products manufactured, and printed matter containing only directions for use.

(2) Sales of containers, wrapping and packing material and related products which actually accompany work done for customers, when the services are subject to the Sales or Use Tax, are exempt from the Sales or Use Tax. Sales of tangible personal property to persons who render services which are not subject to the Sales or Use Tax, are subject to the Sales or Use Tax.

(3) Charges made by dealers in this State for “gift wrapping” are subject to the Sales or Use Tax.

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Amendment filed October 16, 1978, effective January 29, 1979.

Tenn. Comp. R. & Regs. 1320-05-01-.12 REPEALED

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Repeal filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-05-01-.13 REPEALED

History

Authority: T.C.A. §§ 67-1-102, 67-6-102(71), and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Amendment filed March 3, 1983; effective June 15, 1983. Public necessity rule filed February 29, 2008; effective through August 12, 2008. Repeal filed March 31, 2008; effective July 29, 2008.

Tenn. Comp. R. & Regs. 1320-05-01-.14 REPEALED

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Repeal filed June 28, 2000; effective September 11, 2000.

Tenn. Comp. R. & Regs. 1320-05-01-.15 ENERGY FUEL AND WATER

(1) All energy producing fuels such as coal, coke, electricity, natural or petroleum gases, fuel oil, and other combustibles, and water except as indicated in paragraph (3) of this rule, are subject to the Sales and Use Tax. In the event the purchaser does not pay the applicable Sales or Use Tax to the vendor, he must report the purchases, and pay the tax due thereon directly to the department.

(2) A manufacturer whose principal business at a specified location is fabricating or processing tangible personal property for resale and for ultimate use or consumption off of his premises may apply to the Commissioner and be authorized to purchase energy fuel and water for use at that location at such reduced rate as may be authorized by law. Manufacturers authorized to purchase energy fuels and water at the reduced tax rate shall furnish a certified or photostatic copy of the authorization to the vendors of any energy fuel or water being claimed at the reduced rate of tax, and pay the tax to the vendor if the vendor is qualified to collect the applicable Sales or Use Tax.

(3) Manufacturers who qualify for energy fuel or water at the reduced rate may apply for and be granted authority to purchase those energy fuels or water which are separately metered or shown to be solely used in a manner coming into direct contact with or as a component part of an article being fabricated or processed for sale without the payment of any sales or use tax. Manufacturers authorized to purchase and use energy producing fuels or water shall furnish a certified copy of the authorization given by the Commissioner enumerating what energy fuels or water the manufacturer may purchase without paying sales or use tax to the vendor and shall pay direct to the Commissioner the tax on those energy fuels or water upon which no tax has been paid to the vendor and which do not come into direct contact with or become a component part of an article being fabricated or produced for sale.

(4) Manufacturers claiming the benefits of this rule must submit applications for the reduced rate or complete exemption for each place engaged in manufacturing or processing tangible personal property for sale. Energy fuel and water used by manufacturers in other places where business may be conducted and in those places for which a specific authorization has not been granted by the Commissioner are subject to the full rate of tax.

(5) The Commissioner may from time to time require a manufacturer to furnish additional or current information concerning the right of one who has been authorized to either purchase and use energy fuel or water at the reduced rate or to purchase and use energy fuel or water without payment of tax. Upon notice from the Commissioner, the manufacturer shall immediately furnish such information as the Commissioner may deem necessary to ascertain whether the conditions necessary for the authorization have changed, and whether the manufacturer is or has been entitled to the reduced rate of tax or a complete exemption on

part of the energy fuel or water. Failure to submit any necessary information to the Commissioner to make this determination shall be a basis for revoking any authorization given to the manufacturer.

(6) Vendors selling energy fuels or water to a manufacturer claiming a partial or complete examination from paying the tax on energy fuels or water shall have appropriate copies of the authorizations granted by the Commissioner to the manufacturer in their files as evidence to show why the full tax rate has not been collected and paid to the department. Vendors shall be liable for any tax due from manufacturers where proper evidence is not obtained from the manufacturer.

(7) Vendors shall report the total sales of energy fuel and water sold to manufacturers with any other sales of energy fuels, water and any other tangible personal property and taxable services. The total amount of sales of energy fuels and water sold to manufacturers furnishing certified copies of the appropriate authorizations shall be reported on the forms and in the manner provided by the Commissioner. Manufacturers purchasing energy fuel and water without paying the appropriate tax to the vendor, when any is due, shall include and indicate the amount of purchases of energy fuel and water on their returns, and pay the appropriate tax direct to the department.

(8) Manufacturers and processors authorized to buy any energy fuel or water without paying any tax to the vendor shall maintain accurate records showing what energy fuel or water has been used in a manner so as to be to totally exempt from tax and the total purchases of such energy fuel or water. In cases of electricity, natural or artificial gas, water, and any other item that is metered, accurate meter readings showing readings of the exempt portion and the total purchases of energy fuel and water at least once each month, preferably at the time the readings are made by or for the vendor for billing purposes, shall be maintained by the manufacturer or processor.

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Amendment filed March 3, 1983; effective June 15, 1983.

Tenn. Comp. R. & Regs. 1320-05-01-.16 REPEALED

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Repeal filed June 28, 2000; effective September 11, 2000.

Tenn. Comp. R. & Regs. 1320-05-01-.17 DENTISTS

A dentist is a consumer of the tangible personal property and taxable services which he uses in the practice of his profession. Therefore, all sales of tangible personal property and taxable services to a dentist are subject to the Sales or Use Tax unless otherwise exempt.

History

Authority: T.C.A. §§ 67-1-102, 67-6-201, 67-6-314, and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Amendment filed June 28, 2000; effective September 11, 2000.

Tenn. Comp. R. & Regs. 1320-05-01-.18 SALES TO EMPLOYEES

(1) An employer selling tangible personal property or taxable services to employees, for use or consumption, must include the receipts from such sales in his gross taxable sales. It is immaterial that such employer makes sales at retail only to his employees, and not to the general public.

(2) All meals sold or furnished to employees in conjunction with their employment are subject to sales tax upon the sales price to the employee or the cost of the ingredients of the meal, whichever is greater.

History

Authority: T.C.A. §§ 67-1-102, 67-6-102, and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Amendment filed June 28, 2000; effective September 11, 2000.

Tenn. Comp. R. & Regs. 1320-05-01-.19 REPEALED

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Repeal filed June 28, 2000; effective September 11, 2000.

Tenn. Comp. R. & Regs. 1320-05-01-.20 REPEALED

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Amendment filed March 3, 1983; effective June 15, 1983. Repeal filed December 15, 1986; effective January 29, 1987.

Tenn. Comp. R. & Regs. 1320-05-01-.21 FURNITURE AND STORAGE WAREHOUSEMEN

(1) Warehousemen and movers engaged in the business of moving, storing, packing and shipping tangible personal property belonging to other persons render services, which are not subject to the Sales Tax. Crating, boxing, packaging, and packing materials purchased for their use and not resold are subject to the Sales and Use Tax.

(2) Warehousemen and movers engaged in the business of selling second-hand furniture or other tangible personal property to which they have acquired title, must collect and report the Sales Tax due on any such sales, but sales at auction made by warehousemen or movers to satisfy a warehousemen’s lien on account of moving, storing or other services charge will be deemed occasional sales and not subject to the Sales Tax.

History

Authority: T.C.A. §§ 67-1-102, 67-6-102, and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Amendment filed June 28, 2000; effective September 11, 2000.

Tenn. Comp. R. & Regs. 1320-05-01-.22 FLORISTS AND NURSERYMEN

(1) Sales of flowers, wreaths, bouquets, potted plants, shrubbery, and other such items of tangible personal property are subject to the Sales and Use Tax.

(2) Where florists conduct transactions through a florists’ telegraphic delivery association, the following rules will apply in the computation of tax liability:

(a) On all orders taken by a Tennessee florist and telegraphed to a second florist in Tennessee for delivery in the State, the sending florist will be liable for the tax. All service, relay and any other charges for the orders shall be considered to be part of the selling price subject to the sales tax.

(b) In cases where a Tennessee florist receives an order pursuant to which he gives telegraphic instructions to a second florist located outside Tennessee for delivery of flowers to a point outside of Tennessee, the tax will likewise be owing with respect to the total receipts of the sending florist from the customer who places the order.

(c) In cases where Tennessee florists receive telegraphic instructions from other florists either without or outside of Tennessee for the delivery of flowers, the receiving florist will not be held liable for tax with respect to any receipts which he may realize from the transaction. In this instance, if the order originated in Tennessee, the tax will be due from and payable by the Tennessee florist who first received the order and gave the telegraphic instructions to the second florist.

(3) Nursery stock actually produced by the nurseryman, when sold direct from the nursery, is exempt if such stock is accounted for separate and apart from other nursery stock.

(4) When a nurseryman or florist sells shrubbery, young trees or similar items which are not exempt under paragraph three (3) of this rule, and as a part of the transaction transplants them to the land of the purchaser for a lump sum or a flat rate, the vendor so selling and installing must make a segregation of that portion of the charge which is for tangible personal property sold and that portion of the charge which is for installation. Failure to segregate the charge will subject the entire amount of the transaction to the Sales Tax. In cases where a nurseryman or other contractor agrees to landscape an area, the nurseryman or contractor shall be deemed to be the user and consumer of the nursery stock, fertilizer, seed and any other tangible personal property, and shall be liable for tax on the purchase price or fair market value of the tangible personal property used in connection with his contract.

History

Authority: T.C.A. §§ 67-1-102, 67-6-102(71), and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Amendment filed March 3, 1983; effective June 15, 1983. Public necessity rule filed February 29, 2008; effective through August 12, 2008. Amendment filed March 31, 2008; effective July 29, 2008.

Tenn. Comp. R. & Regs. 1320-05-01-.23 FEDERAL EXCISE TAXES, WHEN DEDUCTIBLE

(1) Any Federal Excise Tax which is required by law to be passed on to, and is paid by the ultimate consumer, is not a part of the selling price subject to the Sales and Use Tax, provided such tax is billed separately to the customer. However, any Federal Excise Tax which is not required by law to be passed on to consumer is a part of the selling price, even though such tax may be billed separately to the customer.

History

Authority: T.C.A. §§ 67-1-102, 67-6-102, 67-6-102(71), and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Amendment filed December 15, 1986; effective January 29, 1987. Amendment filed June 28, 2000; effective September 11, 2000. Public necessity rule filed February 29, 2008; effective through August 12, 2008. Amendment filed March 31, 2008; effective July 29, 2008.

Tenn. Comp. R. & Regs. 1320-05-01-.24 FINANCE COMPANIES

Sales of tangible personal property by a finance company as a result of a default of payments by a customer are subject to the Sales or Use Tax when such property is sold to a Consumer.

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-05-01-.25 FINANCE CHARGES - CARRYING CHARGES

(1) Finance charges, carrying charges, time price differential, or interest from credit extended on sales of tangible personal property under conditional sale contracts or other contracts providing for deferred payments of the purchase price are not considered a part of the selling price of such property and are not subject to Sales Tax if the amount of such finance charges, carrying charges, time price differential, or interest is in addition to the usual or established case selling price, and:

(a) Is segregated on the taxpayer’s invoice or bill of sale, or (b) Is billed separately to customers.

(2) Unless these conditions are met, such charges shall be deemed to be part of the selling price for the purpose of computing the tax.

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-05-01-.26 HOSPITALS AND SANITARIUMS

(1) Hospitals and sanitariums are primarily engaged in the business of rendering services and are the consumers or users of all tangible personal property or taxable services purchased for use or consumption in connection with the operation of the institution. The sellers of tangible personal property, other than prescription drugs or mobility enhancing equipment prescribed for patients or prosthetic devices, or taxable services to these institutions must collect from them the appropriate tax, but this provision does not apply to a hospital or sanitarium which is otherwise exempt from paying the sales and use tax by virtue of its being a charitable or other like institution.

(2) If a hospital or sanitarium operates any division that sells tangible personal property or taxable services, such as a lunch room, repair shop, or similar department, then the hospital or sanitarium is liable for the tax upon the gross receipts or gross proceeds derived from such sales.

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Amendment filed March 3, 1983; effective June 15, 1983. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-05-01-.27 INSTALLATION SALES

(1) Charges for installing tangible personal property that remains tangible personal property after installation are subject to sales and use tax. The tax is due from the dealer regardless of whether the dealer or someone acting on the dealer’s behalf installs the property.

(2) Installation services that are provided in connection with the sale of tangible personal property are a part of the sales price of the tangible personal property sold. If a dealer provides installation services in connection with the sale of tangible personal property, such installation services are subject to sales and use tax if the tangible personal property being installed is subject to sales and use tax. Installation services that are sold in transactions unrelated to the sale of the tangible personal property are subject to sales and use tax regardless of the taxability of the tangible personal property installed unless the installation services are otherwise exempt from tax.

(3) Tangible personal property which is sold and attached to real property, but which will ordinarily be removed by the owner or tenant, such as window air conditioning units, curtain and drapery rods, gasoline pumps, etc., shall be deemed to be personal property and the installation charges therefor shall be subject to the sales and use tax.

(4) Charges made for installing tangible personal property which becomes a part of real property, are not subject to sales and use tax. The person so installing the property shall be liable for any sales and use tax that may be due, if any, on the property bought and/or used in making the installation.

History

Authority: T.C.A. §§ 67-1-102, 67-6-102, 67-6-205, and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-05-01-.28 INSTALLMENT AND CREDIT SALES

Persons making conditional, charge, or installment sales must report the total selling price of such sales and pay the Sales or Use Tax thereon in the monthly tax period in which the contracts of sales are entered into.

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-05-01-.29 NONRESIDENT PURCHASES

(1) If a nonresident of Tennessee purchases articles of tangible personal property or taxable services from a dealer in Tennessee, and the sale is delivered to the vendee in Tennessee, the sale is not one of interstate commerce, and is subject to the Sales Tax. It is immaterial that the property will be later transported outside the State.

(2) Bona fide dealers outside the State of Tennessee, who make purchases of tangible personal property or taxable services in this State which would otherwise be subject to the provisions of the Sales and Use Tax Law, may make purchases of items or services which they normally sell free of the Sales Tax, provided such a dealer will furnish his vendor in this State with a valid certificate of resale showing that he is a dealer located out of this State and would be entitled to purchase such property upon a resale certificate if he were a dealer in this State.

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-05-01-.30 REPEALED

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Repeal filed June 28, 2000; effective September 11, 2000.

Tenn. Comp. R. & Regs. 1320-05-01-.31 JEWELRY SHOPS

(1) Sales of watches, watch chains and straps, clocks, pens, rings, and other jewelry are subject to the Sales or Use Tax.

(2) Charges made for repairing, cleaning, sizing or making slight changes in jewelry, watches, etc., refinishing, converting one item of tangible personal property into another, and engraving incidental to the sale of the tangible personal property, are subject to the Sales or Use Tax.

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-05-01-.32 LEASE OR RENTAL

(1) The gross receipts or gross proceeds derived from or amount agreed to be paid for the lease or rental, within Tennessee, of all kinds of types of tangible personal property are subject to the Sales or Use Tax. The tax shall be computed on the gross receipts, gross proceeds, or rental payable without any deduction whatsoever for expense incident to the conduct of business.

(2) The terms of the contract under which such tangible personal property is leased or rented shall be the basis for computing the tax. The tax is to be computed on a billing basis, either on the lump sum at the time of execution, or on a monthly or periodical basis as provided in the contract. The Sales Tax shall apply to all leases of tangible personal property delivered to a lessee or rentee in this State, regardless of where the property will be taken or used by the lessee or rentee, whether within or without the State of Tennessee.

(3) Tangible personal property sold to be used exclusively for renting or leasing may be sold upon a resale certificate.

(4) Royalties paid, or agreed to be paid, either on a lump sum or production basis, for tangible personal property used in this State are rentals subject to the Sales or Use Tax.

(5) If the owner of the property maintains continuous supervision over the personal property being rented or leased, and furnishes an operator or crew to operate such property, he is rendering a service, and the same is not subject to Sales or Use Tax on the other hand, if the owner does not furnish the crew or operator, but merely rents the property, and the lessee operates it himself for a stated consideration or price, either by the day or week or month, in such case, the Sales or Use Tax would apply as the lessee has the possession, use and control of the property.

(6) The tax on leases or rentals are due from the lessee even though the lessor may be a tax exempt entity. Where it is contemplated that a person shall have the right to use tangible personal property only on the premises of the owner, and such premises are occupied by the owner in the conduct of his business, the transaction shall be regarded as a license to use tangible personal property, and not as a rental thereof, and the owner shall pay any applicable Sales or Use Tax on the purchase price thereof. The transaction shall not be regarded as a license to use if the premises are occupied by the lessee or the property is removed from the premises of the lessor.

History

Authority: T. C.A. §§ 67-1-102, 67-6-204, and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Amendment filed December 15, 1986; effective January 29, 1987.

Tenn. Comp. R. & Regs. 1320-05-01-.33 LEASED DEPARTMENTS

When a dealer leases certain of its departments to other persons selling tangible personal property or taxable services to consumers, each such lessee shall make separate monthly returns and remittances if the lessee keeps his own records and makes his own collections on retail sales from such leased department. If the lessor of such departments keeps the records for the leased departments and makes collections of their accounts, the lessor may, as agent for the lessees, include on his own returns the retail sales and taxable purchases for such departments and pay the taxes due. A lessee shall not be relieved of his liability under the Act in case the lessor fails to make the proper returns or fails to pay the taxes due.

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-05-01-.34 MEALS FURNISHED TO THE PUBLIC

(1) Meals furnished at any restaurant, eating-house, hotel, drug store, club, resort, or other place at which meals are served to the public are subject to the Sales Tax.

(2) Where meals are served only to regular boarders, the operators of the boarding house are the consumers of food articles which are subject to the Sales or Use Tax.

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-05-01-.35 MEALS SERVED BY RAILROADS, AIRPLANES OR OTHER TRANSPORTATION

FACILITIES.

(1) Sales of meals or any other item of food or drink by railroads, airlines, or any other transportation company, while within the State, are subject to the Sales Tax.

(2) In cases where meals or any other item of food or drink are served without a specific charge therefor to the passengers, the carrier will be considered to be the user and consumer thereof. Any purchases of such food or drink items in this State are subject to the Sales Tax, regardless of where the food or drink may be consumed by the carrier or passengers.

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-05-01-.36 BOARDING INSTITUTIONS

Institutions of learning operating as boarding institutions, except K-12, shall be deemed the ultimate consumer of foods purchased for meal purposes and shall be liable for the payment of sales and use tax for such supplies, unless such institutions have qualified for exemption from sales and use tax on the ground that they are church supported or non-profit colleges or universities.

History

Authority: T.C.A. §§ 67-1-102, 67-6-329, and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Amendment filed February 7, 1980; effective April 22, 1980. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-05-01-.37 REPEALED

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Repeal filed June 28, 2000; effective September 11, 2000.

Tenn. Comp. R. & Regs. 1320-05-01-.38 REPEALED

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Repeal filed January 5, 1993; effective April 30, 1993.

Tenn. Comp. R. & Regs. 1320-05-01-.39 MEMORIAL STONE AND MONUMENT DEALERS

Memorial stones are tangible personal property and the sale thereof is subject to the Sales and Use Tax.

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Amendment filed March 3, 1983; effective June 15, 1983.

Tenn. Comp. R. & Regs. 1320-05-01-.40 MANUFACTURERS AND PROCEDURES

(1) Materials and taxable services bought for future processing, manufacturing or conversion into articles of tangible personal properly for resale, where such materials become a component

part of the finished products are not subject to Sales or Use Tax.

(2) Materials and supplies coming in direct contact with and which are consumed within twentyfive (25) consecutive calendar days, in the processing of manufactured products are not subject to the Sales or Use Tax. Unless materials and supplies come in direct contact with and are consumed within twenty-five (25) consecutive calendar days, they will not be considered as industrial materials or supplies exempt from the Sales or Use Tax. The time period, here indicated, shall apply to any single article in the solid state or to the contents of a container in which liquid is held for introduction for direct contact with the product being manufactured.

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-05-01-.41 “MADE TO ORDER” SALES

Where persons contract to fabricate articles of tangible personal property from materials selected or furnished by customers, the total proceeds from the sale are subject to the Sales or Use Tax. Such persons may not deduct labor or service charges of fabrication or production, notwithstanding that such charges may be separately billed to customers apart from charges for materials. Charges made for labor and other services to install tangible personal property which has been fabricated, and which remains personal property after installation, are subject to tax. Charges made for labor and other services to install such property which becomes real property are not subject to the Sales or Use Tax if such charges are billed separately on an invoice given to the customer at the time of the sale

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Amendment filed March 3, 1983; effective June 15, 1983.

Tenn. Comp. R. & Regs. 1320-05-01-.42 OXYGEN, ACETYLENE, HYDROGEN, AND LIQUIFIED PETROLEUM

(1) Sales of oxygen, acetylene, hydrogen, and liquefied petroleum gas to refiners, repairmen, contract welders, dentists, junk dealers, and others, or for use as fuel and illumination, are sales to consumers or users, and are subject to the Sales or Use Tax.

(2) Oxygen, acetylene, hydrogen, and liquefied petroleum gas are not subject to the Sales or Use Tax if the gas is used as an industrial material or supply in a manner exempt from tax.

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-05-01-.43 BARBER AND BEAUTY SHOP OPERATORS

(1) Barber and beauty shop operators render personal services which are not taxable. They are consumers of the various items which they use or consume in the rendition of their services.

As such consumers, they are required to pay the Sales or Use Tax on all purchases which they make for use in connection with their business.

(2) Barber and beauty shops making regular sales of tangible personal property for use of consumption are required to register with the Department and to collect the Sales Tax.

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-05-01-.44 OPTOMETRISTS, OPTICIANS, AND OCULISTS

Rule Suspended

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Amendment filed December 2, 1975; effective January 1, 1976. The Commerce Committee of the House of Representatives, pursuant to T.C.A.§ 4-535, held a hearing to consider suspension of Rule

Tenn. Comp. R. & Regs. 1320-05-01-.45 REPEALED

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Repeal filed March 3, 1983; effective June 15, 1983.

Tenn. Comp. R. & Regs. 1320-05-01-.46 EXEMPT PERIODICALS

Periodicals printed entirely on newsprint or bond paper and regularly distributed on a biweekly or other printed matter distributed with such periodical are exempt from the sales and use tax. For the purpose of this rule and Tennessee Code Annotated Section 67-6-329(25), “periodicals” means publications consisting of successive issues published at regular intervals and “distributed on a biweekly or more frequent basis” refers to the initial distribution of new issues. Therefore, a periodical is considered regularly distributed on a biweekly or more frequent basis if new issues are published and distributed at least every fourteen days.

History

Authority: T.C.A. §§ 67-1-102, 67-6-402, and 67-6-329 and 1993 Tenn. Public Acts 2.
Administrative History: Original rule certified June 7, 1974. Amendment filed March 3, 1983; effective June 15, 1983. Repeal filed July 15, 1991; effective August 29, 1991. New rule filed May 20, 1994; effective August 29, 1994.

Tenn. Comp. R. & Regs. 1320-05-01-.47 PHYSICIANS AND SURGEONS

(1) Physicians and surgeons are the consumers of the various items of tangible personal property and taxable services which they use in the rendition of their professional services and as such, are required to pay the Sales or Use Tax on any of their purchases unless otherwise exempt.

(2) Fees for professional services rendered by physicians and surgeons are not subject to the Sales or Use Tax. If physicians and surgeons, apart from their professional services are engaged in business selling tangible personal property or taxable services, they are vendors and must collect and report the Sales or Use Tax on such sales.

History

Authority: T.C.A. §§ 67-1-102, 67-6-102, 67-6-314, and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Amendment filed March 3, 1983; effective June 15, 1983. Amendment filed June 28, 2000; effective September 11, 2000.

Tenn. Comp. R. & Regs. 1320-05-01-.48 PHOTOGRAPHS, PHOTOSTATS, BLUE PRINTS, ETC

(1) Sales of photographs, portraits, prints from camera film, camera film, photostats, blue prints, frames, and other like items are subject to the sales and use tax when sold for use or consumption. Any sale of paper or other material which becomes a component of the photograph, or other prints, is a sale for resale, and not subject to the sales and use tax.

(2) Charges made for developing films and coloring or tinting pictures or photographs furnished by customers are service charges not subject to the sales and use tax when a separate charge for such services is billed to the customer.

History

Authority: T.C.A. §§ 67-1-102, 67-6-329, and 67-6-402 and Tenn. Pub. Acts 25.
Administrative History: Original rule certified June 7, 1974. Amendment filed December 15, 1986; effective January 29, 1987. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-05-01-.49 PREMIUMS, GIFTS AND TRADING STAMPS

(1) Items of tangible personal property which are withdrawn from a dealer’s stock for which a resale certificate has been issued his supplier, or which are purchased for use as premiums or gifts, are subject to the Sales or Use Tax.

(2) Persons engaged in the business of redeeming trading stamps which have been given by other dealers shall be deemed to be a dealer and shall be liable for the Sales or Use Tax on the retail value of the merchandise given for the stamps: this value shall be deemed to be that which is assigned to the books of stamps. Such dealers shall likewise be liable for any Sale or Use Tax on the purchases and/or distribution of any catalogs, stamps, etc., in this State.

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-05-01-.50 RETURNED MERCHANDISE, CREDITS, AND ALLOWANCES

(1) The records of a taxpayer must clearly reflect and support a claim for all deductions for merchandise returned for credit or refund.

History

Authority: T.C.A. §§ 67-1-102, 67-6-402, 67-6-102(71)(C), and 67-6-507.
Administrative History: Original rule certified June 7, 1974. Amendment filed March 3, 1983; effective June 15, 1983. Amendment filed June 28, 2000; effective September 11, 2000. Public necessity rule filed February 29, 2008; effective through August 12, 2008. Amendment filed March 31, 2008; effective July 29, 2008.

Tenn. Comp. R. & Regs. 1320-05-01-.51 RELIGIOUS, CHARITABLE, EDUCATIONAL AND OTHER NON-PROFIT

INSTITUTIONS.

(1) Sales made to individuals or organizations for the use and benefit of institutions which may themselves be exempt from the Sales or Use Tax, are subject to the Sales or Use Tax.

(2) Sales of tangible personal property to churches or other religious, charitable, educational, scientific or any other similar institution for the purpose of resale when such organizations are not regularly engaged in the business of selling tangible personal property, are subject to the Sales and Use Tax, and the church or other institution shall not be required to charge or be liable for any tax on such sales. In the event, however, any church or other similar institution is regularly engaged in the business of selling tangible personal property or furnishing any taxable service, it shall qualify with the Department as a dealer and be liable for any tax due on such sales.

(3) Religious, charitable or educational institutions entitled to an exemption from sales or use tax upon tangible personal property sold, given or donated to them will be issued a letter of exemption upon application to the commissioner. When purchasing goods and services from suppliers, the exempt institution must furnish its supplier with a properly completed copy of the letter or valid exemption under 26 U.S.C. 501(c)(3) pursuant to T.C.A. § 67-6-322(e). The exempt institution should retain the original exemption letter with the lower portion left uncompleted for copy making purposes. For the purpose of these rules, “letter of exemption” and “exemption letter” shall have the same meaning as “certificate of exemption” and “exemption certificate”

History

Authority: T.C.A. §§ 67-1-102, 67-6-322, and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Amendment filed March 3, 1983; effective June 15, 1983. Amendment filed February 14, 1990; effective April 1, 1990. Amendment filed June 28, 2000; effective September 11, 2000.

Tenn. Comp. R. & Regs. 1320-05-01-.52 REPOSSESSIONS

(1) The unpaid balance to be considered in the calculation of the repossession credit allowed by T.C.A. § 67-6-507(d) is only that which constitutes principal, and shall not include interest, carrying charges or any similar charges. Any dealer claiming such a deduction or deductions shall preserve, as a part of the official records of his business, full information concerning the sale and subsequent repossession of the subject item of personal property; information shall include identification of parties and items involved, the dates of the sale and repossession, the amount of the original price to the purchaser upon which sales tax was due to be paid, and the amount of unpaid balance which forms the basis for the deduction.

(2) A bank or other financial institution purchasing contracts “without recourse” from dealers selling tangible personal property may not claim any deduction or credit for any unpaid balances remaining due on any property which has been sold by the other dealer on a security agreement or other title retained instrument, and later repossessed, or which resulted from any other action to enforce the lien.

History

Authority: T.C.A. §§ 67-1-102, 67-6-402, and 67-6-507.
Administrative History: Original rule certified June 7, 1974. Amendment filed June 28, 2000; effective September 11, 2000.

Tenn. Comp. R. & Regs. 1320-05-01-.53 LAUNDRIES, DRY CLEANERS, AND OTHER CLEANING TANGIBLE PERSONAL

PROPERTY.

(1) The washing, drying, or cleaning of any kind of tangible personal property and sales of any tangible personal property such as soap, bleaches, etc., and repair or alteration of any tangible personal property, for use and consumption, are subject to the Sales and Use Tax.

This includes, but is not limited to such articles as clothing, furniture, rugs, draperies, jewelry, motor vehicles, etc. The receipts from coin-operated laundry and dry cleaning machines are not subject to tax if the customer performs all of the activities related to the handling of their clothing. If the dealer performs any of these services, the receipts are taxable.

(2) The cleaning of real property such as windows, walls, and wall to wall carpeting in buildings, is not subject to any Sales or Use Tax. Likewise; charges for storage of and insurance on laundry and cleaning, and dyeing, blocking, and pressing only, are not subject to the Sales or Use Tax, provided such charges are stated separately on a ticket, statement, or invoice given to the customer and are accounted for as such on the books and records of the dealer.

(3) Items of tangible personal property bought by laundries and dry cleaners which accompany tangible personal property washed or cleaned for customers, such as identification and packaging supplies, and items bought for resale, such as soap, bleach, and repair supplies, may be bought on a resale certificate without Sales or Use Tax. Items of tangible personal property which do not accompany tangible personal property washed or cleaned for customers, and all items used to wash or clean real property, such as equipment, public utilities, and cleaning agents, are subject to the Sales or Use Tax.

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-05-01-.54 REPAIR SERVICES

(1) All charges for repair services and repairs of any kind of tangible personal property, such as automobiles, clothing, watches and jewelry, office equipment, machinery, tires, etc., including all parts and/or labor, are subject to the Sales Tax. This includes occasions when there may be no new parts involved in the transaction, and occasions when a customer may furnish any or all of the parts necessary for the repair work. Any factor entering into the consideration charged for repair services and repairs such as “service call”, minimum charge, hourly or flat rates, mileage, etc., shall be subject to the Sales Tax.

(2) For the purposes of this rule, “repair services” and “repairs” of tangible personal property shall mean and include any one or all of the following for a user and consumer; work done to preserve or restore to or near the original condition made necessary by wear, normal use, wastage, injury, decay, partial destruction, or dilapidation; mending, correction, or adjustment made for any defect or defective portion; alterations; refinishing; any cleaning that is a necessary part of any repair work; “service calls” where any repair work is done or contemplated; and changes in the size, shape, or content. Repair services and repairs of tangible personal property shall not include any maintenance or other work on buildings, or electrical wiring, plumbing, or fixtures attached to and a part of any real property; installation of tangible personal property not incidental to a sale or repair thereof; service calls where no repair is contemplated; work done on one’s own property insofar as labor is concerned, either personally, or by one’s own employees, (but not to include parts, supplies, etc., all of which are taxable); or engraving not incidental to a sale of tangible personal property. In the event any services and repairs are not taxable, the charges therefor must be billed separately to the customer and indicated as such on the books and records of the dealer.

(3) Dealers performing repair services and repairs of tangible personal property may purchase repair parts, repair services, and containers, labels, etc., for packaging work repaired, without tax, on a certificate of resale. All equipment, energy fuel, and other supplies and taxable services are subject to the Sales or Use Tax, and the tax due thereon must be paid to the vendor.

History

Authority: T.C.A. §§ 67-1-102, 67-6-102, and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Amendment filed June 28, 2000; effective September 11, 2000.

Tenn. Comp. R. & Regs. 1320-05-01-.105 REPEALED

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Repeal filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-05-01-.106 INDUSTRIAL MACHINERY

(1) Persons who wish to make purchases or leases of industrial machinery shall apply to the Commissioner of Revenue for authority to make such purchases exempt from tax. This application shall give such information as the Commissioner may require. If the Commissioner finds from such information that the applicant is entitled to make purchases or leases of industrial machinery, authority shall be permanent in nature and shall continue until such time as the business ceases operation or until such time as the business changes in character such that it is no longer operating within the scope of its original application. Any misrepresentation made on the application by the taxpayer will subject the taxpayer to any applicable tax, penalty and interest.

(2) Authority must be obtained prior to the purchase in order for the machinery to qualify as industrial machinery for tax purposes. However, if authority is not obtained prior to the purchase the Commissioner may allow retroactive application of the authority upon a showing sufficient to the Commissioner that the failure to obtain authority resulted from:

(a) A major restructuring of the business or the business having gone through a change in ownership; or (b) A death of a key person in the tax area of the organization; or (c) The entity having been misled by state officials which indicated that authority to purchase industrial machinery was not required; or (d) Any other grounds that the Commissioner finds satisfactory to allow retroactive application of this exemption.

(3) Persons who have obtained authority from the Commissioner to make purchases of industrial machinery shall provide their vendors with a copy of their authority or a copy of a fully completed Streamlined Sales Tax certificate of exemption which must include the manufacturer’s exemption authorization number included on the certificate issued by the Commissioner, and such purchases shall then be exempt from tax.

(4) Persons to whom the Commissioner has extended special written permission to make purchases for their own use under a certificate of resale pursuant to 1320-05-01-.68(4) must obtain authority from the Commissioner as provided in this rule prior to making purchases of industrial machinery, but may provide their vendors with a copy of the special permission extended under 1320-05-01-.68(4) in lieu of the authority to purchase industrial machinery.

(5) Persons s seeking to purchase industrial machinery must comply with the provisions of this

rule in order to obtain the exemption provided at T.C.A. § 67-6-206(a). Failure to do so shall subject such purchases to tax.

History

Authority: T.C.A. §§ 67-1-102, 67-6-102, 67-6-206, and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Amendment filed March 3, 1983; effective June 15, 1983. Amendment filed February 17, 1988; effective May 29, 1988. Amendment filed June 28, 2000; effective September 11, 2000. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-05-01-.107 ELECTRICITY

(1) Sales of electricity, including any charges such as demand, minimum bill, temporary service, and scrap, and items of tangible personal property for accommodation, are subject to sales and use tax.

(2) Charges for amortization, investment, collection fees, damaged facilities, late payment, and security deposits are not subject to sales and use tax provided they are indicated as such on the statement given to the customer, and the charges are segregated and maintained as such on the books and records of the dealer. If these changes are not indicated as such on a statement given to the customer, and are not maintained as such on the books and records of the dealer, they are subject to sales and use tax.

(3) Statements for sales of electricity must indicate in some manner whether the customer is paying any sales and use tax.

History

Authority: T.C.A. §§ 67-1-102, 67-6-209, and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Amendment filed December 15, 1986; effective January 29, 1987. Amendment filed June 28, 2000; effective September 11, 2000. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-05-01-.108 NATURAL OR ARTIFICIAL GAS

(1) Sales of natural or artificial gas of any kind, and sales of appliances, pipe or fittings, and installation charges for installing tangible personal property incidental to the sale thereof where the property remains personal property, are subject to the Sales or Use Tax.

(2) In the event a distributor of natural or artificial gas uses electricity, gas, or other tangible personal property in connection with his distribution, he shall be liable for the Sales or Use Tax applicable to the cost price thereof where it is used.

(3 In the event a dealer installs pipe, fittings, etc., which he has sold to a customer which is exempt from paying Sales and Use Tax, and which becomes real property when it is installed, the dealer shall be deemed to be a contractor, and liable for Sales and Use Tax on the cost price of the tangible personal property which becomes real property, except where the customer is a church or private nonprofit college or university, and the pipe, fittings, etc., are used for church or private nonprofit college or university construction, maintenance etc., in which case the dealer is not liable for any Sales or Use Tax.

(4) Statements for sales of natural or artificial gas must indicate in some manner whether the customer is paying any Sales or Use Tax.

History

Authority: T.C.A. §§ 67-1-102, 67-6-209, and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Amendment filed December 15, 1986; effective January 29, 1987. Amendment filed June 28, 2000; effective September 11, 2000.

Tenn. Comp. R. & Regs. 1320-05-01-.109 REPEALED

History

Authority: T.C.A. §§ 67-1-102, 67-6-102, 67-6-205, and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Public necessity rule filed February 29, 2008; effective through August 12, 2008. Repeal filed March 31, 2008; effective July 29, 2008.

Tenn. Comp. R. & Regs. 1320-05-01-.110 WATER

(1) Sales of water, including any charges for standby or special fire protection, minimum bills, or any other charges where the use of water is contemplated, are subject to the Sales or Use Tax.

(2) Charges for sewage disposal, amortization, tap fees, late payment and damages to facilities are not subject to the Sales or use Tax, provided some definite amount or percentage of the charges for water are indicated as such on the statement given to the customer, and the charges are segregated and maintained as such on the books and records of the dealer.

Security deposits are not subject to the Sales or Use Tax. If these charges are not indicated as such on a statement given to a customer, and are not maintained as such on the books and records of the dealer, they are subject to the Sales or Use Tax.

(3) Dealers giving allowances to customers for charges for water that has been metered, but which is lost because of leaky or open pipe, may claim credit for such allowances.

(4) Statements for sales of water must indicate in some manner whether the customer is paying Sales or Use Tax.

(5) Landlords who make any charges to tenants for water shall be deemed to be dealers, shall qualify with the Department for Sales Tax purposes, and report and pay applicable tax due on such sales to their tenants.

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-05-01-.111 REPEALED

History

Authority: T.C.A. §§ 67-1-102, 67-6-207, and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Amendment filed March 3, 1983; effective June 15, 1983. Amendment filed December 15, 1986; effective January 29, 1987. Public necessity rule filed February 29, 2008; effective through August 12, 2008. Repeal filed March 31, 2008; effective July 29, 2008.

Tenn. Comp. R. & Regs. 1320-05-01-.112 REPEALED

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Repeal filed June 28, 2000; effective September 11, 2000.

Tenn. Comp. R. & Regs. 1320-05-01-.113 RECORDING AND TELEVISION STUDIOS, MASTERING TAPES

(1) Recording studios, engaged in the business of making original sound recordings onto tapes or discs, are deemed to be engaged primarily in rendering personal services which are not subject to the sales tax. In addition, persons engaged in the business of mastering such original tapes are also rendering a personal service not subject to the tax.

(2) Television studios engaged in the business of recording commercials or other programming onto video tapes or film are deemed to be engaged primarily in rendering personal services which are not subject to the sales tax.

(3) Sales to recording studios, to persons engaged in the mastering business, or to television studios of tangible personal property, such as supplies, cameras, recording equipment, mastering equipment, magnetic tape, video tape, etc., for use or consumption by such persons in connection with the recording of their services are subject to the Sales or Use Tax.

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule filed January 17, 1978; effective February 17, 1978.

Tenn. Comp. R. & Regs. 1320-05-01-.114 DEPOSIT AND ALLOCATION OF TAX RECEIPTS

(1) All moneys received by the Department of Revenue shall be promptly deposited to the credit of the state treasurer in state depositories. Receipts shall be earmarked and allocated as provided in T.C.A. § 67-6-103.

(2) A municipality which qualifies as a “premiere type tourist resort” may elect or withdraw an election to have tax receipts allocated to it during any fiscal year (July 1 - June 30) under the alternative allocation formula by a written notice from the chief executive or fiscal officer of the municipality to the commissioner of revenue. To be effective such notice must be received on or before June 1 of the fiscal year next preceding the fiscal year for which the election is made or within thirty (30) days of the effective date of this rule. An election or withdrawal shall remain in effect throughout the fiscal year. In the absence of further notification in the manner described above, the election or withdrawal shall also remain in effect during subsequent fiscal year.

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule filed April 24, 1980; effective July 29, 1980.

Tenn. Comp. R. & Regs. 1320-05-01-.115 SALES TAX ON AMUSEMENT OR RECREATIONAL ACTIVITY

The sales and use tax shall also apply to actual or accrued gross receipts from:

(1) Dues and fees to membership sports and recreation clubs;

(2) Admissions to places of amusement, sports, entertainment, exhibition, display or other recreational events or activities;

(1) Charges for engaging in any kind of recreational activity when no admission is charged spectators;

(4) Charges made for the privilege of using tangible personal property for amusement, sports, entertainment or recreational activity where the privilege does not otherwise constitute a taxable rental; and

History

Authority: T.C.A. §§ 67-1-102, 67-6-212, 67-6-330, and 67-6-402.
Administrative History: Original rule filed May 18, 1984; effective June 17, 1984. Amendment filed June 1, 1988; effective September 28, 1988. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-05-01-.116 MEMBERSHIP SPORTS AND RECREATION CLUBS

(1) Membership sports and recreation clubs shall include but not be limited to those organizations listed in Major Group No. 79, Industry 7991 of the Standard Industrial Classification Manual of 1987, as amended. Industry 7991 includes, but is not limited to, establishments primarily engaged in operating reducing and health clubs, spas, and similar facilities featuring exercise and other active physical fitness conditioning. Membership sports and recreation clubs shall also include, but not be limited to, those organizations listed in Major Group No. 79, Industry 7997 of the Standard Industrial Classification Manual of 1987, as amended. Industry 7997 includes, but is not limited to, sports and recreation clubs which are restricted to use by members and their guests, such as country, golf, tennis, yacht and amateur sports and recreation clubs.

(2) Membership dues or fees shall include initiation fees, required stock purchases, and any other fees required for membership, but do not include member assessments for capital improvements.

History

Authority: T.C.A. §§ 67-1-102, 67-6-212, 67-6-330, and 67-6-402.
Administrative History: Original rule filed May 18, 1984; effective June 17, 1984. Amendment filed June 1, 1988; effective September 28, 1988. Amendment filed June 28, 2000; effective September 11, 2000. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-05-01-.117 ADMISSIONS

Places of amusement, sports, entertainment, exhibition, display or other recreational events or activities subject to sales and use tax upon charges or admissions shall include, but not be limited to:

(1) Establishments listed or described in Major Group 79 of the Standard Industrial Classification Manual as establishments providing amusement or entertainment.

(2) Motion picture theaters, mini adult theaters, or similar establishments displaying motion pictures, whether the exhibition is indoors or outdoors.

(3) Establishments listed or described in Major Group 84 of the Standard Industrial Classification Manual including noncommercial museums, art galleries and botanical and zoological gardens.

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule filed May 18, 1984; effective June 17, 1984.

Tenn. Comp. R. & Regs. 1320-05-01-.55 SALES TO THE STATE OR POLITICAL SUBDIVISIONS

(1) Sales of tangible personal property and taxable services to the State, or a County, or Municipality within the State of Tennessee are not subject to the Sales or Use Tax provided that such governmental institution furnishes the vendor with a properly executed exemption certificate; however, any sale made to a State other than Tennessee, or a County or Municipality not located within Tennessee, is subject to the Sales Tax.

(2) In order to be a sale to the State of Tennessee, or a County or Municipality in this State, the State, County, or Municipality must make the purchase of the property or taxable service, obtain title to the property or service immediately when it is delivered, and pay directly to the dealer supplying the property or service the purchase price of such property or taxable service.

(3) Sales of tangible personal property and taxable services to a contractor or other person for the use and later benefit of the State or a County, or Municipality in this State, are subject to the appropriate Sales or Use Tax.

(4) Dealers must have an appropriate Governmental Exemption Certificate for any tangible personal property or taxable service which is sold to governmental institutions from whom the Sales or Use Tax is not collected, and keep such certificate as a part of their records to show that such sales are exempt from the Sales or Use Tax.

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Amendment filed March 3, 1983; effective June 15, 1983.

Tenn. Comp. R. & Regs. 1320-05-01-.56 REPEALED

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Repeal filed March 3, 1983; effective June 15, 1983.

Tenn. Comp. R. & Regs. 1320-05-01-.57 TRUSTEES, RECEIVERS, EXECUTORS AND ADMINISTRATORS

Trustees, including bankruptcy trustees, receivers, executors and administrators, who continue to operate, manage or control a business selling tangible personal property or taxable services or who liquidate such a business must collect, report and pay the Sales or Use Tax as any other dealer. It is immaterial that such officers may have been appointed by a court and may be acting by virtue of their appointment. Such persons are deemed to be engaged in the business of selling tangible personal property or taxable services, even though engaged in liquidating the assets of a business.

History

Authority: T.C.A. §§ 67-1-102, 67-6-402, and 67-6-102.
Administrative History: Original rule certified June 7, 1974. Amendment filed January 30, 1990; effective April 1, 1990.

Tenn. Comp. R. & Regs. 1320-05-01-.58 SALES TO THE UNITED STATES OR AGENCIES THEREOF

(1) Dealers making sales direct to the United States, or any agency thereof, shall obtain an appropriate exemption certificate, and keep it in their records as evidence of such a sale.

(2) Sales made to a contractor, who may be doing contract work for the U.S. Government, are not exempt from the Sales or Use Tax.

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-05-01-.59 REPEALED

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Repeal filed June 28, 2000; effective September 11, 2000.

Tenn. Comp. R. & Regs. 1320-05-01-.60 REPEALED

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Repeal filed December 15, 1986; effective January 29, 1987.

Tenn. Comp. R. & Regs. 1320-05-01-.61 UNDERTAKERS AND FUNERAL DIRECTORS

(1) Undertakers and Funeral Directors are engaged in the business of selling tangible personal property, and shall report, collect, and pay the tax on their sales of caskets, grave vaults, clothing, flowers, and similar articles. Receipts from services rendered, such as embalming, hearse service, family cars, and the like, are not subject to the Sales or Use Tax.

(2) In order for the dealer to claim any or all of the exemptions set out herein, the vendor shall furnish an invoice showing the amount of sales or tangible personal property and the amount of sales of services, properly segregated, to the customer. Failure to furnish an invoice showing the segregation to the customer at the time of the sale will subject the total amount to the Sales or Use Tax.

(3) Where undertakers and funeral directors furnish items of tangible personal property, such as flowers and clothing, without a specific charge indicated on an invoice to the customer, the undertaker or funeral director shall be considered the user and consumer, and shall pay the appropriate Sales or Use Tax on all tangible personal property furnished for the services.

(4) Equipment, embalming fluids, and any other supplies purchased to be consumed or used by the undertaker or funeral director in performing his services are subject to the Sales or Use Tax.

History

Authority: T.C.A. §§ 67-1-102, 67-6-329, and 67-6-402 and Chapter 602, § 93, of the Public Acts of 2007.
Administrative History: Original rule certified June 7, 1974. Amendment filed June 28, 2000; effective September 11, 2000. Public necessity rule filed February 29, 2008; effective through August 12, 2008. Amendment filed March 31, 2008; effective July 29, 2008.

Tenn. Comp. R. & Regs. 1320-05-01-.62 SALES FOR RESALE

(1) “Sales for resale” means those whereby a supplier of materials, supplies, equipment and services makes such tangible personal property or services available to legitimate dealers actually selling such property or services as such, or which becomes an industrial material or supply in a manufacturing or processing operation.

(2) The price which a vendor charges his vendee for tangible personal property or services, whether it is a “retail” or “wholesale” price, or the quantity of such property or services sold to the vendee, may not be used to determine whether a sale is a “sale for resale.”

History

Authority: T.C.A. §§ 67-101 and 67-3045.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-05-01-.63 REGISTRATION CERTIFICATE

(1) Sales Tax.

(a) When a dealer changes his business location within the same county, the certificate holder shall notify the Department of the new business address and surrender his Registration Certificate. A new certificate will be issued showing the correct business address.

(b) When a dealer changes his business location to a different county, or to a different type of business, the certificate must be submitted for cancellation, and an application for a new certificate filed.

(2) Dealers within the State having both sales and use tax to report shall register for sales tax purposes, and report sales and use tax on forms provided for such purposes.

(3) Dealers having average monthly gross sales of $400.00 or less and taxable services of $100.00 or less may in the discretion of the Commissioner of Revenue be required to pay tax to their suppliers on purchases in lieu of registering for sales and use tax purposes since the Department’s cost of administering the account would exceed the taxes reported.

(4) An individual property owner who sells, rents, or charges for the occupation of a room, lodging, or accommodation for a period of less than ninety (90) continuous days and a property management company that is required to collect sales and use tax on behalf of an individual property owner as required by T.C.A. § 67-6-501 shall file with the Commissioner an application for a certificate of registration for each property that it owns or manages. If an individual property owner owns or a property management company manages multiple locations within one local jurisdiction, the individual property owner or the property management company shall be required to register only one location per local jurisdiction and report all sales in that local jurisdiction to the registered location.

History

Authority: T.C.A. §§ 67-1-102, 67-6-205, 67-6-402, and 67-6-501.
Administrative History: Original rule certified June 7, 1974. Amendment filed December 15, 1986; effective January 29, 1987. Amendment filed June 28, 2000; effective September 11, 2000. Amendments filed June 28, 2016; effective September 26, 2016. Amendments filed October 3, 2016; effective January 1, 2017.

Tenn. Comp. R. & Regs. 1320-05-01-.64 REPEALED

History

Authority: T.C.A. §§ 67-101 and 67-3045.
Administrative History: Original rule certified June 7, 1974. Repeal filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-05-01-.65 SIGN MANUFACTURERS AND PAINTERS

(1) Sales of signs which are and remain tangible personal property are subject to the Sales and Use Tax, based upon the actual sales price thereof. Charges for installing signs which are and remain personal property which are made in connection with the sale of the signs, and any charges for repairs or maintenance of signs which are and remain personal property are subject to the Sales Tax. Signs which are and remain tangible personal property are these which are not attached in a permanent fashion to buildings or which are not an integral part of such structure or buildings, or which are not displayed on structures securely anchored in the ground.

(2) Sales of signs which are attached in a secured and permanent fashion to buildings, which are an integral part of such buildings, or which are displayed on structures securely anchored in the ground, are subject to the Sales Tax based on the selling price thereof. Any charges for installing, repairing or maintaining such signs are not subject to the tax, but the person so installing, repairing or maintaining such signs shall be regarded as the user and consumer of tangible personal property which is used in connection with such installation, repair or maintenance, and shall be liable for the Sales or Use Tax on such materials in this case, the tax is due on the actual selling price of the sign which is securely and permanently attached to the building or to structures bolted to the building or to structures permanently anchored in the ground on heavy wood or steel poles.

(3) Persons engaged in the business of painting signs on buildings or other real or personal property shall be considered as rendering services, not subject to the tax. Sales of paint and any other tangible personal property to such persons are subject to the Sales and Use Tax.

(4) Signs which are personal property and which are leased to others are subject to Sales or Use Tax. Where space on signs which are real property is leased to others, and where the lessor has a right to remove the signs at the end of a specified period to time, the lease shall not be regarded as a lease of tangible personal property subject to the Sales or Use Tax; any materials, supplies and equipment which are used in connection with the construction, upkeep, repair, or maintenance, however, are subject to the Sales or Use Tax.

History

Authority: T.C.A. §§ 67-101 and 67-3045.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-05-01-.66 REPEALED

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Repeal filed June 28, 2000; effective September 11, 2000.

Tenn. Comp. R. & Regs. 1320-05-01-.67 PRINTING INDUSTRY

(1) Sales of advertising circulars, books, forms, tickets, and other like printed items of tangible personal property are subject to sales and use tax unless the printed matter is sold for resale purposes.

(2) The printing and binding of paper, books, forms, letters, and the like is a fabrication thereof, and is subject to sales and use tax unless the fabrication is a part of a manufacturing process for resale. It is immaterial whether the customer furnishes any or all the paper or other materials used in the fabrication work. Any rebinding or other repair of a book or other tangible personal property is subject to sales and use tax.

History

Authority: T.C.A. §§ 67-101, 67-1-102, 67-3045, 67-6-102, 67-6-102(23), and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Public necessity rule filed February 29, 2008; effective through August 12, 2008. Amendment filed March 31, 2008; effective July 29, 2008. Amendment filed March 31, 2008; effective July 29, 2008. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-05-01-.68 RESALE CERTIFICATE

(1) Dealers shall require certificates of resale for all tangible personal property sold or services rendered in this State, for the purpose of resale, and such certificates must be available at the establishment of the dealer for ready inspection and comparison with the deductions claimed on monthly Sales and Use Tax returns. A dealer duly registered under the provisions of the Sales Tax Act and continually engaged in the business of selling tangible personal property or taxable services at retail may present evidence to his wholesaler or supplier as to his registration as a retailer, and shall not be required to execute additional certificates of resale for individual purchases as long as there is no change in the character of his operation, and the purchases are of tangible personal property or taxable services of a sort usually purchased by the purchaser for resale.

(2) All sales for resale which are not supported by resale certificates properly executed shall be deemed retail sales, and the dealer held liable for the tax unless the same comes within the exception mentioned as a part of paragraph (1) of this rule.

(3) Certificates of resale may not be used to obtain tangible personal property or taxable services to be used by the purchaser, and not for resale; such use shall be grounds for the Commissioner to revoke the registration certificate of the dealer wrongfully making use of such certificate of resale. In addition to this penalty it is a misdemeanor to misuse the certificate of registration and resale certificates for the purpose of obtaining tangible personal property or taxable services without the payment of the Sales or Use Tax when it is due.

(4) Provided, however, the Commissioner may extend special written permission to a registered dealer to make purchases for his own use under a certificate of resale, and to report separately his tax liability to the Department under exceptional circumstances or hardship upon the taxpayer. A certified or photostatic copy of such permission shall be filed with the wholesaler or dealer. This special written permission to remit the use tax shall in no wise alter or affect the test or criteria for determination of whether a transaction is taxable in this State.

History

Authority: T.C.A. §§ 67-101, 67-1-102, 67-3045, 67-6-409(b)(1), 67-6-102(13)(A), and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Amendment filed December 15, 1986; effective January 29, 1987. Public necessity rule filed February 29, 2008; effective through August 12, 2008. Amendment filed March 31, 2008; effective July 29, 2008.

Tenn. Comp. R. & Regs. 1320-05-01-.69 REPEALED

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Repeal filed June 28, 2000; effective September 11, 2000.

Tenn. Comp. R. & Regs. 1320-05-01-.70 HOTELS, MOTELS, INNS, LODGING HOUSES, APARTMENT HOUSES

(1) The sale, rental or charges for any rooms, lodgings, or accommodations furnished to transients by any hotel, inn, tourist court, tourist cabin, motel, or any place in which rooms, lodgings, or accommodations are furnished to transients for a consideration, are subject to the Sales Tax. The tax shall apply to any charges made for rooms, lodgings or accommodations until the same person or persons has (have) occupied the rooms, lodgings, or accommodations for a period of ninety (90) continuous days or more, and applies without regard to whether payment for the charges is ever received from that customer.

(2) After a transient has occupied a room or other accommodation for ninety (90) continuous days or more the dealer furnishing the room or other accommodations may refund any Sales Tax which he has actually collected from the person, and claim credit for that tax on a subsequent return filed with the Department.

(3) Sales of such articles as beds, bedding, bathroom supplies, equipment, and all other supplies and taxable services used by hotels, inns, motels, or any place of business offering lodging accommodations for a consideration, are sales to consumers, and are, therefore, subject to the Sales or Use Tax.

History

Authority: T.C.A. §§ 67-101 and 67-3045.
Administrative History: Original rule filed June 7, 1974.

Tenn. Comp. R. & Regs. 1320-05-01-.71 REPEALED

History

Authority: T.C.A. §§ 67-101, 67-1-102, 67-3045, and 67-6-102(23) and (71).
Administrative History: Original rule filed June 7, 1974. Public necessity rule filed February 29, 2008; effective through August 12, 2008. Repeal filed March 31, 2008; effective July 29, 2008.

Tenn. Comp. R. & Regs. 1320-05-01-.72 SERVICE STATIONS

(1) Services such as repairing tires and tubes, replacing parts in motor vehicles, charging batteries, switching tires, washing motor vehicles, and lubrication are subject to the Sales and Use Tax.

(2) Tangible personal property which can be identified as going to the customer, such as parts, grease, patches, etc., may be purchased on a resale certificate without payment of the tax to the vendor. Other types of supplies and equipment such as machinery, car wash soap and detergents, etc., are subject to the tax. The tax due thereon must be paid by the operator of the service station to the vendor making the sale.

History

Authority: T.C.A. §§ 67-1-102, 67-6-102, and 67-6-402.
Administrative History: Original rule filed June 7, 1974. Amendment filed June 28, 2000; effective September 11, 2000.

Tenn. Comp. R. & Regs. 1320-05-01-.73 REPEALED

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Repeal filed June 28, 2000; effective September 11, 2000.

Tenn. Comp. R. & Regs. 1320-05-01-.74 TAXPAYER’S REPORTS

(1) All dealers selling any tangible personal property or furnishing any of the services subject to sales tax from a location in the State and all vendors and users, whether within or without the State having an “active” account as designated in their Certificate of Registration shall file a complete report of all sales, purchases, deductions, etc., with the Commissioner of Revenue for each month (except as indicated in paragraph (2)). These reports shall be filed regardless of whether the dealer or user is a “manufacturer,” “wholesaler,” or “retailer,” or whether there have been any sales or purchases of any kind, or whether there is any sales and use tax due to be paid.

(2) Reporting on other than a monthly basis may be permitted as follows:

(a) Dealers whose sales and use tax liability for twelve consecutive months has averaged $200 or less per month may be permitted in the discretion of the Commissioner to file returns and make remittances thereon on a quarterly or annual basis. Quarterly returns and remittances thereon shall cover the three calendar months ending on the last day of March, June, September and December. Annual returns and remittances thereon shall cover the 12 calendar months ending on the last day of December.

(b) If a dealer’s tax liability for any subsequent twelve month period should exceed $2400, or if the Commissioner should determine that a loss of revenue might result from permitting such dealer to continue filing returns and making remittances on other than a monthly basis, the Commissioner may require such dealer to file on a monthly basis.

Failure to timely file a return or make remittance of the tax due thereon shall be grounds for returning a dealer to a monthly basis of filing returns and making remittances.

(c) A new dealer whose business in the determination of the Commissioner is highly likely to qualify under (a) may be permitted to file returns and make remittances on other than a monthly basis without the required reporting experience.

(d) Dealers filing returns and making remittances on other than a monthly basis shall be liable for penalties and interest on the same basis as dealers on a monthly basis are liable. Monthly, quarterly and annual returns shall be filed and remittances made thereon on or before the 20th day of the month following the close of the period covered by such returns and remittances and shall be delinquent if made after such time.

History

Authority: T.C.A. §§ 67-1-101, 67-1-102, 67-3045, 67-6-402, 67-6-504, and 67-6-505.
Administrative History: Original rule filed June 7, 1974. Amendment filed April 28, 1977; effective October 1, 1977. Amendment filed December 15, 1986; effective January 29, 1987. Amendment filed June 2, 1989; effective July 17, 1989. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-05-01-.75 LAYAWAY AND WILL-CALL SALES

A sale whose delivery is conditional on payment of the amount due on the price of the sale is not completed until the amount due is received by the seller and, therefore, not taxable until the tangible personal property or service is delivered to the customer.

History

Authority: T.C.A. §§ 67-101 and 67-3045.
Administrative History: Original rule filed June 7, 1974.

Tenn. Comp. R. & Regs. 1320-05-01-.76 TIPS, GRATUITIES AND SERVICE CHARGES

(1) The term “tip ” means a monetary gift or gratuity given by a customer to a server in a bar or restaurant or similar establishment. Tips are not normally included in the sales price of food or beverages sold.

(2) (a) Ti ps will, however, be included in the sales price of food or beverages if the tips are either mandatory on the part of the purchaser or if the tips are not returned to the persons performing the service.

(b) A charge which is automatically added to the customer’s bill by the seller shall be considered mandatory, whether styled by the seller as a tip, gratuity or otherwise. This presumption may be overcome by an affirmative showing by the seller by a preponderance of the evidence that the prevailing practice was that payment of such charge was not required.

History

Authority: T.C.A. §§ 67-1-102, 67-6-102 and 67-6-402; Memphis Country Club v. Tidwell, 503 S.W.2d 919 (Tenn. 1973).
Administrative History: Original rule filed June 7, 1974. Repeal filed December 15, 1986; effective January 29, 1987. Original rule filed January 31, 1992; effective March 16, 1992.

Tenn. Comp. R. & Regs. 1320-05-01-.77 REPEALED

History

Authority: T.C.A. §§ 67-1-102, 67-6-504(i), and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Public necessity rule filed February 29, 2008; effective through August 12, 2008. Repeal filed March 31, 2008; effective July 29, 2008.

Tenn. Comp. R. & Regs. 1320-05-01-.78 EXEMPTION CERTIFICATE

(1) Dealers making sales of tangible personal property and furnishing services that are subject to the Sales Tax to vendees exempt from payment of the Sales and Use Tax shall obtain and keep, as a part of their books and records, appropriate exemption certificates. Dealers shall likewise obtain and keep, as a part of their records, appropriate exemption certificates for sales of tangible personal property which is not specifically exempt from the Sales or Use Tax, but which may be used in a manner that will exempt it from the Sales or Use Tax. Such exemption certificates shall be maintained in the establishment of the dealer making such sales, and shall be available for inspection and comparison with the Sales or Use Tax return upon which any deduction is made from gross sales.

(2) All sales for which an exemption has been claimed, but which are not supported by exemption certificates, will be deemed retail sales, and the dealer will be held liable for the Sales or Use Tax due thereon.

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-05-01-.79 REFUNDS OF, OR CREDIT FOR OVERPAYMENT OF SALES OR USE TAX

Persons who have overpaid Sales or Use Tax to the State may file a Claim for Refund for any taxes paid within the time period provided at T.C.A. § 67-1-707. Such person’s records must show that customers have been refunded the Sales or Use Tax, or that they have been given credit for such tax, where this is the basis for the refund. No credit for overpayment of taxes may be given unless a person claiming credit would have a right to receive the credit by means of a Claim for Refund.

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Amendment filed March 3, 1983; effective June 15, 1983.

Tenn. Comp. R. & Regs. 1320-05-01-.80 RECORDS OF DEALERS, PRESERVATION OF

(1) Every dealer must keep and preserve such adequate and complete records as are required by law to determine the amount of Sales and Use Tax for which he may be liable: it is advisable for every dealer to keep and preserve such records for a period of six years. Such records shall include and show:

(a) A daily record of all cash and credit sales, including sales under any type of financing or installment plan in use;

(b) A record of the amount of all merchandise purchased, including all bills of lading, invoices, and copies of purchase orders;

(c) A record of all deductions and exemptions allowed by law and/or claimed in filing Sales or Use Tax returns, including exemption and resale certificates;

(d) A record of all tangible personal property used or consumed in the conduct of his business;

(e) A true and complete inventory of the value of the stock on hand taken at least once yearly.

(2) If an assessment has been made and an appeal to the Commissioner or to a Court is pending, books and records, as above specified, relating to the period covered by such proposed assessment, must be preserved until the final disposition of the appeal.

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-05-01-.81 DAIRIES

(1) Dairy products sold for use or consumption in this State are subject to the Sales or Use Tax as follows:

(a) A dairy buying all of its milk used for processing is required to collect, report, and pay the Sales or Use Tax on all of its sales for use or consumption.

(b) A farmer dairyman selling his own milk produced on his farm is not required to collect the Sales or Use Tax on his sales.

(c) A farmer dairyman buying milk for processing, either to supplement his own milk, or to fill in at times when he has no milk of his own to process, is required to collect, report and pay the Sales or Use Tax on that part which is purchased.

(d) A farmer dairyman who buys milk for processing and intermingles it with his own milk is required to collect, report, and pay the Sales or Use Tax on all of his sales for use or consumption.

(2) Supplies, equipment and taxable services used by dairies to process dairy products are subject to the Sales or Use Tax.

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-05-01-.82 ADMINISTRATION OF OATHS

The Commissioner, or any of his duly authorized representatives, may administer oaths and take affirmations in any matter pertaining to the administration of the Sales Tax Law.

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-05-01-.83 REPEALED

History

Authority: T.C.A. §§ 67-101, 67-1-102, 67-3045, and 67-6-504(i).
Administrative History: Original rule certified June 7, 1974. Amendment filed February 27, 1976; effective May 14, 1976. Public necessity rule filed February 29, 2008; effective through August 12, 2008. Repeal filed March 31, 2008; effective July 29, 2008.

Tenn. Comp. R. & Regs. 1320-05-01-.84 REPEALED

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Repeal filed June 28, 2000; effective September 11, 2000.

Tenn. Comp. R. & Regs. 1320-05-01-.85 COMMON CARRIERS

(1) A common carrier shall pay the Sales or use Tax on all tangible personal property or taxable services which it buys or uses in this State, except rolling stock, aircraft, or floating equipment which enters the State in actual use in interstate commerce at the time of entering and is continuously used in interstate commerce thereafter. This exception shall not apply to such equipment which is localized for use within the State.

(2) Where tangible personal property is stored in this State, and is later exported to another State for use therein, the tax previously having been paid on this property, the common carriers may take credit for the tax paid on said property, in settlement for the month in which the property is removed from this State, provided accurate records of all transactions are kept on file.

(3) Lubricants and fuel put into equipment storage facilities outside the State, and brought into this State are not subject to the Sales or Use Tax; lubricants and fuel put into equipment storage facilities in this State are subject to the Sales or use Tax. This rule is applicable regardless of the amount of lubricants or fuel used in this State.

(4) Dealers making sales for use and consumption from locations in the State are liable for the applicable Sales Tax due thereon regardless of any possible losses or damages which may occur while the tangible personal property is in the hands of a common or contract carrier.

Any claims for losses or damages to such property shall include the applicable Sales Tax.

Claims for losses or damages for tangible personal property sold by a dealer for use and consumption from a place of business in the State, but actually shipped from a location out of the State shall likewise include the applicable Sales Tax. Dealers making sales, and users and consumers making shipments from out of state locations shipping tangible personal property into the State for use and consumption may be given credit for any losses or damages to tangible personal property shipped into this State for use and consumption, and the Use Tax on such losses and damages will not be considered as a part of claims for losses or damages.

(5) Common carriers making regular sales of damaged tangible personal property shall be deemed to be dealers selling tangible personal property, and must collect and be liable for any applicable Sales Tax.

History

Authority: T.C.A. §§ 67-101 and 67-3045.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-05-01-.86 RAILROAD CROSS TIES, BRIDGE TIMBERS, ETC

(1) Where a railroad buys untreated ties or timber in this State and pays the Sales Tax thereon, it may, thereafter, have such ties or timber creosoted within or without the State without being subject to the payment of further Sales or Use Tax if such property is used in this State.

(2) Where a railroad buys untreated ties or timber in this State for shipment in interstate commerce and does not pay the Sales or Use Tax thereon, and such ties or timber are shipped and creosoted outside the State, and subsequently shipped and used in this State, such railroads will be required to pay a Use Tax thereon, based upon the cost of the untreated ties or timber in Tennessee, and the cost of processing of the finished product brought into the State.

(3) Where a railroad buys untreated ties or timber outside the State and brings said property into the State for creosoting or other processing treatment, such railroads will be required to pay a Use Tax based upon the amount paid for such untreated ties and timber.

(4) Where a railroad buys untreated ties or timber outside the State, and the same are creosoted outside the State of Tennessee, and the railroad subsequently brings said ties or timber into the State for use, such railroad will be required to pay the Use Tax thereon, based upon the cost of the finished product.

History

Authority: T.C.A. §§ 67-101 and 67-3045.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-05-01-.87 REPEALED

History

Authority: T.C.A. §§ 67-101, 67-1-102, 67-3045, 67-6-207 67-6-504(I).
Administrative History: Original rule certified June 7, 1974. Public necessity rule filed February 29, 2008; effective through August 12, 2008. Repeal filed March 31, 2008; effective July 29, 2008.

Tenn. Comp. R. & Regs. 1320-05-01-.88 REPEALED

History

Authority: T.C.A. §§ 67-101, 67-1-102, 67-3045, and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Repeal filed February 14, 1990; effective April 1, 1990.

Tenn. Comp. R. & Regs. 1320-05-01-.89 EXTENSION OF TIME

(1) The Commissioner, under emergency or other extraordinary conditions, may extend for not to exceed thirty (30) days the time for filing any sales or use tax return pursuant to T.C.A. § 67- 6-506. Requests for extensions must state why the extension is needed; must be in writing, must be signed by the dealer or his representative; and must be made before the due date of the return.

(2) Emergency or other extraordinary conditions shall include intervening providential causes such as the occurrence of a disabling injury or illness, or death of the taxpayer, or a member of his immediate family or of a person upon whom the taxpayer has previously exclusively relied for the preparation of his returns. Emergency or extraordinary conditions shall also include the destruction by fire or other casualty of the taxpayer’s place of business or records, or the breakdown or malfunction of a computer essential to preparation of the return.

History

Authority: T.C.A. §§ 67-101, 67-1-102, 67-3045, 67-6-402, and 67-6-506.
Administrative History: Original rule certified June 7, 1974. Amendment filed December 15, 1986; effective January 29, 1987.

Tenn. Comp. R. & Regs. 1320-05-01-.90 BILLING OF SALES AND USE TAX

(1) Vendors must indicate in some definite manner whether their customers are paying any Sales Tax. This indication must be stated on the ticket, invoice, or other record given to the customer, or it may be shown by posting a sign in the place of business of the dealer indicating that the prices shown include any applicable Sales Tax. This statement cannot be included on a ticket, invoice, or other record given, and tax may not be charged, to vendees who are exempt from paying the Sales Tax.

History

Authority: T.C.A. §§ 67-101, 67-1-102, 67-3045, and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-05-01-.91 CREDIT FOR SALES AND USE TAX PAID IN OTHER STATES

(1) Persons actually paying a legally imposed Sales or Use Tax to another State on tangible personal property or taxable services imported into this State may claim such payment as a credit against any Use Tax liability accruing in this State. The Commissioner may require persons claiming such credit to furnish the name of the vendor from whom he purchased the property, and an affidavit that such a tax has been paid. See also 1320-05-01-.09(2) regarding new residents.

(2) Fees paid in States to register a motor vehicle are not a Sales or Use Tax, and may not be claimed as a credit for a Sales or Use Tax paid to another State.

History

Authority: T.C.A. §§ 67-1-102, 67-6-402, and 67-6-507.
Administrative History: Original rule certified June 7, 1974. Amendment filed June 28, 2000; effective September 11, 2000.

Tenn. Comp. R. & Regs. 1320-05-01-.92 REPEALED

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Repeal and filed December 15, 1986; effective January 29, 1987.

Tenn. Comp. R. & Regs. 1320-05-01-.93 REPEALED

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Repeal filed December 15, 1986; effective January 29, 1987.

Tenn. Comp. R. & Regs. 1320-05-01-.94 REPEALED

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Repeal filed December 15, 1986; effective January 29, 1987.

Tenn. Comp. R. & Regs. 1320-05-01-.95 USE OF PROPERTY UPON WHICH NO SALES OR USE TAX HAS BEEN PAID

When a person purchases tangible personal property upon which no Sales or Use Tax is paid, and which is used or consumed as tangible personal property subject to the Sales or Use Tax, such use must be reported and a tax paid thereon for the month in which the taxable use arose. It is the duty of the person to keep accurate records to show what determination is made of such property.

History

Authority: T.C.A. §§ 67-1-102, 67-6-201, and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Amendment filed June 28, 2000; effective September 11, 2000.

Tenn. Comp. R. & Regs. 1320-05-01-.96 REPEALED

History

Authority: T.C.A. §§ 4-3-1903, 67-101, 67-1-102, 67-3045, and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Repeal filed October 12, 2021; effective January 10, 2022.

Tenn. Comp. R. & Regs. 1320-05-01-.97 DEFINITIONS

(1) The following terms wherever used in these Rules and Regulations shall have the following meanings:

(a) “Commissioner” shall mean the Department of Revenue of the State of Tennessee.

(b) “Department” shall mean the Department of Revenue of the State of Tennessee.

(d) “Sales Tax Law” or “Sales Tax Act” shall mean the “Retailers’ Sales Tax Act,” as codified in Title 67, Chapter 6, T.C.A.

(e) “State” shall mean the State of Tennessee.

History

Authority: T.C.A. §§ 67-101, 67-1-102, 67-3045, and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Amendment filed December 15, 1986; effective January 29, 1987.

Tenn. Comp. R. & Regs. 1320-05-01-.98 REPEALED

History

Authority: T.C.A. §§ 67-1-101 and 67-3045.
Administrative History: Original rule certified June 7, 1974. Repeal filed March 3, 1983; effective June 15, 1985.

Tenn. Comp. R. & Regs. 1320-05-01-.99 ADVERTISING, ADVERTISING AGENCIES, ETC

(1) Charges made for advertising in newspapers, magazines, brochures, programs, etc., are not subject to the Sales or Use Tax. Any sales or works of art to be used in preparing advertising material for use in newspapers, magazines, brochures, programs, etc., are however, subject to the Sales and Use Tax.

(2) In the event an advertising agency sells tangible personal property to its clients, or obtains tangible personal property for a client and charges the client more for the property than the agency pays for the property the agency shall collect, report and pay the Sales or Use Tax on the amount actually charged or received for the tangible personal property.

(3) Catalogues, magazines, handbills, and other items of tangible personal property which are sold, imported, or caused to be imported into the State for advertising purposes, and which are not for resale purposes, are subject to the Sales or Use Tax. Any charges for postage are not subject to the Sales or Use Tax, provided the charge for postage is stated separately on the invoice.

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-05-01-.100 ALCOHOLIC BEVERAGES AND BEER

(1) All sales of alcoholic beverages, including beer, ale and any other malt beverages, are subject to the Sales or Use Tax.

(2) The sales price subject to tax shall include any and all Federal and State taxes, except the tax imposed by T.C.A. § 57-4-301(c) on the sale of alcoholic beverages.

History

Authority: T.C.A. §§ 67-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Amendment filed December 15, 1986; effective January 29, 1987.

Tenn. Comp. R. & Regs. 1320-05-01-.101 CONTRACTORS - USE OF TANGIBLE PERSONAL PROPERTY UPON WHICH NO

SALES OR USE TAX HAS BEEN PAID. Any tangible personal property or taxable service which is furnished by a church to a contractor or subcontractor for use in church construction is exempt from the Sales or Use Tax, but the exemption does not apply to any materials which may be furnished and used in constructing any other building or improvement to real property, even though it may be for a church supported hospital, school, orphanage, etc.

History

Authority: T.C.A. §§ 67-1-102, 67-6-209, 67-6-322, and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Amendment filed June 28, 2000; effective September 11, 2000.

Tenn. Comp. R. & Regs. 1320-05-01-.102 ELECTRIC GENERATING PLANTS AND TRANSMISSION SYSTEMS

(1) Tangible personal property which actually becomes a component part of an electric generating plant or distribution system owned or operated by the United States or any of its agencies, by the State of Tennessee, or any of its political subdivisions, or any Electric Membership Corporation or Electric Cooperative Organized pursuant to the Tennessee Law, is exempt from the Sales or Use Tax. This exemption applies without regard to who purchases the tangible personal property, and without regard to the form of any contract involved for the installation of the property as a part of such a system. The exemption provided for herein does not apply to any tangible personal property as a part of such a system. The exemption provided for herein does not apply to any tangible personal property or taxable service which is used in the process of installing the exempt property, when such property does not become a component part of the electric generating plant or distribution system.

(2) Contractors and sub-contractors purchasing tangible personal property to be use as a component part of an electric generating plant or distribution system may furnish their supplier an exemption certificate for each purchase in lieu of the Sales or Use Tax on such sales. Dealers making such sales shall keep such certificates as part of their records. Any dealer who has made any sales which would otherwise be exempt because of this rule and

regulation, but who fails to obtain an appropriate exemption certificate at the time of making the sale, shall nevertheless be liable for the payment of any Sales or Use Tax which would otherwise be due on such a transaction.

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-05-01-.103 FABRICATION OR PROCESSING OF TANGIBLE PERSONAL PROPERTY TO BE

APPLIED TO OR INSTALLED ON REAL PROPERTY, OR TANGIBLE PERSONAL PROPERTY

OTHERWISE USED.

(1) Any manufacturer, producer, compounder or contractor who builds, makes, compounds or otherwise fabricates tangible personal property in a manner changing the form of the property used, and then uses the property shall be liable for use tax upon the fair market value of the fabricated property.

(2) Contractors and sub-contractors who are not in the business of selling tangible personal property which they fabricate to erect or apply as a component part of a building shall pay the Sales or Use Tax on the purchase price of the materials and supplies used in connection with their contract work.

(3) Any manufacturer, producer, compounder, or contractor who fabricates, in any manner, any tangible personal property, such as machinery, or other equipment for use, shall pay a Sales or Use Tax upon the fair market value of the fabricated property.

(4) In no case shall the total Sales or use Tax due, under the provisions of this rule, be less than the tax due on the cost of the materials plus direct labor and overhead involved in fabricating or severing the item of tangible personal property applied to real property, or otherwise used, except as indicated in (2) above.

History

Authority: T.C.A. §§ 67-1-102, 67-6-209, and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Amendment filed February 17, 1988; effective May 29, 1988. Amendment filed June 28, 2000; effective September 11, 2000.

Tenn. Comp. R. & Regs. 1320-05-01-.104 PARKING LOTS

(1) The Sales Tax applies to any charges made for storing or parking motor vehicles and trailers overnight, but does not apply to charges made for storing and parking trailers, other than overnight, when the trailers are not attached to motor vehicles.

(2) Charges for storing airplanes, motorboats, and similar conveyances are not subject to tax under T.C.A. § 67-6-102(13)(F)(ii).

History

Authority: T.C.A. §§ 67-1-102, 67-6-102, and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Amendment filed December 15, 1986; effective January 29, 1987. Amendment filed June 28, 2000; effective September 11, 2000.

Tenn. Comp. R. & Regs. 1320-05-01-.118 REPEALED

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Repeal filed June 28, 2000; effective September 11, 2000.

Tenn. Comp. R. & Regs. 1320-05-01-.119 EXEMPT EVENTS

Organizations qualified as exempt from federal taxes under 26 U.S.C. §501(c) or that are listed in Major Group 86 of the Standard Industrial Classification Manual of 1972, as amended, which wish to obtain a prior advisory ruling on the events exempt status may provide the Department with information relating to where and when the event will be held and details concerning the conducting, producing and promoting of the event. This information should be supplied in letter form at least thirty (30) days prior to the event. A copy of the organization’s 26 U.S.C. §501(c) determination or other proper evidence of the organization’s exempt status should also be submitted.

History

Authority: T.C.A. §§ 67-1-102, 67-6-212, 67-6-330, and 67-6-402.
Administrative History: Original rule filed May 18, 1984; effective June 17, 1984. Amendment filed June 1, 1988; effective September 28, 1988.

Tenn. Comp. R. & Regs. 1320-05-01-.120 ATHLETIC AND INTERSCHOLASTIC SPORTING EVENTS

All proceeds from dues, fees, or other charges made for admission to interscholastic sporting events held or sponsored by private or public colleges or universities are subject to tax notwithstanding T.C.A. § 67-6-330; except proceeds from activity fees charged students. Proceeds from athletic events for participants under eighteen years of age sponsored by civic or not-for profit organizations, other than private or public colleges or universities, are not taxable. If any individual eighteen (18) years of age or older may qualify for participation in the event, the entire gross proceeds of the event shall be taxable

History

Authority: T.C.A. §§ 67-1-102, 67-6-212, 67-6-330, and 67-6-402.
Administrative History: Original rule filed May 18, 1984; effective June 17, 1984. Amendment filed June 1, 1988; effective September 28, 1988. Amendment filed June 28, 2000; effective September 11, 2000.

Tenn. Comp. R. & Regs. 1320-05-01-.121 FREE, COMPLIMENTARY, OR REDUCED DUES, FEES, OR ADMISSION

CHARGES. Free or complimentary dues, fees, or admission charges are taxable when made in connection with a valuable contribution. Tax shall apply only to that portion of the contribution which represents the fair market value of the membership or admission. Where memberships or admissions are purchased at a reduced charge, tax shall apply only to the reduced charge; provided that tax shall also apply to any additional contribution up to the actual fair market value of the membership or admission.

The sales and use tax is not imposed on free amusements provided to employees of amusement providers as fringe benefits (e.g., free tans to employees of a tanning bed operator or free membership to employees of a health spa).

History

Authority: T.C.A. §§ 67-1-102, 67-6-212, and 67-6-402.
Administrative History: Original rule filed May 18, 1984; effective June 17, 1984. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-05-01-.122 ENTERING OR ENGAGING IN AMUSEMENT OR RECREATIONAL ACTIVITY

Fees or charges for the privilege of entering or engaging in tennis, racquetball, handball, skiing, dancing or any other amusement or recreational activity are taxable in addition to membership fees or admissions.

Fees or charges for instruction in such activities are not taxable. If recreational activity not essential to or a part of the instruction is also provided, the entire charge shall be subject to tax unless charges for instruction are separately billed.

History

Authority: T.C.A. §§ 67-1-102, 67-6-212, 67-6-330, and 67-6-402.
Administrative History: Original rule filed May 18, 1984; effective June 17, 1984. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-05-01-.123 CHARGES FOR USING PROPERTY FOR AMUSEMENT, SPORTS,

ENTERTAINMENT OR RECREATION. Charges for using entertainment equipment such as televisions, stereo equipment, etc., are taxable. Tangible personal property purchased by a dealer and provided to the customer in the manner described herein for use only on the premises of the owner is not deemed to be purchased for resale.

History

Authority: T.C.A. §§ 67-1-102, 67-6-212, and 67-6-402.
Administrative History: Original rule filed May 18, 1984; effective June 17, 1984. Amendment filed November 1, 1990; effective February 27, 1991. Amendment filed June 28, 2000; effective September 11, 2000.

Tenn. Comp. R. & Regs. 1320-05-01-.124 REPEALED

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Repeal filed June 28, 2000; effective September 11, 2000.

Tenn. Comp. R. & Regs. 1320-05-01-.125 REPEALED

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Repeal filed June 28, 2000; effective September 11, 2000.

Tenn. Comp. R. & Regs. 1320-05-01-.126 REPEALED

History

Authority: T.C.A. §§ 67-1-102 and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Repeal filed June 28, 2000; effective September 11, 2000.

Tenn. Comp. R. & Regs. 1320-05-01-.127 REPEALED

History

Authority: T.C.A. §§ 67-1-102 and 67-6-212.
Administrative History: Original rule filed July 6, 1992; effective October 28, 1992. Repeal filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-05-01-.128 RESEARCH AND DEVELOPMENT

(1) The sales and use tax does not apply to machinery, apparatus, and equipment with all associated parts, appurtenances, and accessories for such machinery and equipment that is necessary to and primarily for research and development. The sales and use tax does not apply to repair parts and labor and installation of research and development machinery and equipment.

(2) (a) “Research and development” must have one of the following as its ultimate goal:

Basic research in a scientific field of endeavor;
Advancing knowledge or technology in a scientific or technical field of endeavor;
The development of a new product, whether or not the new product is offered for sale;
The improvement of an existing product, whether or not the improved product is offered for sale;
The development of new uses of an existing product, whether or not a new use is offered as a rationale to purchase the product; or 6. The design and development of prototypes, whether or not a resulting product is offered for sale.

(b) “Research and development” does not include:

Ordinary testing or inspection of materials or products used for quality control, other than that occurring during the activities listed in subsection (2)(a) of this

rule;

Market research;
Efficiency surveys;
Consumer surveys;
Advertising and promotions;
Management studies; or 7. Research in connection with literary, historical, social science, psychological, or other similar nontechnical activities.

(3) Persons who wish to make tax exempt purchases of research and development machinery shall apply to the Commissioner of Revenue for authority to make such purchases exempt from tax. The application shall give such information as the Commissioner may require.

(4) The research and development sales and use tax exemption authorization must be obtained prior to making such purchases exempt from the tax. However, if authority is not obtained prior to the purchase, the Commissioner may allow retroactive application of the authority upon a showing sufficient to the Commissioner that the failure to obtain authority resulted from:

(a) A major restructuring of the business or the business having gone through a change in ownership; or (b) A death of a key person in the tax area of the organization; or (c) The entity having been misled by state officials which indicated that authority to purchase research and development machinery was not required; or (d) Any other grounds that the Commissioner finds satisfactory to allow retroactive application of this exemption.

(5) Persons who have obtained the research and development tax exemption authorization for research and development shall provide their vendors with a copy of the authorization or a fully completed Streamlined Sales Tax certificate of exemption, which must include the research and development exemption authorization number included on the certificate issued by the Commissioner.

(6) Persons are not required to be engaged in any business of fabricating or processing tangible personal property for resale to qualify for the tax exemption authorization for research and development machinery.

History

Authority: T.C.A. §§ 67-1-102, 67-6-102, and 67-6-402.
Administrative History: New rule filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-05-01-.129 OUT-OF-STATE DEALERS

(1) Out-of-state dealers with a physical presence in Tennessee have a substantial nexus with this state. These dealers shall register with the Department for sales and use tax purposes and shall report and pay the appropriate tax to the Department on sales of tangible personal property and other taxable items delivered to consumers in this state.

(2) Out-of-state dealers who engage in the regular or systematic solicitation of consumers in this state through any means and make sales that exceed $500,000 to consumers in this state during the previous twelve-month period also have a substantial nexus with this state.

(a) By March 1, 2017, these dealers, if they have not already done so, shall register with the Department for sales and use tax purposes and thereby affirmatively acknowledge that they will collect and remit sales and use taxes to the Department beginning July 1, 2017. Beginning July 1, 2017, unless a later date is established by the Department by notice, these dealers shall report and pay the appropriate tax to the Department on sales of tangible personal property and other taxable items delivered to consumers in this state.

(b) Dealers who meet the $500,000 threshold after March 1, 2017, shall register with the Department and begin to collect and remit Tennessee sales and use tax by the first day of the third calendar month following the month in which the dealer met the threshold.

In no case, however, shall such dealers be required to collect and remit sales and use taxes to the Department for periods before July 1, 2017.

(3) Persons who purchase tangible personal property or other taxable items from any dealer that is registered with the Department must pay Tennessee sales and use tax to the dealer, unless the sale is otherwise exempt. Persons who import tangible personal property or other taxable items into this state and have not paid the sales and use tax to the dealer shall report and pay the use tax directly to the Department, unless the sale is otherwise exempt.

History

Authority: T.C.A. §§ 67-1-102, 67-6-402, and 67-6-501.
Administrative History: New rule filed October 3, 2016; effective January 1, 2017.

Chapter 1320-05-02 Local Sales and Use Tax Rules

Tenn. Comp. R. & Regs. 1320-05-02-.01 REPEALED

History

Authority: T.C.A. §§ 67-1-102 and 67-6-504(i).
Administrative History: Original rule certified June 7, 1974. Amendment filed February 27, 1976; effective May 14, 1976. Amendment filed February 14, 1990; effective April 1, 1990. Public necessity rule filed February 29, 2008; effective through August 12, 2008. Repeal filed March 31, 2008; effective July 29, 2008.

Tenn. Comp. R. & Regs. 1320-05-02-.03 DEFINITIONS

The following terms wherever used in these rules and regulations shall have the following meanings:

(a) “Commissioner” shall mean the Commissioner of Revenue of the State of Tennessee, or any of his duly authorized assistants.

(b) “Department” shall mean the Department of Revenue of the State of Tennessee.

(c) “Local government” shall mean any county, city, or town authorized by the “1963 Local Option Revenue Act” to impose a local sales tax within its jurisdiction.

(d) “Local officer” or “local official” shall mean the responsible person acting in an official capacity, who is designated in the resolution or ordinance imposing the local sales tax to whom official payments, notices, etc., shall be given by the Commissioner, and against whom suit may be brought by a taxpayer who claims that any payment which he may be required to make is illegal or improper.

(e) “Local rules and regulations” shall mean the rules and regulations as promulgated by the Commissioner from time to time in accordance with the provisions of the state sales tax law, and the “1963 Local Option Revenue Act.”

(f) “Local sales tax” shall mean any locally imposed tax pursuant to the provisions of the “1963 Local Option Revenue Act.”

(g) “Local sales tax law” shall mean the resolution or ordinance lawfully adopting a locally imposed tax.

(h) “Locally imposed tax” shall mean any lawfully imposed sales and use tax, including any applicable penalty and interest, by a local government pursuant to, and in accordance with the provisions of the state sales tax law and the “1963 Local Option Act”.

(i) “State” shall mean the State of Tennessee.

(j) “State rules and regulations” shall mean the Tennessee rules and regulations as promulgated from time to time by the Commissioner pursuant to the state sales tax law.

(k) “State sales tax” shall mean the Tennessee Sales and Use Tax, and penalty and interest where applicable, as provided for in the state sales tax law.

(l) “State sales tax law” shall mean the Tennessee sales and use tax law as provided for in the “Retailers’ Sales Tax Act” in Sections 67-6-101 to 67-6-607, inclusive, of the Tennessee Code Annotated.

(m) “Tax” shall mean and include any penalty and interest, when applicable.

(n) “Taxpayer” shall mean any dealer or any person as defined in the state sales tax law.

History

Authority: T.C.A. §§67-3045, 67-101 and 67-6-402.
Administrative History: Original rule certified June 7, 1974. Amendment filed February 14, 1990; effective April 1, 1990.

Tenn. Comp. R. & Regs. 1320-05-02-.02 COLLECTION OF LOCAL SALES TAX

(1) Any local government imposing a local sales tax may provide that it will collect its tax by means of its own officers and employees; promulgate rules and regulations which are not inconsistent with the state and sales and use tax law or the rules and regulations promulgated thereunder; adopt the state rules and regulations as they may be promulgated or changed form time to time; adopt provisions imposing penalty and interest; and use the same powers that are available to the Commissioner to administer the state sales tax law, make refunds for tax, penalty and/or interest collected improperly, and enforce payment by means of distress warrants, liens, injunction, etc. Provided, however, that no local government collection its own tax may prescribe or require a bracket system for the shifting of the tax burden to the consumer of tangible personal property or services, such bracket system being calculated to include the amount of the state tax in addition to the local tax, unless such bracket system shall be been approved specifically by the Commissioner.

(2) The Commissioner an the Department shall deem it feasible to collect, and shall collect any local sales tax under the following conditions.

(a) The resolution or ordinance imposing the local sales tax shall provide that:

The Department shall collect the sales or use tax, penalty and interest.
Penalty and interest shall be imposed and collected in the same manner as the penalty and interest is imposed and collected by and for the state.
The state rules and regulations as promulgated and as may be amended, changed, added or rescinded by the Commissioner for the state sales tax shall apply to the local sales tax and the administration of the local tax.
A local official shall be designated to receive any notice of a payment made under protest to the Commissioner, which the Commissioner will give to the county, city or town, and be the official against whom suit, if any, may be brought for recovery of any tax, penalty and interest which the Commissioner has collected and which is alleged by the taxpayer to be illegal or improper.

(b) The Commissioner shall have the right to, and shall proceed to do all things necessary to collect the tax, penalty and interest, enforce payment by any means available now and later available to the state to collect the state sales tax, make any necessary adjustments and refunds of the locally imposed tax, penalty and interest as may be necessary, and file any claims necessary in any court involving delinquent, insolvent, or bankrupt taxpayers, for the locally imposed tax, penalty and interest.

(c) The Commissioner shall undertake to defend any locally imposed tax insofar as a determination of the state tax will govern liability for a local sales tax, in the courts of Davidson County, Tennessee, only. Where there is no determination of a state tax to be made, and there is an alleged illegal payment to the Commissioner and suit is brought to recover the payment, the officer designated in the resolution or ordinance imposing the tax shall be named as the defendant, and shall do all things necessary to defend the action; such action shall be brought in the courts of the county where the tax is imposed.

(d) The county, city, or town imposing the local sales tax shall agree to pay a sufficient amount to the Commissioner to reimburse the Department for any costs involved in administering the local sales tax.

(e) The combined state and local tax rate must be a multiple of .25. Example: 7.75% but not 7.875%.

History

Authority: T.C.A. §§67-1-101, 67-6-402 and 67-3045.
Administrative History: Original rule certified June 7, 1974. Amendment filed February 14, 1990; effective April 1, 1990.

Tenn. Comp. R. & Regs. 1320-05-02-.04 ENERGY FUEL AND WATER

The locally imposed tax applies to any sales of water for use and consumption. Any sales of water, however to a manufacturer, are subject to tax at the rate applicable under T.C.A. 67-6-702(b). If a manufacturer has been exempted by the Commissioner from paying the state sales tax to the vendor because of his use of the water, the manufacturer shall not pay any local sales tax to the vendor, but shall report and pay the applicable tax on that portion of the water used which is not entirely exempt from the tax, as provided for in the state sales tax law, direct to the local government if it is collecting its own tax, or to the Commissioner if he is collecting the locally imposed tax for the local government. Where the Commissioner collects the tax for a local government, the authorizations given a manufacturer to purchase water at the state rate of one percent (1%) tax, or to be entirely exempt from the tax on a portion of the water because of the way it is used by the manufacturer, shall be deemed sufficient to authorize the manufacturer to be entitled to the reduced rate applicable under T.C.A. 67-6-702(b) or entirely exempt from the locally imposed tax.

History

Authority: T.C.A. §§67-1-102, 67-6-402, 67-6-701.
Administrative History: Original rule certified June 7, 1974. Amendment filed June 28, 2000; effective September11, 2000.

Tenn. Comp. R. & Regs. 1320-05-02-.05 LIABILITY FOR THE LOCALLY IMPOSED TAX

(1) Dealers shall be liable for sales tax on any sales which are made from any place of business within the physical limits of a local government imposing a local sales tax where delivery is made by the dealer to a user or consumer anywhere within the physical limits of the state, or to a carrier or the U.S. Post Office for delivery to a place within the physical limits of the state.

The place where a user or consumer may take or use tangible personal property or taxable services has no bearing on whether a sales tax is due. A dealer making sales form a place of business within the physical limits of a local government imposing a local sales tax shall not be liable for any sales tax where he deliveries possession of the tangible personal property or taxable services either to a place outside the physical limits of the state, or to a common carrier for delivery to a place outside the physical limits of the state, provided the transaction is bona fide, and the dealer has no reason to believe that the property or service sold is to be brought back immediately into the state for use.

(2) Out of state vendors subject to the jurisdiction of the state and making sales of tangible personal property or taxable services to persons within the physical limits of a local government imposing a local sales tax, for use and consumption, and who are subject to the jurisdiction of that local government, shall be liable for the local tax. Users and consumers within the physical limits of a local government imposing a local sales tax importing tangible personal property for use or consumption therein shall be liable for any use tax on purchases of tangible personal property and taxable services from dealers outside the state when the is not paid to such dealers for the local government.

History

Authority: T.C.A. §§67-3045 and 67-101.
Administrative History: Original rule certified June 7, 1974.

Tenn. Comp. R. & Regs. 1320-05-02-.06 REPEALED

History

Authority: T.C.A. §§67-1-102, 67-6-402, 67-6-701.
Administrative History: Original rule certified June 7, 1974. Repeal filed June 28, 2000; effective September 11, 2000.

Tenn. Comp. R. & Regs. 1320-05-02-.07 REGISTRATION

(1) Where the Commissioner is collecting a locally imposed tax, the Certificate of Registration which dealers have for the collection and paying of the state sales tax shall, except as provided for therein, be sufficient evidence of their registration with the Department t for the

purpose of collection and paying the locally imposed tax, and no additional Certificate of Registration shall be required.

(2) In those cases where a dealer has no separate State Certificate of Registration for a place of business within a county, city or town imposing a local sales tax, and the Commissioner is collecting the locally imposed tax, the dealer shall apply for and receive a separate Certificate of Registration form the Commissioner for each unit of local government imposing a local sales tax at the time the local tax becomes operative. This shall not apply to state use tax registrants, but such dealers (vendors or consumers) shall designate on a separate schedule what sales are made and what use tax is due to each local government imposing a local sales tax, and pay any tax due as indicated thereon to the Commissioner with the State Use Tax Return(s).

History

Authority: T.C.A. §§67-3045 and 67-101.
Administrative History: Original rule certified June 7, 1974

Chapter 1320-06-01 Franchise and Excise Tax Rules and Regulations

Tenn. Comp. R. & Regs. 1320-06-01-.01 REPEALED

History

Authority: T.C.A. §§ 67-1-102(a) and Acts 1999, Ch. 406, §2; effective July 1, 1999.
Administrative History: Original rule certified June 7, 1974. Repealed and refiled July 22, 1977; effective August 22, 1977. Repeal filed May 14, 2003; effective July 28, 2003.

Tenn. Comp. R. & Regs. 1320-06-01-.02 DUE DATE

The franchise and excise tax return shall be filed with the Commissioner of Revenue on or before the fifteenth (15th) day of the fourth month following the close of the taxpayer's taxable year. The return shall coincide with the accounting period covered by the federal return and the appropriate tax must be paid to the department at the time of filing the return. Returns that are based on a 52-53 week year will be due on or before the fifteenth (15th) day of the fourth month following the end of the month closest to the 52-53 week year end.

History

Authority: T.C.A. §§ 67-1-102(a), 67-1-102, 67-4-806, 67-44-817, 67-4-907, 67-4-915, 67-4-2007, 67-4- 2015, and 67-4-2119.
Administrative History: Original rule certified June 7, 1974. Repealed and refiled July 22, 1977; effective August 22, 1977. Amendment filed November 6, 1984; effective December 6, 1984. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-06-01-.03 REPEALED

History

Authority: T.C.A. §§ 67-102(a).
Administrative History: Original rule certified June 7, 1974. Amendment filed August 13, 1974; effective September 12, 1974. Repealed and refiled July 22, 1977; effective August 22, 1977. Repeal filed April 3, 1997; effective August 28, 1997.

Tenn. Comp. R. & Regs. 1320-06-01-.04 REPEALED

History

Authority: T.C.A. §§ 67-1-102(a), 67-4-817, 67-4-907, and 67-4-915.
Administrative History: Original rule certified June 7, 1974. Repealed and refiled July 22, 1977; effective August 22, 1977. Amendment filed November 6, 1984; effective December 6, 1984. Repeal filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-06-01-.05 REPEALED

History

Authority: T.C.A. §§ 67-1-102(a) and 67-4-817.
Administrative History: Original rule certified June 7, 1974. Repealed and refiled July 22, 1977; effective August 22, 1977. Amendment filed November 6, 1984; effective December 6, 1984. Repeal filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-06-01-.06 REPEALED

History

Authority: T.C.A. § 67-101(2).
Administrative History: Original rule certified June 7, 1974. Repealed and refiled July 22, 1977; effective August 22, 1977. Repeal filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-06-01-.07 REPEALED

History

Authority: T.C.A. § 67-102(a).
Administrative History: Original rule certified June 7, 1974. Repealed and refiled July 22, 1977; effective August 22, 1977. Repeal filed April 3, 1997; effective August 28, 1997.

Tenn. Comp. R. & Regs. 1320-06-01-.08 REPEALED

History

Authority: T.C.A. §§ 67-1-1-02(a), 67-4-819, and 67-4-916.
Administrative History: Original rule certified June 7, 1974. Repealed and refiled July 22, 1977; effective August 22, 1977. Amendment filed November 6, 1984; effective December 6, 1984. Amendment filed April 5, 1990; effective July 29, 1990. Repeal filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-06-01-.09 REPEALED

History

Authority: T.C.A. § 67-101(2).
Administrative History: Original rule certified June 7, 1974. Repealed and refiled July 22, 1977; effective August 22, 1977. Repeal filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-06-01-.10 REPEALED

History

Authority: T.C.A. § 67-101(2).
Administrative History: Original rule certified June 7, 1974. Amendment filed August 13, 1974; effective September 12, 1974. Repealed and refiled July 22, 1977; effective August 22, 1977. Repeal filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-06-01-.11 REPEALED

History

Authority: T.C.A. §§ 67-1-102(a), 48-1001, 48-1001, 48-1007, and 48-1108.
Administrative History: Original rule certified June 7, 1974. Repealed and refiled June 22, 1977; effective August 22, 1977. Amendment filed November 6, 1984; effective December 6, 1984. Repeal filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-06-01-.12 REPEALED

History

Authority: T.C.A. § 67-1-102(a) and Acts 1999, Ch. 406, §2; effective July 1, 1999.
Administrative History: Original rule certified June 7, 1974. Amendment filed August 13, 1974; effective September 12, 1974. Repealed and refiled July 22, 1977; effective August 22, 1977. Amendment filed November 6, 1984; effective December 6, 1984. Repeal filed May 14, 2003; effective July 28, 2003.

Tenn. Comp. R. & Regs. 1320-06-01-.13 REPEALED

History

Authority: T.C.A. § 67-101(2).
Administrative History: Original rule certified June 7, 1974. Amendment filed August 13, 1974; effective September 12, 1974. Repealed and refiled July 22, 1977; effective August 22, 1977. Repeal filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-06-01-.14 REPEALED

History

Authority: T.C.A. §§ 67-1-102(a) and 67-4-904.
Administrative History: Original rule certified June 7, 1974. Amendment filed August 13, 1974; effective September 12, 1974. Repealed and refiled July 22, 1977; effective August 22, 1977. Amendment filed November 6, 1984; effective December 6, 1984. Repeal filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-06-01-.15 INDEBTEDNESS-ADEQUACY OF CAPITAL

The amount of indebtedness to be included pursuant to T.C.A. § 67-4-2107 shall not exceed the greater of the following amounts: (1) Excess of indebtedness over quick assets (cash, receivables, marketable investments), (2) Excess of book value (cost less accumulated depreciation) of capital assets (including inventories) per ending balance sheet of the return over net worth (including surplus reserves). If quick assets exceed the indebtedness to an affiliated corporation and the net worth exceeds the capital assets, the capital is adequate and no part of such indebtedness need be included.

History

Authority: T.C.A. §§ 67-1-102 (a), 67-1-102, 67-4-905(c), and 67-4-2107.
Administrative History: Original rule certified June 7, 1974. Amendment filed August 13, 1974; effective September 12, 1974. Repealed and refiled July 22, 1977; effective August 22, 1977. Amendment filed November 6, 1984; effective December 6, 1984. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-06-01-.16 REPEALED

History

Authority: T.C.A. § 67-101(2).
Administrative History: Original rule certified June 7, 1974. Amendment filed August 13, 1974; effective September 12, 1974. Repealed and refiled July 22, 1977; effective August 22, 1977. Repeal filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-06-01-.17 REPEALED

History

Authority: T.C.A. § 67-1-102(a) and Acts 1999, Ch. 406, §2; effective July 1, 1999.
Administrative History: Original rule certified June 7, 1974. Repealed and refiled July 22, 1977; effective August 22, 1977. Amendment filed November 6, 1984; effective December 6. 1984. Repeal filed May 14, 2003; effective July 28, 2003.

Tenn. Comp. R. & Regs. 1320-06-01-.18 MINIMUM MEASURE OF FRANCHISE TAX

(1) Rentals included in the minimum measure of the franchise tax may be offset by subrentals only to the amount of rentals paid. To qualify as subrental, the sublessee must have the same rights as the lessee with respect to use of the property.

(2) If property owned by others is used by the taxpayer at no charge or rented by the taxpayer for a nominal rate, the net annual rental rate for such property shall be determined on the basis of a reasonable market rental rate for such property.

(3) Property in transit between locations of the taxpayer to which it belongs shall be considered to be at the destination for purposes of the franchise tax. Property in transit between the buyer and seller and shown on the books and records of the taxpayer in accordance with its regular accounting practices shall be included in the minimum measure of the franchise tax if it is destined to a Tennessee location.

(4) The value of any property while under construction must be included in the minimum measure of the franchise tax if there is actual utilization of such property by the taxpayer either in whole or in part. Actual utilization of the construction in progress will depend upon whether or not the construction in progress is utilized in the particular business conducted by the corporation.

Example 1: A manufacturer is in the process of building or expanding its facilities. The construction in progress would not actually be utilized in conducting the business of manufacturing until put in service by the corporation.

Example 2: A corporation is in the business of building and selling homes and the construction in progress will ultimately be for sale or rental. All of the construction in progress is utilized in conducting the business of home building.

Example 3: A corporation is in the business of operating motels and has a facility under construction. The construction in progress would not actually be utilized in conducting the business of operating motels until put in service by the corporation.

History

Authority: T.C.A. §§ 67-1-102(a), 67-1-102, 67-4-906, and 67-4-2108.
Administrative History: Original rule certified June 7, 1974. Repealed and refiled July 22, 1977; effective August 22, 1977. Amendment filed November 6, 1984; effective December 6, 1984. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-06-01-.19 REPEALED

History

Authority: T.C.A. §§ 67-1-102, 67-4-803, and 67-4-805.
Administrative History: Original rule certified June 7, 1974. Amendment filed August 13, 1974; effective September 12, 1974. Repealed and refiled July 22, 1977; effective August 22, 1977. Amendment filed November 6, 1984; effective December 6, 1984. Amendment filed March 9, 1990; effective April 23, 1990. Repeal filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-06-01-.20 ACTUAL CHARITABLE CONTRIBUTIONS

In determining net earnings for the purpose of computing the excise tax, T.C.A. § 67-4-2006 requires the charitable contributions deduction claimed under Section 170 of the Internal Revenue Code to be added to federal taxable income; whereas, § 67-4-2006 permits a deduction for actual charitable contributions made by the taxpayer during the fiscal year. The term “actual charitable contributions” means all bona fide contributions expensed and paid in a given year without regard to any percentage as required under federal law. The same criteria used for federal purposes in determining whether or not a contribution is a bona fide contribution is used by this state; however, only the book basis of property donated to charity is allowed as a deduction in determining net earnings for the purpose of computing the excise tax.

History

Authority: T.C.A. §§67-1-102(a), 67-1-102, 67-4-805, 67-4-2006, and 67-4-2108.
Administrative History: Original rule certified June 7, 1974. Amendment filed August 13, 1974; effective September 12, 1974. Repealed and refiled July 22, 1977; effective August 22, 1977. Amendment filed November 6, 1984; effective December 6, 1984. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-06-01-.21 LOSS CARRYOVERS

(1) Net operating losses may be carried forward fifteen (15) years as net operating loss carryovers.

(2) The term “net operating loss” is defined by T.C.A. § 67-4-2006 of the excise tax law as the excess of allowable deductions over total income allocable to this state for the year of the loss. The loss is the same as that reported for federal income tax purposes before any operating loss adjustment and special deductions provided for in the Internal Revenue Code, and the loss is subject to the adjustments (additions and subtractions) provided for in § 67-4- 2006. The amount of the loss that may be carried forward will be subject to the following adjustments:

(a) There shall be added to the net loss as determined for excise tax purposes all nonbusiness earnings, all interest, dividends excluded from net earnings pursuant to § 67-4-2006 and any other income excluded from net earnings pursuant to § 67-4-2006.

(b) With respect to taxpayers doing business both within and without Tennessee, adjustment shall be made to reflect the apportionment of the loss on the basis of business done within and without the State of Tennessee during the loss year. After making the adjustment as provided in subparagraph (a) hereof, the loss deductible for Tennessee excise tax purposes shall be that portion of the total loss apportioned to this state by the applicable statutory apportionment formula.

(c) The net loss so determined must be offset against the net earnings from business done within the state for the succeeding year, and if not completely offset by the net earnings from business done within the state for such year, the remainder of such net loss may be offset against the net earnings from business done within the state during the following year. In no case may any portion of such loss be carried forward and used to offset net earnings for any period beyond the applicable net loss carryover period as provided in paragraph (1) above, and in applying the loss carryovers where losses for more than one year are involved, the most remote year will be applied first.

History

Authority: T.C.A. §§ 67-1-102, 67-4-805, and 67-4-2006.
Administrative History: Original rule certified June 7, 1974. Amendment filed August 13, 1974; effective September 12, 1974. Repealed and refiled July 22, 1977; effective August 22, 1977. Amendment filed November 6, 1984; effective December 6, 1984. Amendment filed March 9, 1990; effective April 23, 1990. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-06-01-.22 REPEALED

History

Authority: T.C.A. §§ 67-1-102(a), 67-4-808, and 56-4-217.
Administrative History: Original rule certified June 7, 1974. Amendment filed August 13, 1974; effective September 12, 1974. Repealed and refiled July 22, 1977; effective August 22, 1977. Amendment filed November 6, 1984; effective December 6, 1984. Repeal filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-06-01-.23 BUSINESS AND NONBUSINESS EARNINGS

(1) (a) Business earnings are defined by T.C.A. §§ 67-4-2004 as earnings arising from transactions and activities in the regular course of the taxpayer’s trade or business or earnings from tangible and intangible property, if the acquisition, use, management, or disposition of the property constitutes an integral part of the taxpayer’s regular trade or business operations. In essence, all earnings which arise from the conduct of the trade or business operations of a taxpayer are business earnings. For purposes of administration of T.C.A. § 67-4-2001 et seq., the income of the taxpayer is business earnings unless clearly classifiable as nonbusiness earnings.

(b) Nonbusiness earnings means all income other than business earnings.

(c) The classification of income by the labels occasionally used, such as manufacturing income, compensation for services, sales income, interest, dividends, rents, royalties, gains, operating income, nonoperating income, etc., is not determinative of whether income is business or nonbusiness earnings. Income of any type or class and from any source is business earnings if it arises from transactions and activity occurring in the regular course of trade or business. Accordingly, the critical element in determining whether income is “business earnings” or “nonbusiness earnings” is the identification of the transactions and activity which are elements of a particular trade or business. In general, all transactions and activities of the taxpayer which are dependent upon or contribute to the operations of the taxpayer’s economic enterprise as a whole constitute the taxpayer’s trade or business and will be transactions and activity arising in the regular course of, and will constitute integral parts of, a trade or business.

(d) A taxpayer may have more than one regular trade or business in determining whether income is business earnings.

(2) Business and Nonbusiness Earnings – Application of Definitions. The following are rules and examples for determining whether particular income is business or nonbusiness earnings.

(The examples used throughout these regulations are illustrative only and do not purport to set forth all pertinent facts.)

(a) Rents from Real and Tangible Personal Property. Rental income from real and tangible property is business income if the property with respect to which the rental income was received is used in the taxpayer’s trade or business or if the rental income from the use or management of the property constitutes an integral part of the taxpayer’s regular trade or business operations.

Example 1: The taxpayer operates a multi-state car rental business. The income from car rentals is business earnings.

Example 2: The taxpayer is engaged in the heavy construction business in which it uses equipment such as cranes, tractors, and earthmoving vehicles. The taxpayer makes short-term leases of the equipment when particular pieces of equipment are not needed on any particular project. The rental income is business earnings.

Example 3: The taxpayer constructed a plant for use in its multi-state manufacturing business, and twenty (20) years later the plant was closed and put up for sale. The plant was rented for a temporary period from the time it was closed by the taxpayer until it was sold eighteen (18) months later. The rental income is business income and the gain on the sale of the plant is business earnings.

Example 4: The taxpayer is a heavy machinery manufacturer. The taxpayer enters into a complicated multi-million dollar deal to acquire the manufacturing assets of another, similar business. As a result of the acquisition, the taxpayer becomes the owner of a small, roadside market in Tennessee. The market is being leased by a third party lessee for $1,000 per month. The taxpayer acquired the assets of the other company solely to expand its manufacturing operations. It had never operated the market and has no intent to engage in the business of leasing commercial real estate. The Taxpayer does not own any other similar property that it leases to others. The taxpayer intends to sell the market as soon as the current lease expires. The rental income from the market is de minimis in relation to that derived from the taxpayer’s manufacturing operations. Under these circumstances, the rental income is nonbusiness earnings.

The acquiring taxpayer would also exclude the market in the property factor for purposes of the apportionment formula, and would not claim the expenses relative to the market as business expenses.

(b) Gains or Losses from Sales of Assets. As a general rule, gain or loss from the sale, exchange or other disposition of real or tangible or intangible personal property constitutes business earnings if the property while owned by the taxpayer was used in the taxpayer’s trade or business operations, or if the income from the disposition of the property constitutes an integral part of the taxpayer’s regular trade or business operations.

Example 1: In conducting its multi-state manufacturing business, the taxpayer systematically replaces automobiles, machines, and other equipment used in the business. The gains or losses resulting from those sales constitute business earnings.

Example 2: The taxpayer constructed a plant for use in its multi-state manufacturing business and twenty (20) years later sold the property at a gain while it was in operation by the taxpayer. The gain is business earnings.

Example 3: Same as two (2), except that the plant was closed and put up for sale but was not in fact sold until a buyer was found eighteen (18) months later. The gain is business earnings.

Example 4: Same as two (2), except that the plant was rented while being held for sale.

The rental income is business income and the gain on the sale of the plant is business earnings.

(c) Interest. Interest income is business earnings where the intangible with respect to which the interest was received arises out of or was created in the regular course of the taxpayer’s trade or business operations or where income from the use or management of the intangible constitutes an integral part of the taxpayer’s regular trade or business operations.

Example 1: The taxpayer operates a multi-state chain of department stores, selling for cash and on credit. Service charges, interest, or time-price differentials and the like are received with respect to installment sales and revolving charge accounts. These amounts are business earnings.

Example 2: The taxpayer conducts a multi-state manufacturing business. During the year the taxpayer receives a federal income tax refund and collects a judgment against a debtor of the business. Both the tax refund and the judgment bore interest. The interest income is business earnings.

Example 3: The taxpayer is engaged in a multi-state manufacturing and wholesaling business. In connection with that business, the taxpayer maintains special accounts to cover such items as workmen’s compensation claims, rain and storm damage, machinery replacement, etc. The moneys in those accounts are invested at interest.

Similarly, the taxpayer temporarily invests funds intended for payment of federal, state and local tax obligations. The interest income is business earnings.

Example 4: The taxpayer is engaged in a multi-state money order and traveler’s checks business. In addition to the fees received in connection with the sale of the money orders and traveler’s checks, the taxpayer earns interest income by the investment of the funds pending their redemption. The interest income is business earnings.

(d) Dividends. Dividends are business earnings where the stock with respect to which the dividends are received arises out of or was acquired in the regular course of the taxpayer’s trade or business operations or where the dividend income from the use or management of the stock constitutes an integral part of the taxpayer’s regular trade or business operations.

Example 1: The taxpayer operates a multi-state chain of stock brokerage houses.

During the year the taxpayer receives dividends on stock it owns. The dividends are business earnings.

Example 2: The taxpayer is engaged in a multi-state manufacturing and wholesaling business. In connection with that business the taxpayer maintains special accounts to cover such items as workmen’s compensation claims, etc. A portion of the moneys in those accounts is invested in interest bearing bonds. The remainder is invested in various common stocks listed on national stock exchanges. Both the interest income and any dividends are business earnings.

Example 3: The taxpayer and several unrelated corporations own all of the stock of a corporation whose business operations consist solely of acquiring and processing materials for delivery to the corporate owners. The taxpayers acquired the stock in order to obtain a source of supply of materials used in its manufacturing business. The dividends are business earnings.

Example 4: The taxpayer is engaged in a multi-state heavy construction business.

Much of its construction work is performed for agencies of the federal government and various state governments. Under state and federal laws applicable to contracts for these agencies, a contractor must have adequate bonding capacity, as measured by the ratio of its current assets (cash and marketable securities) to current liabilities. In order to maintain an adequate bonding capacity, the taxpayer holds various stocks and interest bearing securities. Both the interest income and any dividends received are business earning.

Example 5: The taxpayer received dividends from the stock of its subsidiary or affiliate which acts as the marketing agency for products manufactured by the taxpayer. The dividends are business earnings.

(e) Patent and Copyright Royalties. Patent and copyright royalties are business income where the patent or copyright with respect to which the royalties were received arises out of or was created in the regular course of the taxpayer’s trade or business operations or where the royalty income from the use or management of the patent or copyright constitutes an integral part of the taxpayer’s regular trade or business operations.

Example 1: The taxpayer is engaged in the multi-state business of manufacturing and selling industrial chemicals. In connection with that business the taxpayer obtained patents on certain of its products. The taxpayer licensed the production of the chemicals in foreign countries, in return for which the taxpayer receives royalties. The royalties received by the taxpayer are business earnings.

Example 2: The taxpayer is engaged in the music publishing business and holds copyrights on numerous songs. The taxpayer acquires the assets of a smaller publishing company, including music copyrights. These acquired copyrights are thereafter used by the taxpayer in its business. Any royalties received on these copyrights are business earnings.

(3) Proration of Deductions. As a general rule, the allowable deductions for expenses of a taxpayer are related to both business and nonbusiness earnings. Such items as administrative costs, taxes, insurance, repairs, maintenance, and depreciation are to be considered. In the absence of evidence to the contrary, it is assumed that the expenses related to nonbusiness rental earnings will be an amount equal to 50% of such earnings and that expenses related to other nonbusiness earnings will be an amount equal to 5% of such earnings.

History

Authority: T.C.A. §§ 67-1-102(a), 67-1-102, 67-4-804, 67-4-809, 67-4-2004, and 67-4-2010.
Administrative History: Original rule certified June 7, 1974. Repealed and refiled July 22, 1977; effective August 22, 1977. Amendment filed November 6, 1984; effective December 6, 1984. Amendment by Public Chapter 575; effective July 1, 1986. Amendment filed February 14, 1991; effective March 31. 1991. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-06-01-.41 SERIES LIMITED LIABILITY COMPANIES

(1) The Tennessee Revised Limited Liability Company Act, T.C.A. §§ 48-249-101 et. seq., generally permits the establishment of one or more designated “series” within a limited liability company, commonly referred to as the “Master LLC.” The Master LLC and each series is treated as a separate entity and must determine its tax classification as though it were a separate limited liability company. The Master LLC and each series will generally be classified as a corporation, partnership, or other type of business entity, consistent with the way it is classified for federal income tax purposes. A Master LLC or a series that is wholly owned by a corporation and that is disregarded for federal income tax purposes will be disregarded for franchise and excise tax purposes. All other federally disregarded Master LLCs or series are treated as separate entities for franchise and excise tax purposes.

(2) A Master LLC and each series doing business in and having substantial nexus with Tennessee must separately register with the department and set up separate tax accounts. A series must provide on its application for franchise, excise tax registration information about the Master LLC under whose organization documents the series was authorized.

(3) Unless a series is classified as a disregarded entity for franchise and excise tax purposes, each series must file a separate tax return. The Master LLC must also file a separate return unless disregarded. The Master LLC and each series will be treated as separate entities for purposes of assessments, refunds and taxpayer remedies, unless disregarded.

(4) The Master LLC and each series must apply separately to qualify for any applicable franchise and excise tax exemption. On any application for exemption, the series should state that it is a limited liability company. Because each series is treated as a separate entity under state law, only that series’ activities, income, and other attributes will be considered in any applicable exemption determination.

(5) If a series terminates its existence, it must obtain a separate tax clearance.

History

Authority: T.C.A. §§ 67-1-102, 67-4-2004, 67-4-2007, 67-4-2106, 48-29-101, 48-249-309, and 48-249- 1003.
Administrative History: New rules filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-06-01-.42 SALES FACTOR — SALES OTHER THAN SALES OF TANGIBLE PERSONAL

PROPERTY IN THIS STATE.

(1) General Rules.

(a) Market-Based Sourcing. Sales, other than sales of tangible personal property, are in Tennessee if and to the extent that the taxpayer’s market for the sales is in Tennessee.

In general, the provisions in this section establish uniform rules for (1) determining whether and to what extent the market for a sale other than the sale of tangible personal property is in Tennessee, (2) reasonably approximating the state or states of assignment where such state or states cannot be determined, and (3) excluding the sale where the state or states of assignment cannot be determined or reasonably approximated.

(b) Outline of topics. The provisions in this regulation are organized as follows.

General Rules.

a. Market-Based Sourcing b. Outline of Topics c. Definitions Market-Based Sourcing d. General Principles of Application; Contemporaneous Record e. Rules of Reasonable Approximation f. Exclusion of Sales from the Sales Factor 2. Sale, Rental, Lease or License of Real Property.

Rental, Lease or License of Tangible Personal Property.
Sale of a Service.

a. General Rule b. In-Person Services c. Services Delivered to the Customer or on Behalf of the Customer, or Delivered Electronically Through the Customer d. Professional Services e. Broadcast Advertising 5. License or Lease of Intangible Property.

a. General Rules b. License of a Marketing Intangible c. License of a Production Intangible d. License of a Broadcasting Intangible e. License of Mixed Intangible f. License of Intangible Property where Substance of the Transaction Resembles a Sale of Goods or Services g. Examples 6. License of Intangible Property.

a. Assignment of Sales b. Examples 7. Special Rules.

a. Software Transactions b. Sales or Licenses of Digital Goods and Services c. Enforcement of Legal Rights (c) Definitions. For the purposes of this regulation the following terms have the following meanings.

“Billing address” means the location indicated in the books and records of the taxpayer as the primary mailing address relating to a customer’s account as of the time of the transaction as kept in good faith in the normal course of business and not for tax avoidance purposes.
“Broadcast customer” means a person, corporation, partnership, limited liability company, or other entity, such as an advertiser or a platform distribution company, that has a direct connection or contractual relationship with the broadcaster under which revenue is derived by a broadcaster.
“Broadcaster” means a taxpayer that is a television broadcast network, a cable program network, or a television distribution company. The term “broadcaster” does not include a platform distribution company.
“Business customer” means a customer that is a business operating in any form, including an individual who operates a business through the form of a sole proprietorship. Sales to a non-profit organization, to a trust, to the U.S.

Government, to any foreign, state or local government, or to any agency or instrumentality of such government shall be treated as sales to a business customer and shall be assigned consistent with the rules that apply to such sales.

“Commercial domicile” means the principal place from which the trade or business of a business entity is directed or managed.
“Film programming” means one or more performances, events, or productions (or segments of performances, events, or productions) intended to be distributed for visual and auditory perception, including but not limited to news, entertainment, sporting events, plays, stories, or other literary, commercial, educational, or artistic works.
“Individual customer” means any customer who is not a business customer.
“Place of order,” means the physical location from which a customer places an order for a sale other than a sale of tangible personal property from a taxpayer, resulting in a contract with the taxpayer.
“Platform distribution company” means a cable service provider, a direct broadcast satellite system, an Internet content distributor, or any other distributor that directly charges viewers for access to any film programming.
“State where a contract of sale is principally managed by the customer,” means the primary location at which an employee or other representative of a customer serves as the primary contact person for the taxpayer with respect to the implementation and day-to-day execution of a contract entered into by the taxpayer with the customer.

(d) General Principles of Application; Contemporaneous Records. In order to satisfy the requirements of this regulation, a taxpayer’s assignment of sales of other than tangible personal property must be consistent with the following principles:

A taxpayer’s application of the rules set forth in this regulation shall be based on objective criteria and shall consider all sources of information reasonably available to the taxpayer at the time of its tax filing including, without limitation, the taxpayer’s books and records kept in the normal course of business. A taxpayer’s method of assigning its sales shall be determined in good faith, applied in good faith, and applied consistently with respect to similar transactions and year to year. A taxpayer shall retain contemporaneous records that explain the determination and application of its method of assigning its sales, including its underlying assumptions, and shall provide such records to the Commissioner of Revenue upon request.
The provisions of Rule 1320-06-01-.42(4)-(7) provide for various assignment rules that apply sequentially in a hierarchy. For each sale to which a hierarchical

rule applies, a taxpayer must make a reasonable effort to apply the primary rule applicable to the sale before seeking to apply the next rule in the hierarchy (and must continue to do so with each succeeding rule in the hierarchy, where applicable). For example, in some cases, the applicable rule first requires a taxpayer to determine the state or states of assignment, and where the taxpayer cannot do so, the rule then requires the taxpayer to reasonably approximate such state or states. In such cases, the taxpayer must in good faith and with reasonable effort attempt to determine the state or states of assignment (i.e., apply the primary rule in the hierarchy) before it may reasonably approximate such state or states.

A taxpayer’s method of assigning its sales, including the use of a method of approximation, where applicable, must reflect an attempt to obtain the most accurate assignment of sales consistent with the regulatory standards set forth in this regulation, rather than an attempt to lower the taxpayer’s tax liability. A method of assignment that is reasonable for one taxpayer may not necessarily be reasonable for another taxpayer, depending upon the applicable facts.

(e) Rules of Reasonable Approximation.

In General. In general, the provisions of Rule 1320-06-01-.42(4)-(7) establish uniform rules for determining whether and to what extent the market for a sale other than the sale of tangible personal property is in Tennessee. The provisions of the regulation also set forth rules of reasonable approximation, which apply where the state or states of assignment cannot be determined. In some instances, the reasonable approximation must be made in accordance with specific rules of approximation prescribed by this regulation. See, e.g., Rule 1320-06-01-.42(4)(d) (pertaining to professional services). In other cases, the applicable rule in this regulation permits a taxpayer to reasonably approximate the state or states of assignment, using a method that reflects an effort to approximate the results that would be obtained under the applicable rules or standards set forth in this regulation.
Approximation Based Upon Known Sales. In any instance where, applying the applicable rules set forth in Rule 1320-06-01-.42(4) (pertaining to sales of services), a taxpayer can ascertain the state or states of assignment of a substantial portion of its sales of substantially similar services (“assigned sales”), but not all of such sales, and the taxpayer reasonably believes, based on all available information, that the geographic distribution of some or all of the remainder of such sales generally tracks that of the assigned sales, it shall include those sales which it believes track the geographic distribution of the assigned sales in its sales factor in the same proportion as its assigned sales.

This rule also applies in the context of licenses and sales of intangible property where the substance of the transaction resembles a sale of goods or services.

See 1320-06-01-.42(5)(f) and (6)(a)4.

(f) Exclusion of Sales from the Sales Factor. In any case in which a taxpayer cannot ascertain the state or states to which a sale is to be assigned pursuant to the applicable rules set forth in this regulation (including through the use of a method of reasonable approximation, where relevant) using a reasonable amount of effort undertaken in good faith, the sale shall be excluded from the numerator and the denominator of the taxpayer’s sales factor.

(2) Sale, Rental, Lease or License of Real Property. In the case of a sale, rental, lease or license of real property, the sale is in Tennessee if and to the extent that the property is in Tennessee.

(3) Rental, Lease or License of Tangible Personal Property. In the case of a rental, lease or license of tangible personal property, the sale is in Tennessee if and to the extent that the property is in Tennessee. If property is mobile property that is located both within and without Tennessee during the period of the lease or other contract, the receipts assigned to Tennessee shall be the receipts from the contract period multiplied by the fraction used by the taxpayer for property factor purposes (as adjusted when necessary to reflect differences between usage during the contract period and usage during the taxable year).

(4) Sale of a Service.

(a) General Rule. The sale of a service is in Tennessee if and to the extent that the service is delivered at a location in Tennessee. In general, the term “delivered” shall be construed to refer to the location of the taxpayer’s market for the service provided and is not to be construed by reference to the location of the property or payroll of the taxpayer as otherwise determined for corporate apportionment purposes. The rules to determine the location of the delivery of a service in the context of several specific types of service transactions are set forth at Rule 1320-06-01-.42(4)(b)-(e).

(b) In-Person Services.

In General. Except as otherwise provided in this subsection, in-person services are services that are physically provided in person by the taxpayer, where the customer or the customer’s real or tangible property upon which the services are performed is in the same location as the service provider at the time the services are performed. This rule includes situations where the services are provided on behalf of the taxpayer by a third-party contractor. Examples of in-person services include, without limitation, warranty and repair services; cleaning services; plumbing services; carpentry; construction contractor services; pest control; landscape services; medical and dental services, including medical testing and xrays and mental health care and treatment; child care; hair cutting and salon services; live entertainment and athletic performances; and in-person training or lessons. In-person services include services within the description above that are performed at (1) a location that is owned or operated by the service provider or (2) a location of the customer, including the location of the customer’s real or tangible personal property. Various professional services, including legal, accounting, financial and consulting services, and other such services as described in Rule 1320-06-01-.42(4)(d), although they may involve some amount of in-person contact, are not treated as in-person services within the meaning of this section.
Assignment of Sales. Except as otherwise provided in this subsection, where the service provided by the taxpayer is an in-person service, the delivery of the service is at the location where the service is received. Therefore, the sale is in Tennessee if and to the extent the customer receives the in-person service in Tennessee.

(i) Rule of Determination. In assigning its sales of in-person services, a taxpayer shall first attempt to determine the location where a service is received, as follows:

(I) Where the service is performed with respect to the body of an individual customer in Tennessee (e.g. hair cutting or x-ray services) or in the physical presence of the customer in Tennessee (e.g. live entertainment or athletic performances), the service is received in Tennessee.

(II) Where the service is performed with respect to the customer’s real estate in Tennessee or where the service is performed with respect to the customer’s tangible personal property at the customer’s residence or in the customer’s possession in Tennessee, the service is received in Tennessee.

(III) Where the service is performed with respect to the customer’s tangible personal property and the tangible personal property is to be shipped or delivered to the customer, whether the service is performed in Tennessee or outside Tennessee, the service is received in Tennessee if such property is shipped or delivered to the customer in Tennessee.

(ii) Rule of Reasonable Approximation. In any instance in which the state or states where a service is actually received cannot be determined, but the taxpayer has sufficient information regarding the place of receipt from which it can reasonably approximate the state or states where the service is received, the taxpayer shall reasonably approximate such state or states.

In General. Where the service provided by the taxpayer is not an in-person service within the meaning of Rule 1320-06-01-.42(4)(b) or a professional service within the meaning of Rule 1320-06-01-.42(4)(d) and the service is delivered to or on behalf of the customer, or delivered electronically through the customer, the sale is in Tennessee if and to the extent that the service is delivered in Tennessee. For purposes of this section, a service that is delivered “to” a customer is a service in which the customer and not a third party is the recipient of the service. A service that is delivered “on behalf of” a customer is one in which a customer contracts for a service but one or more third parties, rather than the customer, is the recipient of the service, such as fulfillment services (see

Rule 1320-06-01-.42(4)(c)2(i) or the direct or indirect delivery of advertising to the customer’s intended audience (see Rule 1320-06-01-.42(4)(c)2(iii)). A service that is delivered electronically “through” a customer is a service that is delivered electronically to a customer for purposes of resale and subsequent electronic delivery in substantially identical form to an end user or other third-party recipient. Except in the instance of a service that is delivered through a customer (where the service must be delivered electronically), a service is included within the meaning of this section, irrespective of the method of delivery, e.g., whether such service is delivered by a physical means or through an electronic transmission.

Assignment of Sales. The assignment of a sale to a state or states in the instance of a service that is delivered to the customer or on behalf of the customer, or delivered electronically through the customer, depends upon the method of delivery of the service and the nature of the customer. Separate rules of assignment apply to services delivered by physical means and services delivered by electronic transmission. (For purposes of this section, a service delivered by an electronic transmission shall not be considered a delivery by a physical means). In any instance where, applying the rules set forth in this

section, the rule of assignment depends on whether the customer is an individual or a business customer, and the taxpayer acting in good faith cannot reasonably determine whether the customer is an individual or business customer, the taxpayer shall treat the customer as a business customer.

(i) Delivery to or on Behalf of a Customer by Physical Means, Whether to an Individual or Business Customer. Services delivered to a customer or on behalf of a customer through a physical means include, for example, product delivery services where property is delivered to the customer or to a third party on behalf of the customer; the delivery of brochures, fliers or other direct mail services; the delivery of advertising or advertising-related services to the customer’s intended audience in the form of a physical medium; and the sale of custom software (e.g., where software is developed for a specific customer in a case where the transaction is properly treated as a service transaction for purposes of corporate taxation) where the taxpayer installs the custom software at the customer’s site. The rules in this subsection apply whether the taxpayer’s customer is an individual customer or a business customer.

(I) Rule of Determination. In assigning the sale of a service delivered to a customer or on behalf of a customer through a physical means, a taxpayer must first attempt to determine the state or states where such services are delivered. Where the taxpayer is able to determine the state or states where the service is delivered, it shall assign the sale to such state or states.

(II) Rule of Reasonable Approximation. Where the taxpayer cannot determine the state or states where the service is actually delivered, but has sufficient information regarding the place of delivery from which it can reasonably approximate the state or states where the service is delivered, it shall reasonably approximate such state or states.

(III) Examples. Assume in each of these examples that the taxpayer that provides the service is taxable in Tennessee and is to apportion its income pursuant to T.C.A. §67-4-2012.

Example 1: Direct Mail Corp, a corporation based outside Tennessee, provides direct mail services to its customer, Business Corp. Business Corp transacts with Direct Mail Corp to deliver printed fliers to a list of customers that is provided to it by Business Corp. Some of Business Corp’s customers are in Tennessee and some of those customers are in other states. Direct Mail Corp will use the postal service to deliver the printed fliers to Business Corp’s customers. The sale of Direct Mail Corp’s services to Business Corp is assigned to Tennessee to the extent that the services are delivered on behalf of Business Corp to Tennessee customers (i.e., to the extent that the fliers are delivered on behalf of Business Corp to Business Corp’s intended audience in Tennessee).

Example 2: Ad Corp is a corporation based outside Tennessee that provides advertising and advertising-related services in Tennessee and in neighboring states. Ad Corp enters into a contract at a location outside Tennessee with an individual customer who is not a Tennessee resident to design advertisements for billboards to be displayed in Tennessee, and to design fliers to be mailed to Tennessee residents. All of the design work is performed outside Tennessee. The sale of the design services is in Tennessee because the service is physically delivered on behalf of the customer to the customer’s intended audience in Tennessee.

Example 3: Same facts as Example 2, except that the contract is with a business customer that is based outside Tennessee. The sale of the design services is in Tennessee because the services are physically delivered on behalf of the customer to the customer’s intended audience in Tennessee.

Example 4: Fulfillment Corp, a corporation based outside Tennessee, provides product delivery fulfillment services in Tennessee and in neighboring states to Sales Corp, a corporation located outside Tennessee that sells tangible personal property through a mail order catalog and over the Internet to customers. In some cases when a customer purchases tangible personal property from Sales Corp to be delivered in Tennessee, Fulfillment Corp will, pursuant to its contract with Sales Corp, deliver that property from its fulfillment warehouse located outside Tennessee. The sale of the fulfillment services of Fulfillment Corp to Sales Corp is assigned to Tennessee to the extent that Fulfillment Corp’s deliveries on behalf of Sales Corp are to recipients in Tennessee.

Example 5: Software Corp, a software development corporation, enters into a contract with a business customer, Buyer Corp, which is physically located in Tennessee, to develop custom software to be used in Buyer Corp’s business. Software Corp develops the custom software outside Tennessee, and then physically installs the software on Buyer Corp’s computer hardware located in Tennessee.

The development and sale of the custom software is properly characterized as a service transaction, and the sale is assigned to Tennessee because the software is physically delivered to the customer in Tennessee.

Example 6: Same facts as Example 5, except that Buyer Corp has offices in Tennessee and several other states, but is commercially domiciled outside Tennessee and orders the software from a location outside Tennessee. The receipts from the development and sale of the custom software service are assigned to Tennessee because the software is physically delivered to the customer in Tennessee.

(ii) Delivery to a Customer by Electronic Transmission. Services delivered by electronic transmission include, without limitation, services that are transmitted through the means of wire, lines, cable, fiber optics, electronic signals, satellite transmission, audio or radio waves, or other similar means, whether or not the service provider owns, leases or otherwise controls the transmission equipment. In the case of the delivery of a service by electronic transmission to a customer, the following rules apply.

(I) Services Delivered By Electronic Transmission to an Individual Customer.

I. Rule of Determination. In the case of the delivery of a service to an individual customer by electronic transmission, the service is delivered in Tennessee if and to the extent that the taxpayer’s customer receives the service in Tennessee. If the taxpayer can determine the state or states where the service is received, it shall assign the sale to such state or states.

II. Rules of Reasonable Approximation. If the taxpayer cannot determine the state or states where the customer actually receives the service, but has sufficient information regarding the place of receipt from which it can reasonably approximate the state or states where the service is received, it shall reasonably approximate such state or states. Where a taxpayer does not have sufficient information from which it can determine or reasonably approximate the state or states in which the service is received, it shall reasonably approximate such state or states using the customer’s billing address.

(II) Services Delivered By Electronic Transmission to a Business Customer.

I. Rule of Determination. In the case of the delivery of a service to a business customer by electronic transmission, the service is delivered in Tennessee if and to the extent that the taxpayer’s customer receives the service in Tennessee. If the taxpayer can determine the state or states where the service is received, it shall assign the sale to such state or states. For purposes of this section, it is intended that the state or states where the service is received reflect the location at which the service is directly used by the employees or designees of the customer.

III. Secondary Rule of Reasonable Approximation. In the case of the delivery of a service to a business customer by electronic transmission where a taxpayer does not have sufficient information from which it can determine or reasonably approximate the state or states in which the service is received, such state or states shall be reasonably approximated as set forth in this section. In such cases, unless the taxpayer can apply the safe harbor set forth in Rule 1320- 06-01-.42(4)(c)2(ii)(II)IV, the taxpayer shall reasonably approximate the state or states in which the service is received as follows: first, by assigning the sale to the state where the contract of sale is principally managed by the customer; second, if the state where the customer principally manages the contract is not reasonably determinable, by assigning the sale to the customer’s place of order; and third, if the customer’s place of order is not reasonably determinable, by assigning the sale using the customer’s billing address; provided, however, that in any instance in which the taxpayer derives more than 5% of its sales of services from a customer, the taxpayer is required to identify the state in which the contract of sale is principally managed by that customer.

IV. Safe Harbor. In the case of the delivery of a service to a business customer by electronic transmission a taxpayer may not be able to determine, or reasonably approximate under

Rule 1320-06-01-.42(4)(c)2(ii)(II)II, the state or states in which the service is received. In these cases, the taxpayer may, in lieu of the rule stated at Rule 1320-06-01-.42(4)(c)2(ii)(II)III, apply the safe harbor stated in this section (Rule 1320-06-01- .42(4)(c)2(ii)(II)IV). Under this safe harbor, a taxpayer may assign its sales to a particular customer based upon the customer’s billing address in any taxable year in which the taxpayer (1) engages in substantially similar service transactions with more than 250 customers, whether business or individual, and (2) does not derive more than 5% of its sales of services from such customer. This safe harbor applies only for purposes of Rule 1320-06-01-.42(4)(c)2(ii)(II) to services delivered by electronic transmission to a business customer, and not otherwise.

(III) Examples. Assume in each of these examples that the taxpayer that provides the service is taxable in Tennessee and is to apportion its income pursuant to T.C.A. § 67-4-2012. Assume where relevant, unless otherwise stated, that the safe harbor set forth at Rule 1320- 06-01-.42(4)(c)2(ii)(II)IV does not apply.

Example 1: Support Corp, a corporation that is based outside Tennessee, provides software support and diagnostic services to individual and business customers that have previously purchased certain software from third-party vendors. These individual and business customers are located in Tennessee and other states.

Support Corp supplies its services on a case-by-case basis when directly contacted by its customer. Support Corp generally provides these services through the Internet but sometimes provides these services by phone. In all cases, Support Corp verifies the customer’s account information before providing any service. Using the information that Support Corp verifies before performing a service, Support Corp can determine where its services are received, and therefore must assign its sales to these locations. The sales made to Support Corp’s individual and business customers are in Tennessee to the extent that Support Corp’s services are received in Tennessee. See Rule 1320-06-01-.42(4)(c)2(ii)(I) and (II).

Example 2: Online Corp, a corporation based outside Tennessee, provides web-based services through the means of the Internet to individual customers who are residents of Tennessee and other states. These customers access Online Corp’s web services primarily in their states of residence, and sometimes, while traveling, in other states. For a substantial portion of its sales, Online Corp either can determine the state or states where such services are received, or, where it cannot determine such state or states, it has sufficient information regarding the place of receipt to reasonably approximate such state or states. However, Online Corp cannot determine or reasonably approximate the state or states of receipt for all of such sales. Assuming that Online Corp reasonably believes, based on all available information, that the geographic distribution of the sales for which it cannot determine or reasonably approximate the location of the receipt of its services generally tracks those for which it does have this information, Online Corp must assign to Tennessee the sales for which it does not know the customers’ location in the same proportion as those sales for which it has this information. See Rule 1320-06-01-.42(1)(e)2.

Example 3: Same facts as in Example 2, except that Online Corp reasonably believes that the geographic distribution of the sales for which it cannot determine or reasonably approximate the location of the receipt of its web-based services do not generally track the sales for which it does have this information. Online Corp must assign the sales of its services for which it lacks information as provided to its individual customers using the customers’ billing addresses. See

Rule 1320-06-01-.42(4)(c)2(ii)(I)II.

Example 4: Net Corp, a corporation based outside Tennessee, provides web-based services to a business customer, Business Corp, a company with offices in Tennessee and two neighboring states. Particular employees of Business Corp access the services from computers in each Business Corp office. Assume that Net Corp determines that Business Corp employees in Tennessee were responsible for 75% of Business Corp’s use of Net Corp’s services, and Business Corp employees in other states were responsible for 25% of Business Corp’s use of Net Corp’s services. In such case, 75% of the sale is received in Tennessee, and therefore 75% of the sale is in Tennessee. See Rule 1320-06-01-.42(4)(c)2(ii)(II). Assume alternatively that Net Corp lacks sufficient information regarding the location or locations where Business Corp’s employees used the services to determine or reasonably approximate such location or locations. Under these circumstances, if Net Corp derives 5% or less of its sales from Business Corp, Net Corp must assign the sale under

Rule 1320-06-01-.42(4)(c)2(ii)(II)III to the state where Business Corp principally managed the contract, or if that state is not reasonably determinable, to the state where Business Corp placed the order for the services, or if that state is not reasonably determinable, to the state of Business Corp’s billing address. If Net Corp derives more than 5% of its sales of services from Business Corp, Net Corp is required to identify the state in which its contract of sale is principally managed by Business Corp and must assign the receipts to that state.

Example 5: Net Corp, a corporation based outside Tennessee, provides web-based services through the means of the Internet to more than 250 individual and business customers in Tennessee and in other states. Assume that for each customer Net Corp cannot determine the state or states where its web services are actually received, and lacks sufficient information regarding the place of receipt to reasonably approximate such state or states. Also assume that Net Corp does not derive more than 5% of its sales of services from any single customer. Net Corp may apply the safe harbor stated in Rule 1320-06-01-.42(4)(c)2(ii)(II)IV and may assign its sales using each customer’s billing address.

(iii) Services Delivered Electronically Through or on Behalf of an Individual or Business Customer. A service delivered electronically “on behalf of” the customer is one in which a customer contracts for a service to be delivered electronically but one or more third parties, rather than the customer, is the recipient of the service, such as the direct or indirect delivery of advertising on behalf of a customer to the customer’s intended audience. A service delivered electronically “through” a customer to third-party recipients is a service that is delivered electronically to a customer for purposes of resale and subsequent electronic delivery in substantially identical form to end users or other third-party recipients.

(I) Rule of Determination. In the case of the delivery of a service by electronic transmission, where the service is delivered electronically to end users or other third-party recipients through or on behalf of the customer, the service is delivered in Tennessee if and to the extent that the end users or other third-party recipients are in Tennessee.

For example, in the case of the direct or indirect delivery of advertising on behalf of a customer to the customer’s intended audience by electronic means, the service is delivered in Tennessee to the extent that the audience for such advertising is in Tennessee.

In the case of the delivery of a service to a customer that acts as an intermediary in reselling the service in substantially identical form to third-party recipients, the service is delivered in Tennessee to the extent that the end users or other third-party recipients receive such services in Tennessee. The rules in this subsection apply whether the taxpayer’s customer is an individual customer or a business customer and whether the end users or other third-party recipients to which the services are delivered through or on behalf of the customer are individuals or businesses.

(II) Rule of Reasonable Approximation. If the taxpayer cannot determine the state or states where the services are actually delivered to the end users or other third-party recipients either through or on behalf of the customer, but has sufficient information regarding the place of delivery from which it can reasonably approximate the state or states where the services are delivered, it shall reasonably approximate such state or states.

(III) Select Secondary Rules of Reasonable Approximation.

I. Where a taxpayer’s service is the direct or indirect electronic delivery of advertising on behalf of its customer to the customer’s intended audience, if the taxpayer lacks sufficient information regarding the location of the audience from which it can determine or reasonably approximate such location, the taxpayer shall reasonably approximate the audience in a state for such advertising using the following secondary rules of reasonable approximation. Where a taxpayer is delivering advertising directly or indirectly to a known list of subscribers, the taxpayer shall reasonably approximate the audience for advertising in a state using a percentage that reflects the ratio of the state’s subscribers in the specific geographic area in which the advertising is delivered relative to the total subscribers in such area. For a taxpayer with less information about its audience, the taxpayer shall reasonably approximate the audience in a state using the percentage that reflects the ratio of the state’s population in the specific geographic area in which the advertising is delivered relative to the total population in such area.

II. Where a taxpayer’s service is the delivery of a service to a customer that then acts as the taxpayer’s intermediary in reselling such service to end users or other third-party recipients, if the taxpayer lacks sufficient information regarding the location of the end users or other third-party recipients from which it can determine or reasonably approximate such location, the taxpayer shall reasonably approximate the extent to which the service is received in a state by using the percentage that reflects the ratio of the state’s population in the specific geographic area in which the taxpayer’s intermediary resells such services, relative to the total population in such area.

(IV) Examples. Assume in each of these examples that the taxpayer that provides the service is taxable in Tennessee and is to apportion its income pursuant to T.C.A. § 67-4-2012.

Example 1: Web Corp, a corporation that is based outside Tennessee, provides Internet content to viewers in Tennessee and other states. Web Corp sells advertising space to business customers pursuant to which the customers’ advertisements will appear in connection with Web Corp’s Internet content. Web Corp receives a fee for running the advertisements that is determined by reference to the number of times the advertisement is viewed or clicked upon by the viewers of its website. Web Corp’s sale of advertising space to its business customers is assigned to Tennessee to the extent that the viewers of the Internet content are in Tennessee, as measured by viewings or clicks. See Rule 1320- 06-01-.42(4)(c)2(iii)(I). If Web Corp is unable to determine the actual location of its viewers, and lacks sufficient information regarding the location of its viewers to reasonably approximate such location, Web Corp must approximate the amount of its Tennessee sales by multiplying the amount of such sales by a percentage that reflects the Tennessee population in the specific geographic area in which the content containing the advertising is delivered relative to the total population in such area. See Rule 1320-06-01-.42(4)(c)2(iii)(III).

Example 2: Retail Corp, a corporation that is based outside of Tennessee, sells tangible property through its retail stores located in Tennessee and other states, and through a mail order catalog.

Answer Co, a corporation that operates call centers in multiple states, contracts with Retail Corp to answer telephone calls from individuals placing orders for products found in Retail Corp’s catalogs. In this case, the phone answering services of Answer Co are being delivered to Retail Corp’s customers and prospective customers. Therefore, Answer Co is delivering a service electronically to Retail Corp’s customers or prospective customers on behalf of Retail Corp, and must assign the proceeds from this service to the state or states from which the phone calls are placed by such customers or prospective customers. If Answer Co cannot determine the actual locations from which phone calls are placed, and lacks sufficient information regarding the locations to reasonably approximate such locations, Answer Co must approximate the amount of its Tennessee sales by multiplying the amount of its fee from Retail Corp by a percentage that reflects the Tennessee population in the specific geographic area from which the calls are placed relative to the total population in such area. See Rule 1320- 06-01-.42(4)(c)2(iii)(III)I.

Example 3: Web Corp, a corporation that is based outside of Tennessee, sells tangible property to customers via its Internet website. Design Co designed and maintains Web Corp’s website, including making changes to the site based on customer feedback received through the site. Design Co’s services are delivered to Web Corp, the proceeds from which are assigned pursuant to Rule 1320- 06-01-.42(4)(c)2(ii). The fact that Web Corp’s customers and prospective customers incidentally benefit from Design Co’s services, and may even interact with Design Co in the course of providing feedback, does not transform the service into one delivered “on behalf of” Web Corp to Web Corp’s customers and prospective customers.

Example 4: Wholesale Corp, a corporation that is based outside Tennessee, develops an Internet-based information database outside Tennessee and enters into a contract with Retail Corp whereby Retail Corp will market and sell access to this database to end users. Depending on the facts, the provision of database access may be either the sale of a service or the license of intangible property or may have elements of both. Assume that on the particular facts applicable in this example Wholesale Corp is selling database access in transactions properly characterized as involving the performance of a service. When an end user purchases access to Wholesale Corp’s database from Retail Corp, Retail Corp in turn compensates Wholesale Corp in connection with that transaction. In this case, Wholesale Corp’s services are being delivered through Retail Corp to the end user. Wholesale Corp must assign its sales to Retail Corp to the state or states in which the end users receive access to Wholesale Corp’s database. If Wholesale Corp cannot determine the state or states where the end users actually receive access to Wholesale Corp’s database, and lacks sufficient information regarding the location from which the end users access the database to reasonably approximate such location, Wholesale Corp must approximate the extent to which its services are received by end users in Tennessee by using a percentage that reflects the ratio of the Tennessee population in the specific geographic area in which Retail Corp regularly markets and sells Wholesale Corp’s database relative to the total population in such area. See Rule 1320-06-01-.42(4)(c)2(iii)(III)II. Note that it does not matter for purposes of the analysis whether Wholesale Corp’s sale of database access constitutes a service or a license of intangible property, or some combination of both. See Rule 1320-06-1-.42(5)(f).

(d) Professional Services.

In General. Except as otherwise provided in Rule 1320-06-01-.42(4)(d)2, professional services are services that require specialized knowledge and in some cases require a professional certification, license or degree. Professional services include, without limitation, management services, bank and financial services, financial custodial services, investment and brokerage services, fiduciary services, tax preparation, payroll and accounting services, lending and credit card services, legal services, consulting services, video production services, graphic and other design services, engineering services, and architectural services.
Overlap with Other Categories of Services.

(i) Certain services that fall within the definition of “professional services” set forth in Rule 1320-06-01-.42(4)(d)1 are nevertheless treated as “in-person services” within the meaning of Rule 1320-06-01-.42(4)(b), and are assigned under Rule 1320-06-01-.42(4)(b). Specifically, professional services that are physically provided in person by the taxpayer such as carpentry, certain medical and dental services or child care services, where the customer or the customer’s real or tangible property upon which the services are provided is in the same location as the service provider at the time the services are performed, are “in-person services” and are assigned as such, notwithstanding that they may also be considered to be “professional services”. However, professional services where the service is of an intellectual or intangible nature, such as legal, accounting, financial and consulting services, are assigned as professional services under Rule 1320-06-01-.42(4)(d), notwithstanding the fact that such services may involve some amount of in-person contact.

(ii) Professional services may in some cases include the transmission of one or more documents or other communications by mail or by electronic means. However, in such cases, despite this transmission, the assignment rules that apply are those set forth in Rule 1320-06-01-.42(4)(d), and not those set forth in Rule 1320-06-01-.42(4)(c), pertaining to services delivered to a customer or through or on behalf of a customer.

Assignment of Sales. In the case of a professional service, it is generally possible to characterize the location of delivery in multiple ways by emphasizing different elements of the service provided, no one of which will consistently represent the market for the services. Therefore, for purposes of consistent application of the market-sourcing rule stated in T.C.A. § 67-4-2012, the Commissioner has concluded that the location of delivery in the case of professional services is not susceptible to a general rule of determination, and must be reasonably approximated. The assignment of a sale of a professional service depends in many cases upon whether the customer is an individual or business customer. In any instance in which the taxpayer, acting in good faith, cannot reasonably determine whether the customer is an individual or business customer, the taxpayer shall treat the customer as a business customer. For purposes of assigning the sale of a professional service, a taxpayer’s customer is the person who contracts for such service, irrespective of whether another person pays for or also benefits from the taxpayer’s services.

(i) General Rule. Sales of professional services other than those services described in Rule 1320-06-01-.42(4)(d)3(ii) (architectural and engineering services) are assigned in accordance with this section.

(I) Professional Services Delivered to Individual Customers. Except as otherwise provided in this section, Rule 1320-06-01-.42(4)(d), in any instance in which the service provided is a professional service and the taxpayer’s customer is an individual customer, the state or states in which the service is delivered shall be reasonably approximated as set forth in this section, Rule 1320-06-01-.42(4)(d)3(i)(I). In particular, the taxpayer shall assign the sale to the customer’s state of primary residence, or, if the taxpayer cannot reasonably identify the customer’s state of primary residence, to the state of the customer’s billing address; provided, however, in any instance in which the taxpayer derives more than 5% of its sales of services from an individual customer, the taxpayer is required to identify the customer’s state of primary residence and must assign the receipts from the service or services provided to that customer to that state.

(II) Professional Services Delivered to Business Customers. Except as otherwise provided in this section, Rule 1320-06-01-.42(4)(d), in any instance in which the service provided is a professional service and the taxpayer’s customer is a business customer, the state or states in which the service is delivered shall be reasonably approximated as set forth in this section, 1320-06-01-.42(4)(d)3(i)(II). In particular, unless the taxpayer may use the safe harbor set forth at 1320-06-01- .42(4)(d)3(i)(III), the taxpayer shall assign the sale as follows: first, by assigning the receipts to the state where the contract of sale is principally managed by the customer; second, if such place of customer management is not reasonably determinable, to the customer’s place of order; and third, if such customer’s place of order is not reasonably determinable, to the customer’s billing address; provided, however, in any instance in which the taxpayer derives more than 5% of its sales of services from a customer, the taxpayer is required to identify the state in which the contract of sale is principally managed by the customer.

(III) Safe Harbor; Large Volume of Transactions. Notwithstanding the rules set forth in Rule 1320-06-01-.42(4)(d)3(i)(I) and (II), a taxpayer may assign its sales to a particular customer based on the customer’s billing address in any taxable year in which the taxpayer (1) engages in substantially similar service transactions with more than 250 customers, whether individual or business, and (2) does not derive more than 5% of its sales of services from such customer.

This safe harbor applies only for purposes of Rule 1320-06-01- .42(4)(d)3(i), and not otherwise.

(ii) Architectural and Engineering Services with Respect to Real or Tangible Personal Property. Architectural and engineering services with respect to real or tangible personal property are professional services within the meaning of this section Rule 1320-06-01-.42(4)(d). However, unlike in the case of the general rule that applies to professional services, (1) the sale of such an architectural service is assigned to a state or states if and to the extent that the services are with respect to real estate improvements located, or expected to be located, in such state or states; and (2) the sale of such an engineering service is assigned to a state or states if and to the extent that the services are with respect to tangible or real property located in such state or states, including real estate improvements located in, or expected to be located in, such state or states. These rules apply whether or not the customer is an individual or business customer. In any instance in which architectural or engineering services are not described in this

section (Rule 1320-06-01-.42(4)(d)3(ii)), the sale of such services shall be assigned under the general rule for professional services. See Rule 1320- 06-01-.42(4)(d)3(i).

Example 1: Architecture Corp provides building design services as to buildings located, or expected to be located, in Tennessee to individual customers who are residents of Tennessee and other states, and to business customers that are based in Tennessee and other states.

Architecture Corp’s sales are assigned to Tennessee because the locations of the buildings to which its design services relate are in Tennessee, or are expected to be in Tennessee. For purposes of assigning these sales, it is not relevant where, in the case of an individual customer, the customer primarily resides or is billed for such services, and it is not relevant where, in the case of a business customer, the customer principally manages the contract, placed the order for the services or is billed for such services. Further, such sales are assigned to Tennessee even if Architecture Corp’s designs are either physically delivered to its customer in paper form in a state other than Tennessee or are electronically delivered to its customer in a state other than Tennessee.

See Rule 1320-06-01-.42(4)(d)3(ii).

Example 2: Law Corp provides legal services to individual clients who are residents of Tennessee and other states. In some cases, Law Corp may prepare one or more legal documents for its client as a result of these services and/or the legal work may be related to litigation or a legal matter that is ongoing in a state other than where the client is resident. Assume that Law Corp knows the state of primary residence for many of its clients, and where it does not know this state of primary residence, it knows the client’s billing address. Also assume that Law Corp does not derive more than 5% of its sales of services from any one individual client. Where Law Corp knows its client’s state of primary residence, it shall assign the sale to that state. Where Law Corp does not know its client’s state of primary residence, but rather knows the client’s billing address, it shall assign the sale to that state. For purposes of the analysis it is irrelevant whether the legal documents relating to the service are mailed or otherwise delivered to a location in another state, or the litigation or other legal matter that is the underlying predicate for the services is in another state. See Rule 1320-06- 01-.42(4)(d)2(ii) and 3(i)(I).

Example 3: Law Corp provides legal services to several multistate business clients. In each case, Law Corp knows the state in which the agreement for legal services that governs the client relationship is principally managed by the client. In one case, the agreement is principally managed in Tennessee; in the other cases, the agreement is principally managed in a state other than Tennessee. Where the agreement for legal services is principally managed by the client in Tennessee, the sale of the services shall be assigned to Tennessee; in the other cases, the sale is not assigned to Tennessee. In the case of the sale that is assigned to Tennessee, the sale shall be so assigned even if (1) the legal documents relating to the service are mailed or otherwise delivered to a location in another state, or (2) the litigation or other legal matter that is the underlying predicate for the services is in another state. See Rule 1320-06-01- .42(4)(d)2(ii) and 3(i)(II).

Example 4: Consulting Corp, a company that provides consulting services to law firms and other customers, is hired by Law Corp in connection with legal representation that Law Corp provides to Client Co. Specifically, Consulting Corp is hired to provide expert testimony at a trial being conducted by Law Corp on behalf of Client Co. Client Co pays for Consulting Corp’s services directly. Assuming that Consulting Corp knows that its agreement with Law Corp is principally managed by Law Corp in Tennessee, the sale of Consulting Corp’s services shall be assigned to Tennessee. It is not relevant for purposes of the analysis that Client Co is the ultimate beneficiary of Consulting Corp’s services, or that Client Co pays for Consulting Corp’s services directly. See Rule 1320-06-01- .42(4)(d)3(i)(II).

Example 5: Advisor Corp, a corporation that provides investment advisory services, provides such advisory services to Investment Co. Investment Co is a multistate business client of Advisor Corp that uses Advisor Corp’s services in connection with investment accounts that it manages for individual clients, who are the ultimate beneficiaries of Advisor Corp’s services. Assume that Investment Co’s individual clients are persons that are residents of numerous states, which may or may not include Tennessee. Assuming that Advisor Corp knows that its agreement with Investment Co is principally managed by Investment Co in Tennessee, the sale of Advisor Corp’s services shall be assigned to Tennessee. It is not relevant for purposes of the analysis that the ultimate beneficiaries of Advisor Corp’s services may be Investment Co’s clients, who are residents of numerous states. See Rule 1320-06-01-.42(4)(d)3(i)(II).

Example 6: Design Corp is a corporation based outside Tennessee that provides graphic design and similar services in Tennessee and in neighboring states. Design Corp enters into a contract at a location outside Tennessee with an individual customer to design fliers for the customer.

Assume that Design Corp does not know the individual customer’s state of primary residence and does not derive more than 5% of its sales of services from the individual customer. All of the design work is performed outside Tennessee. The sale is in Tennessee if the customer’s billing address is in Tennessee. See Rule 1320-06-01-.42(4)(d)3(i)(I).

(e) Broadcast Advertising Services. Notwithstanding anything herein to the contrary, receipts from a broadcaster’s sale of advertising services to a broadcast customer are assigned to Tennessee if the commercial domicile of the broadcast customer is in Tennessee. For purposes of this provision, “advertising services” means an agreement to include the broadcast customer’s advertising content in the broadcaster’s film programming.

(5) Rental, Lease, or License of Intangible Property.

(a) General Rule.

The receipts from the rental, lease, or license of intangible property are in Tennessee if and to the extent the intangible is used in Tennessee. In general, the term “use” shall be construed to refer to the location of the taxpayer’s market for the use of the intangible property that is being rented, leased, or licensed and is not to be construed to refer to the location of the property or payroll of the taxpayer.
In general, a rental, lease, or license of intangible property that conveys all substantial rights in such property is treated as a sale of intangible property for tax purposes. See Rule 1320-06-01-.42(6). Note, however, that for purposes of

Rule 1320-06-01-.42(5) and (6), a sale or exchange of intangible property is treated as a license of such property where the receipts from the sale or exchange derive from payments that are contingent on the productivity, use or disposition of the property.

Intangible property rented, leased, or licensed as part of the sale or lease of tangible property is treated under Rule 1320-06-01-.42 as the sale or lease of tangible property.

(b) License of a Marketing Intangible. Where a license is granted for the right to use intangible property in connection with the sale, rental, lease, license, or other marketing of goods, services, or other items (i.e., a marketing intangible), the royalties or other licensing fees paid by the licensee for such right are assigned to Tennessee to the extent that the fees are attributable to the sale or other provision of goods, services, or other items purchased or otherwise acquired by customers in Tennessee. Examples of a license of a marketing intangible include, without limitation, the license of a service mark, trademark, or trade name; certain copyrights and a franchise agreement. In each of these instances the license of the marketing intangible is intended to promote consumer sales. In the case of the license of a marketing intangible, where a taxpayer has actual evidence of the amount or proportion of its receipts that is attributable to Tennessee, it shall assign such amount or proportion to Tennessee. In the absence of actual evidence of the amount or proportion of the licensee's receipts that are derived from Tennessee customers, the portion of the licensing fee to be assigned to Tennessee shall be reasonably approximated by multiplying the total fee by a percentage that reflects the ratio of the Tennessee population in the specific geographic area in which the licensee makes material use of the intangible property to regularly market its goods, services or other items relative to the total population in such area. Where the license of a marketing intangible is for the right to use the intangible property in connection with sales or other transfers at wholesale rather than directly to retail customers, the portion of the licensing fee to be assigned to Tennessee shall be reasonably approximated by multiplying the total fee by a percentage that reflects the ratio of the Tennessee population in the specific geographic area in which the licensee's goods, services, or other items are ultimately marketed using the intangible property relative to the total population of such area.

(c) License of a Production Intangible. Where a license is granted for the right to use intangible property other than in connection with the sale, lease, license, or other marketing of goods, services, or other items, and the license is to be used in a production capacity (a “production intangible”), the licensing fees paid by the licensee for such right are assigned to Tennessee to the extent that the use for which the fees are paid takes place in Tennessee. Examples of a license of a production intangible include, without limitation, the license of a patent, a copyright, or trade secrets to be used in a manufacturing process, where the value of the intangible lies predominately in its use in such process. In the case of a license of a production intangible, it shall be presumed that the use of the intangible property takes place in the state of the licensee's commercial domicile (where the licensee is a business) or the licensee’s state of primary residence (where the licensee is an individual) unless the taxpayer or the Commissioner can reasonably establish the location(s) of actual use. Where the Commissioner can reasonably establish that the actual use of intangible property pursuant to a license of a production intangible takes place in part in Tennessee, it shall be presumed that the entire use is in Tennessee except to the extent that the taxpayer can demonstrate that the actual location of a portion of the use takes place outside Tennessee.

(d) License of a Broadcasting Intangible. Where a broadcaster grants a license to a broadcast customer for the right to use film programming, the licensing fees paid by the licensee for such right are assigned to Tennessee to the extent that the broadcast customer is located in Tennessee. In the case of business customers, the broadcast customer’s location shall be determined using the broadcast customer’s commercial domicile. In the case of individual customers, the broadcast customer’s location shall be determined using the address of the broadcast customer listed in the broadcaster’s records.

(e) License of a Mixed Intangible. Where a license of intangible property includes both a license of a marketing intangible and a license of a production intangible (a “mixed intangible”) and the fees to be paid in each instance are separately and reasonably stated in the licensing contract, the Commissioner will accept such separate statement for purposes of this section if it is reasonable. Where a license of intangible property includes both a license of a marketing intangible and a license of a production intangible and the fees to be paid in each instance are not separately and reasonably stated in the contract, it shall be presumed that the licensing fees are paid entirely for the license of the marketing intangible except to the extent that the taxpayer or the Commissioner can reasonably establish otherwise.

(f) License of Intangible Property where Substance of Transaction Resembles a Sale of Goods or Services.

In general. In some cases, the license of intangible property will resemble the sale of an electronically-delivered good or service rather than the license of a marketing intangible or a production intangible. In such cases, the receipts from the licensing transaction shall be assigned by applying the rules set forth in Rule 1320-06-01-.42(4)(c)2(ii) and (iii), as if the transaction were a service delivered to an individual or business customer or delivered electronically through an individual or business customer, as applicable. Examples of transactions to be assigned under this section (1320-06-01-.42(5)(f)) include, without limitation, the license of database access, the license of access to information, the license of digital goods (see Rule 1320-06-01-.42(7)(b)), and the license of certain software (e.g., where the transaction is not the license of pre-written software that is treated as the sale of tangible personal property, see Rule 1320-06-01-.42(7)(a)).
Sublicenses. Pursuant to Rule 1320-06-01-.42(5)(f)1, Rule 1320-06-01- .42(4)(c)2(iii) may apply where a taxpayer licenses intangible property to a customer that in turn sublicenses the intangible property to end users as if the transaction were a service delivered electronically through a customer to end users. In particular, the rules set forth at Rule 1320-06-01-.42(4)(c)2(iii) that apply to services delivered electronically to a customer for purposes of resale and subsequent electronic delivery in substantially identical form to end users or other recipients may also apply with respect to licenses of intangible property for purposes of sublicense to end users, provided that for this purpose the intangible property sublicensed to an end user shall not fail to be substantially identical to the property that was licensed to the sublicensor merely because the sublicense transfers a reduced bundle of rights with respect to such property (e.g., because the sublicensee’s rights are limited to its own use of the property and do not include the ability to grant a further sublicense), or because such property is bundled with additional services or items of property.

(g) Examples. Assume in each of these examples that the taxpayer that licenses the intangible property is taxable in Tennessee and is to apportion its income pursuant to T.C.A. § 67-4-2012.

Example 1: Crayon Corp and Dealer Co enter into a license contract under which Dealer Co as licensee is permitted to use trademarks that are owned by Crayon Corp in connection with Dealer Co's sale of certain products to retail customers. Under the contract, Dealer Co is required to pay Crayon Corp a licensing fee that is a fixed percentage of the total volume of monthly sales made by Dealer Co of products using the Crayon Corp trademarks. Under the contract, Dealer Co is permitted to sell the products at multiple store locations, including store locations that are both within and without Tennessee. Further, the licensing fees that are paid by Dealer Co are broken out on a per-store basis. The licensing fees paid to Crayon Corp by Dealer Co represent fees from the license of a marketing intangible. The portion of the fees to be assigned to Tennessee shall be determined by multiplying the fees by a percentage that reflects the ratio of Dealer Co’s receipts that are derived from its Tennessee stores relative to Dealer Co’s total receipts. See Rule 1320-06-01-.42(5)(b).

Example 2: Network Corp is a broadcaster that licenses rights to its film programming to both platform distribution companies and individual customers. Platform distribution companies pay licensing fees to Network Corp for the rights to distribute Network Corp’s film programming to the platform distribution companies’ customers. Network Corp’s individual customers pay access fees to Network Corp for the right to directly access and view Network Corp’s film programming. Network Corp’s receipts from each platform distribution company will be assigned to Tennessee if the broadcast customer’s commercial domicile is in Tennessee. Network Corp’s receipts from each individual broadcast customer will be assigned to Tennessee if the address of the broadcast customer listed in the broadcaster’s records is in Tennessee. See Rule 1320-06-01-.42(5)(d).

Example 3: Moniker Corp enters into a license contract with Wholesale Co. Pursuant to the contract Wholesale Co is granted the right to use trademarks owned by Moniker Corp to brand sports equipment that is to be manufactured by Wholesale Co or an unrelated entity, and to sell the manufactured equipment to unrelated companies that will ultimately market the equipment to consumers in a specific geographic region, including a foreign country. The license agreement confers a license of a marketing intangible, even though the trademarks in question will be affixed to property to be manufactured. In addition, the license of the marketing intangible is for the right to use the intangible property in connection with sales to be made at wholesale rather than directly to retail customers. The component of the licensing fee that constitutes the Tennessee sales of Moniker Corp is determined by multiplying the amount of the fee by a percentage that reflects the ratio of the Tennessee population in the specific geographic region relative to the total population in such region. See Rule 1320-06-01- .42(5)(b).

Example 4: Formula, Inc and Appliance Co enter into a license contract under which Appliance Co is permitted to use a patent owned by Formula, Inc to manufacture appliances. The license contract specifies that Appliance Co is to pay Formula, Inc a royalty that is a fixed percentage of the gross receipts from the products that are later sold. The contract does not specify any other fees. The appliances are both manufactured and sold in Tennessee and several other states. Assume the licensing fees are paid for the license of a production intangible, even though the royalty is to be paid based upon the sales of a manufactured product (i.e., the license is not one that includes a marketing intangible). Because the Commissioner can reasonably establish that the actual use of the intangible property takes place in part in Tennessee, the royalty is assigned based on the location of such use rather than to location of the licensee’s commercial domicile, in accordance with Rule 1320-06-01-.42(5)(c). It is presumed that the entire use is in Tennessee except to the extent that the taxpayer can demonstrate that the actual location of some or all of the use takes place outside Tennessee. Assuming that Formula, Inc can demonstrate the percentage of manufacturing that takes place in Tennessee using the patent relative to such manufacturing in other states, that percentage of the total licensing fee paid to Formula, Inc under the contract will constitute Formula, Inc's Tennessee sales. See

Rule 1320-06-01-.42(5)(c).

Example 5: Axel Corp enters into a license agreement with Biker Co in which Biker Co is granted the right to produce motor scooters using patented technology owned by Axel Corp, and also to sell such scooters by marketing the fact that the scooters were manufactured using the special technology. The contract is a license of both a marketing and production intangible, i.e., a mixed intangible. The scooters are manufactured outside Tennessee. Assume that Axel Corp lacks actual information regarding the proportion of Biker Co’s receipts that are derived from Tennessee customers. Also assume that Biker Co is granted the right to sell the scooters in a U.S. geographic region in which the Tennessee population constitutes 25% of the total population during the period in question. The licensing contract requires an upfront licensing fee to be paid by Biker Co to Axel Corp and does not specify what percentage of the fee derives from Biker Co's right to use Axel Corp's patented technology.

Because the fees for the license of the marketing and production intangible are not separately and reasonably stated in the contract, it is presumed that the licensing fees are paid entirely for the license of a marketing intangible, unless either the taxpayer or Commissioner reasonably establishes otherwise. Assuming that neither party establishes otherwise, 25% of the licensing fee constitutes Tennessee sales. See Rule 1320-06-01-.42(5)(b) and (e).

Example 6: Same facts as Example 5, except that the license contract specifies separate fees to be paid for the right to produce the motor scooters and for the right to sell the scooters by marketing the fact that the scooters were manufactured using the special technology. The licensing contract constitutes both the license of a marketing intangible and the license of a production intangible. Assuming that the separately stated fees are reasonable, the Commissioner will: (1) assign no part of the licensing fee paid for the production intangible to Tennessee, and (2) assign 25% of the licensing fee paid for the marketing intangible to Tennessee. See Rule 1320-06-01-.42(5)(e).

Example 7: Better Burger Corp, which is based outside Tennessee, enters into franchise contracts with franchisees who agree to operate Better Burger restaurants as franchisees in various states. Several of the Better Burger Corp franchises are in Tennessee. In each case, the franchise contract between the individual and Better Burger provides that the franchisee is to pay Better Burger Corp an upfront fee for the receipt of the franchise and monthly franchise fees, which cover, among other things, the right to use the Better Burger name and service marks, food processes and cooking know-how, as well as fees for management services. The upfront fees for the receipt of the Tennessee franchises constitute fees paid for the licensing of a marketing intangible. These fees constitute Tennessee sales because the franchises are for the right to make Tennessee sales. The monthly franchise fees paid by Tennessee franchisees constitute fees paid for (1) the license of marketing intangibles (the Better Burger name and service marks), (2) the license of production intangibles (food processes and know-how) and (3) personal services (management fees). The fees paid for the license of the marketing intangibles and the production intangibles constitute Tennessee sales because in each case the use of the intangibles is to take place in Tennessee. See Rule 1320-06-01-.42(5)(b)-(c). The fees paid for the personal services are to be assigned pursuant to Rule 1320-06-01-.42(4).

Example 8: Online Corp, a corporation based outside Tennessee, licenses an information database through the means of the Internet to individual customers that are residents of Tennessee and other states. These customers access Online Corp’s information database primarily in their states of residence, and sometimes, while traveling, in other states. The license is a license of intangible property that resembles a sale of goods or services and shall be assigned in accordance with Rule 1320-06-01- .42(5)(f). If Online Corp can determine or reasonably approximate the state or states where its database is accessed, then it must do so. Assuming that Online Corp cannot determine or reasonably approximate the location where its database is accessed, Online Corp must assign the sales made to the individual customers using the customers’ billing addresses to the extent known. Assume for purposes of this example that Online Corp knows the billing address for each of its customers. In this case, Online Corp’s sales made to its individual customers are in Tennessee in any case in which the customer’s billing address is in Tennessee. See Rule 1320-06-01- .42(4)(c)2(ii)(I).

Example 9: Net Corp, a corporation based outside Tennessee, licenses an information database through the means of the Internet to a business customer, Business Corp, a company with offices in Tennessee and two neighboring states. The license is a license of intangible property that resembles a sale of goods or services and shall be assigned in accordance with Rule 1320-06-01-.42(5)(f). Assume that Net Corp cannot determine where its database is accessed but reasonably approximates that 75% of Business Corp’s database access took place in Tennessee, and 25% of Business Corp’s database access took place in other states. In such case, 75% of the receipts from database access is in Tennessee. Assume alternatively that Net Corp lacks sufficient information regarding the location where its database is accessed to reasonably approximate such location. Under these circumstances, if Net Corp derives 5% or less of its receipts from database access from Business Corp, Net Corp must assign the sale under Rule 1320-06-01-.42(4)(c)2(ii)(II) to the state where Business Corp principally managed the contract, or if that state is not reasonably determinable to the state where Business Corp placed the order for the services, or if that state is not reasonably determinable to the state of Business Corp’s billing address. If Net Corp derives more than 5% of its receipts from database access from Business Corp, Net Corp is required to identify the state in which its contract of sale is principally managed by Business Corp and must assign the receipts to that state. See Rule 1320-06-01- .42(4)(c)2(ii)(II).

Example 10: Net Corp, a corporation based outside Tennessee, licenses an information database through the means of the Internet to more than 250 individual and business customers in Tennessee and in other states. The license is a license of intangible property that resembles a sale of goods or services and shall be assigned in accordance with Rule 1320-06-01-.42(5)(f). Assume that Net Corp cannot determine or reasonably approximate the location where its information database is accessed. Also assume that Net Corp does not derive more than 5% of its sales of database access from any single customer. Net Corp may apply the safe harbor stated in Rule 1320-06- 01-.42(4)(c)2(ii)(II)IV, and may assign its sales to a state or states using each customer’s billing address.

Example 11: Web Corp, a corporation based outside of Tennessee, licenses an Internet-based information database to business customers who then sublicense the database to individual end users that are residents of Tennessee and other states.

These end users access Web Corp’s information database primarily in their states of residence, and sometimes, while traveling, in other states. Web Corp’s license of the database to its customers includes the right to sublicense the database to end users, while the sublicenses provide that the rights to access and use the database are limited to the end users’ own use and prohibit the individual end users from further sublicensing the database. Web Corp receives a fee from each customer based upon the number of sublicenses issued to end users. The license is a license of intangible property that resembles a sale of goods or services and shall be assigned by applying the rules set forth in Rule 1320-06-01-.42(4)(c)2(iii). See 1320-06-01-.42(5)(f). If Web Corp can determine or reasonably approximate the state or states where its database is accessed by end users, then it must do so. Assuming that Web Corp lacks sufficient information from which it can determine or reasonably approximate the location where its database is accessed by end users, Web Corp must approximate the extent to which its database is accessed in Tennessee using a percentage that represents the ratio of the Tennessee population in the specific geographic area in which Web Corp’s customer sublicenses the database access relative to the total population in such area.

See Rule 1320-06-01-.42(4)(c)2(iii)(II).

(6) Sale of Intangible Property.

(a) Assignment of Sales. The assignment of a sale to a state or states in the instance of a sale or exchange of intangible property depends upon the nature of the intangible property sold. For purposes of this section (Rule 1320-06-01-.42(6)), a sale or exchange of intangible property includes a license of such property where the transaction is treated for tax purposes as a sale of all substantial rights in the property and the receipts from transaction are not contingent on the productivity, use or disposition of the property. For the rules that apply where the consideration for the transfer of rights is contingent on the productivity, use or disposition of the property, see Rule 1320-06-01-.42(5)(a) and (6)(a)3.

Contract Right or Government License that Authorizes Business Activity in Specific Geographic Area. In the case of a sale or exchange of intangible property where the property sold or exchanged is a contract right, government license or similar intangible property that authorizes the holder to conduct a business activity in a specific geographic area, the sale is assigned to a state if and to the extent that the intangible property is used or otherwise associated with the state. Where the intangible property is used in, or otherwise associated with, only Tennessee, the taxpayer shall assign the sale to Tennessee. Where the int angible property is used in or is otherwise associated with Tennessee and one or more other states, the taxpayer shall assign the sale to Tennessee to the extent that the intangible property is used in, or associated with, Tennessee, through the means of a reasonable approximation.
Agreement Not to Compete. An agreement or covenant not to compete in a specified geographic area requires the contract party to refrain from conducting certain business activity in that specified area. In the case of an agreement or covenant not to compete the receipts are to be assigned to a state based upon the percentage that reflects the state’s population in the U.S. geographic area specified in the contract relative to the total population in such area.
Sale that Resembles a License (Receipts are Contingent on Productivity, Use or Disposition of the Intangible Property). In the case of a sale or exchange of intangible property where the receipts from the sale or exchange are contingent on the productivity, use or disposition of the property, the receipts from the sale shall be assigned by applying the rules set forth in Rule 1320-06-01-.42(5)

(pertaining to the license or lease of intangible property).

Sale that Resembles a Sale of Goods and Services. In the case of a sale or exchange of intangible property where the substance of the transaction resembles a sale of goods or services and where the receipts from the sale or exchange do not derive from payments contingent on the productivity, use or disposition of the property, the receipts from the sale shall be assigned by applying the rules set forth in Rule 1320-06-01-.42(5)(f) (relating to licenses of intangible property that resemble sales of goods and services). Examples of such transactions include those that are analogous to the license transactions cited as examples in Rule 1320-06-01-.42(5)(f).
Except as otherwise provided in this section, the sale of intangible property that is not referenced in Rule 1320-06-01-.42(6)(a)1,2,4, or 5 shall be excluded from the numerator and the denominator of the taxpayer’s sales factor.

(b) Examples. Assume in each of these examples that the taxpayer that provides the service is taxable in Tennessee and is to apportion its income pursuant to T.C.A. § 67- 4-2012.

Example 1: Airline Corp, a corporation based outside Tennessee, sells its rights to use several gates at an airport located in Tennessee to Buyer Corp, a corporation that is based outside Tennessee. The contract of sale is negotiated and signed outside of Tennessee. The sale is in Tennessee because the intangible property sold is a contract right that authorizes the holder to conduct a business activity solely in Tennessee. See

Rule 1320-06-01-.42(6)(a)1.

Example 2: Wireless Corp, a corporation based outside Tennessee, sells a license issued by the Federal Communications Commission (FCC) to operate wireless telecommunications services in a designated area in Tennessee to Buyer Corp, a corporation that is based outside Tennessee. The contract of sale is negotiated and signed outside of Tennessee. The sale is in Tennessee because the intangible property sold is a government license that authorizes the holder to conduct business activity solely in Tennessee. See Rule 1320-06-01-.42(6)(a)1.

Example 3: Same facts as in Example 2 except that Wireless Corp sells to Buyer Corp an FCC license to operate wireless telecommunications services in a designated area in Tennessee and an adjacent state. Wireless Corp must attempt to reasonably approximate the extent to which the intangible property is used in or associated with Tennessee. For purposes of making this reasonable approximation, Wireless Corp may rely upon credible data that identifies the percentage of persons that use wireless telecommunications in the two states covered by the license. See Rule 1320-06-01- .42(6)(a)1.

Example 4: Sports League Corp, a corporation that is based outside Tennessee, sells the rights to broadcast the sporting events played by the teams in its league in all 50 U.S. states to Network Corp. Although the games played by Sports League Corp will be broadcast in all 50 states, the games are of greater interest in the southeast region of the country, including Tennessee. Because the intangible property sold is a contract right that authorizes the holder to conduct a business activity in a specified geographic area, Sports League Corp must attempt to reasonably approximate the extent to which the intangible property is used in or associated with Tennessee. For purposes of making this reasonable approximation, Sports League Corp may rely upon audience measurement information that identifies the percentage of the audience for its sporting events in Tennessee and the other states. See Rule 1320-06-01-.42(6)(a)1.

Example 5: Business Corp, a corporation based outside Tennessee engaged in business activities in Tennessee and other states, enters into a covenant not to compete with Competition Corp, a corporation that is based outside Tennessee, in exchange for a fee. The agreement requires Business Corp to refrain from engaging in certain business activity in Tennessee and other states. The component of the fee that constitutes a Tennessee sale is determined by multiplying the amount of the fee by a fraction represented by the percentage of the Tennessee population over the total population in the specified geographic region. See Rule 1320-06-01-.42(6)(a)2.

Example 6: Inventor Corp, a corporation that is based outside Tennessee, sells patented technology that it has developed to Buyer Corp, a business customer that is based in Tennessee. Assume that the sale is not one in which the receipts derive from payments that are contingent on the productivity, use or disposition of the property.

See Rule 1320-06-01-.42(6)(a)4. Inventor Corp understands that Buyer Corp is likely to use the patented technology in Tennessee, but the patented technology can be used anywhere (i.e., the rights sold are not rights that authorize the holder to conduct a business activity in a specific geographic area). The sale of the patented technology shall be excluded from the numerator and denominator of Inventor Corp’s sales factor.

See Rule 1320-06-01-.42(6)(a)5.

(7) Special Rules.

(a) Software Transactions. A license or sale of pre-written software for purposes other than commercial reproduction (or other exploitation of the intellectual property rights), when transferred on a tangible medium, is treated as the sale of tangible personal property, rather than as either the license or sale of intangible property or the performance of a service. In such cases, the receipts are assigned to Tennessee as a sale of tangible personal property. In all other cases, the receipts from a license or sale of software are to be assigned to Tennessee as determined otherwise under this regulation (e.g., depending on the facts, as the development and sale of custom software, see Rule 1320-06-01-.42(4)(c), as a license of a marketing intangible, see Rule 1320-06-01- .42(5)(b), as a license of a production intangible, see Rule 1320-06-01-.42(5)(c), as a license of intangible property where the substance of the transaction resembles a sale of goods or services, see Rule 1320-06-01-.42(5)(f), or as a sale of intangible property, see Rule 1320-06-01-.42(6)).

(b) Sales or Licenses of Digital Goods or Services. In the case of a sale or license of digital goods or services, including, among other things, the sale of various video, audio and software products or similar transactions, the receipts from the sale or license shall be assigned by applying the same rules as are set forth in Rule 1320-06-01-.42(4)(c)2(ii) or (iii), as if the transaction were a service delivered to an individual or business customer or delivered through or on behalf of an individual or business customer. For purposes of the analysis, it is not relevant what the terms of the contractual relationship are or whether the sale or license might be characterized, depending upon the particular facts, as, for example, the sale or license of intangible property or the performance of a service. See Rules 1320-06-01-.42(5)(f) and (6)(a)5.

(c) Enforcement of Legal Rights. Receipts attributable to the protection or enforcement of legal rights of a taxpayer through litigation, arbitration, or settlement of legal disputes or claims, including the filing and pursuit of claims under insurance contracts, shall be excluded from the numerator and denominator of the taxpayer’s sales factor. For purposes of this rule, in the case of a settlement agreement, it shall not be relevant how the parties to the agreement characterize the payment made under the agreement.

History

Authority: T.C.A. §§ 67-1-102(a) and 67-4-2012.
Administrative History: New rules filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-06-01-.24 REPEALED

History

Authority: T.C.A. §§ 67-1-102(a), 67-4-806, 67-4-810, 67-4-811, 67-4-814, 67-4-815, 67-4-816, and 67- 4-903.
Administrative History: Original rule certified June 7, 1974. Amendment filed August 13, 1974; effective September 12, 1977. Repealed and refiled July 22, 1977; effective August 22, 1977. Amendment filed November 6, 1984; effective December 6, 1984. Repeal filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-06-01-.25 REPEALED

History

Authority: T.C.A. §§ 67-1-102(a), 67-4-804, and 67-4-809.
Administrative History: Original rule certified June 7, 1974. Repealed and refiled July 22, 1977; effective August 22, 1977. Amendment filed November 6, 1984; effective December 6, 1984. Repeal filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-06-01-.26 REPEALED

History

Authority: T.C.A. § 67-1-102(a) and Acts 1999, Ch. 406, §2; effective July 1, 1999.
Administrative History: Original rule certified June 7, 1974. Repealed and refiled July 22, 1977; effective August 22, 1977. Amendment filed November 6, 1984; effective December 6, 1984. Repeal filed May 14, 2003; effective July 28, 2003.

Tenn. Comp. R. & Regs. 1320-06-01-.27 PROPERTY FACTOR

(1) In General. The property factor of the apportionment formula for the trade or business of the taxpayer shall include all real and tangible personal property owned or rented by the taxpayer and used during the tax period in the regular course of such trade or business. The term “real and tangible personal property” includes land, buildings, machinery, stocks of goods, equipment, and other real and tangible personal property but does not include coin or currency. Property used in connection with the production of nonbusiness earnings shall be excluded from the property factor. Property used both in the production of business earnings and in the production of nonbusiness earnings shall be included in the property factor only to the extent the property is used in the production of business earnings. The method of determining that portion of the value to be included in the factor will depend upon the facts of each case. The property factor shall include the average value of property includable in the factor. See Rule 1320-06-01-.29.

(2) Property Factor – Property Used for the Production of Business Earnings. Property shall be included in the property factor if it is actually used or is available for use or capable of being used during the tax period for the production of business earnings. Property held as reserves or standby facilities or property held as a reserve source of materials shall be included in the factor. For example, a plant temporarily idle or raw material reserves not currently being processed are includable in the factor. Property or equipment under construction during the tax period (except inventoriable goods in process) shall be excluded from the factor until such property is actually used to produce business earnings. If the property is partially used to produce business earnings while under construction, the value of the property to the extent used shall be included in the property factor. Property used to produce business earnings shall remain in the property factor until its permanent withdrawal is established by an identifiable event such as its conversion to the production of nonbusiness earnings or its sale.

Example 1: Taxpayer closed its manufacturing plant in State X and held such property for sale. The property remained vacant until its sale one year later. The value of the manufacturing plant is included in the property factor until the plant is sold.

Example 2: Same as above except that the property was rented until the plant was sold. The plant is included in the property factor until the plant is sold.

(3) Property Factor – Numerator. The numerator of the property factor shall include the average value of the real and tangible personal property owned or rented by the taxpayer and used in this state during the tax period to produce business earnings. Property in transit between locations of the taxpayer to which it belongs shall be considered to be at the destination for purposes of the property factor. Property in transit between a buyer and seller which is included by a taxpayer in the denominator of its property factor in accordance with its regular accounting practices shall be included in the numerator according to the state of destination.

The value of mobile or movable property such as construction equipment, trucks or leased electronic equipment which are located within and without this state during the tax period shall be determined for purposes of the numerator of the factor on the basis of total time within the state during the tax period. An automobile assigned to a traveling employee shall be included in the numerator of the factor of the state to which the employee’s compensation is assigned under the payroll factor or in the numerator of the state in which the automobile is licensed.

(4) Zero Denominator. In the use of any apportionment formula, where the denominator of a factor is zero, such factor must be eliminated entirely and the average then computed from the remaining factor or factors.

History

Authority: T.C.A. §§ 67-101(2), 67-1-102, and 67-4-2012.
Administrative History: Original rule certified June 7, 1974. Repealed and refiled July 22, 1977; effective August 22, 1977. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-06-01-.28 PROPERTY FACTOR — VALUATION

(1) Valuation of Owned Property.

(a) Property owned by the taxpayer shall be valued at its original cost. As a general rule “original cost” is deemed to be the basis of the property for federal tax purposes (prior to any federal adjustments) at the time of acquisition by the taxpayer and adjusted by subsequent capital additions or improvements thereto and partial disposition thereof, by reason of sale, exchange, abandonment, etc. If original cost of property is unascertainable, the property is included in the factor at its fair market value as of the date of acquisition by the taxpayer.

Example 1: The taxpayer acquired a factory building in this state at a cost of $500,000 and 18 months later expended $100,000 for major remodeling of the building. Taxpayer files its return for the current taxable year on the calendar-year basis. Depreciation deduction in the amount of $22,000 was claimed on the building for its return for the current taxable year. The value of the building includable in the numerator and denominator of the property factor is $600,000 as the depreciation deduction is not taken into account in determining the value of the building for purposes of the factor.

Example 2: During the current taxable year, X Corporation merges into Y Corporation in a tax-free reorganization under the Internal Revenue Code. At the time of the merger, X Corporation owns a factory which X built five years earlier at a cost of $1,000,000. X has been depreciating the factory at the rate of two percent per year, and its basis in X’s hands at the time of the merger is $900,000. Since the property is acquired by Y in a transaction in which, under the Internal Revenue Code, its basis in Y’s hands is the same as its basis in X’s, Y includes the property in Y’s property factor at X’s original cost, without adjustment for depreciation, i.e., $1,000,000.

(b) Inventory of stock of goods shall be included in the factor in accordance with the valuation method used for federal income tax purposes.

(c) Property acquired by gift or inheritance shall be included in the factor at its basis for determining depreciation for federal income tax purposes.

(2) Valuation of Rented Property.

(a) Property rented by the taxpayer is valued at eight times the net annual rental rate. The net annual rental rate for any item of rented property is the annual rental rate paid by the taxpayer for such property, less the aggregate annual subrental rates paid by subtenants of the taxpayer. Subrents are not deducted when the subrents constitute business earnings.

Example 1: The taxpayer receives subrents from a bakery concession in a food market operated by the taxpayer. Since the subrents are business earnings they are not deducted from rent paid by the taxpayer for the food market.

(b) “Annual rental rate” is the amount paid as rental for property for a 12-month period (i.e., the amount of the annual rent). Where property is rented for less than a 12-month period, the rent paid for the actual period of rental shall constitute the “annual rental rate” for the tax period. However, where a taxpayer has rented property for a term of 12 or more months and the current tax period covers a period of less than 12 months (due, for example, to a reorganization or change of accounting period), the rent paid for the short tax period shall be annualized. If the rental term is for less than 12 months, the rent shall not be annualized beyond its term. Rent shall not be annualized because of the uncertain duration when the rental term is on a month to month basis. If property owned by others is used by the taxpayer at no charge or rented by the taxpayer for a nominal rate, the net annual rental rate for such property shall be determined on the

basis of a reasonable market rental rate for such property.

Example 1: Taxpayer A which ordinarily files its returns based on a calendar year is merged into Taxpayer B on April 30. The net rent paid under a lease with five (5) years remaining is $2,500 a month. The rent for the tax period January 1 to April 30 is $10,000. After the rent is annualized the net rent is $30,000 ($2,500 X 12).

Example 2: Same facts as in Example 1, except that the lease would have terminated on August 31. In this case the annualized net rent is $20,000 ($2,500 X 8).

(c) “Annual rent” is the actual sum of money or other consideration payable, directly or indirectly, by the taxpayer or for its benefit for the use of the property and includes:

Any amount payable for the use of real or tangible personal property, or any part thereof whether designated as a fixed sum of money or as a percentage of sales, profits or otherwise.

Example: A taxpayer, pursuant to the terms of a lease, pays a lessor $1,000 per month as a base rental and at the end of the year pays the lessor one percent of its gross sales of $400,000. The annual rent is $16,000 ($12,000 plus one percent of $400,000 or $4,000).

Any amount payable as additional rent or in lieu of rents, such as interest, taxes, insurance, repairs or any other items which are required to be paid by the terms of the lease or other arrangement, not including amounts paid as service charges, such as utilities, janitor services, etc. If a payment includes rent and other charges unsegregated, the amount of rent shall be determined by consideration of the relative values of the rent and the other items.

Example (i): A taxpayer, pursuant to the terms of a lease, pays the lessor $12,000 a year rent plus taxes in the amount of $2,000 and interest on a mortgage in the amount of $1,000. The annual rent is $15,000.

Example (ii): A taxpayer stores part of its inventory in a public warehouse. The total charge for the year was $1,000 of which $700 was for the use of storage space and $300 for inventory insurance, handling and shipping charges, and C.O.D. collections. The annual rent is $700. “Annual rent” does not include incidental day-to-day expenses such as hotel or motel accommodations, daily rental of automobiles, etc.

(d) Leasehold improvements shall, for the purposes of the property factor, be treated as property owned by the taxpayer regardless of whether the taxpayer is entitled to remove the improvements or the improvements revert to the lessor upon expiration of the lease. Hence, the original cost of leasehold improvements shall be included in the factor.

History

Authority: T.C.A. §§ 67-1-102(a), 67-1-102, 67-4-811, and 67-4-2012.
Administrative History: Original rule certified June 7, 1974. Repealed and refiled July 22, 1977; effective August 22, 1977. Amendment filed November 6, 1984; effective December 6, 1984. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-06-01-.29 PROPERTY FACTOR: AVERAGING PROPERTY VALUES

(1) As a general rule the average value of property owned by the taxpayer shall be determined by averaging the values at the beginning and ending of the tax period. However, the Commissioner of Revenue may require or allow averaging by monthly values if such method of averaging is required to properly reflect the average value of the taxpayer’s property for the tax period.

(2) Averaging by monthly values will generally be applied if substantial fluctuations in the values of the property exist during the tax period or where property is acquired after the beginning of the tax period or disposed of before the end of the tax period.

Example: The monthly value of the taxpayer’s property was as follows:

January ................................................................................................... $2,000 February ................................................................................................. 2,000 March ..................................................................................................... 3,000 April ....................................................................................................... 3,500 May ........................................................................................................ 4,500 June ........................................................................................................ 10,000 $25,000 July ........................................................................................................ 15,000 August ................................................................................................... 17,000 September.............................................................................................. 23,000 October.................................................................................................. 25,500 November.............................................................................................. 13,000 December ............................................................................................. 2,000 $95,000 TOTAL $120,000 The average value of the taxpayer’s property includable in the property factor for the income year is determined as follows: $120,000 ÷ 12 = $10,000 (3) Averaging with respect to rented property is achieved automatically by the method of determining the net annual rental rate of such property as set forth in Rule 1320-06-01-.28 (b).

History

Authority: T.C.A. §§ 67-101(2), 67-1-102, and 67-4-2012.
Administrative History: Original rule certified June 7, 1974. Repealed and refiled July 22, 1977; effective August 22, 1977. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-06-01-.30 PAYROLL FACTOR

(1) In General.

(a) The payroll factor of the apportionment formula shall include the total amount paid by the taxpayer in the regular course of its trade or business for compensation during the tax period.

(b) The total amount “paid” to employees is determined upon the basis of the taxpayer’s accounting method. If the taxpayer has adopted the accrual method of accounting, all compensation properly accrued shall be deemed to have been paid. Notwithstanding the taxpayer’s method of accounting, at the election of the taxpayer, compensation paid to employees may be included in the payroll factor by use of the cash method if the taxpayer is required to report such compensation under such method for unemployment compensation purposes. The compensation of any employee on account of activities which are connected with the production of nonbusiness earnings shall be excluded from the factor.

Example 1: The taxpayer used some of its employees in the construction of a storage building which, upon completion, is used in the regular course of taxpayer’s trade or business. The wages paid to those employees are treated as a capital expenditure by the taxpayer. The amount of such wages is included in the payroll factor.

Example 2: The taxpayer owns various securities which it holds as an investment separate and apart from its trade or business. The management of the taxpayer’s investment portfolio is the only duty of Mr. X, an employee. The salary paid to Mr. X is excluded from the payroll factor.

(c) The term “compensation” means wages, salaries, commissions and any other form of remuneration paid to employees for personal services. Payments made to an independent contractor or any other person not properly classifiable as an employee are excluded. Only amounts paid directly to employees are included in the payroll factor. Amounts considered paid directly include the value of board, rent, housing, lodging, and other benefits or services furnished to employees by the taxpayer in return for personal services provided that such amounts constitute income to the recipient under the federal Internal Revenue Code. In the case of employees not subject to the federal Internal Revenue Code, e.g., those employed in foreign countries, the determination of whether such benefits or services would constitute income to the employees shall be made as though such employees were subject to the federal Internal Revenue Code.

(d) The term “employee” means any officer of a corporation, or any individual who, under the usual common law rules applicable in determining the employer-employee relationship, has the status of an employee. Generally, a person will be considered to be an employee if he is included by the taxpayer as an employee for purposes of the payroll taxes imposed by the Federal Insurance Contributions Act; except that, since certain individuals are included within the term “employees” in the Federal Insurance Contributions Act who would not be employees under the usual common law rule, it may be established that a person who is included as an employee for purposes of the Federal Insurance Contributions Act is not an employee for purposes of this regulation.

(2) Denominator. The denominator of the payroll factor is the total compensation paid everywhere during the tax period. Accordingly, compensation paid to employees whose services are performed entirely in a state where the taxpayer is immune from taxation, for example, by Public Law 86-272, is included in the denominator of the payroll factor.

Example: A taxpayer has employees in its state of legal domicile (State A) and is taxable in State B. In addition, the taxpayer has other employees whose services are performed entirely in State C where the taxpayer is immune from taxation by Public Law 86-272. As to these latter employees, the compensation will be assigned to State C where their services are performed (i.e., included in the denominator - but not the numerator - of the payroll factor) even though the taxpayer is not taxable in State C.

(3) Numerator. The numerator of the payroll factor is the total amount paid in this state during the tax period by the taxpayer for compensation. The tests in T.C.A. §67-4-2012 to be applied in determining whether compensation is paid in this state are derived from the Model Unemployment Compensation Act. Accordingly, if compensation paid to employees is included in the payroll factor by use of the cash method of accounting or if the taxpayer is required to report such compensation under such method for unemployment compensation purposes, it shall be presumed that the total wages reported by the taxpayer to this state for unemployment compensation purposes constitute compensation paid in this state except for compensation excluded under Rule 1320-06-01-.30. The presumption may be overcome by satisfactory evidence that an employee’s compensation is not properly reportable to this state for unemployment compensation purposes.

History

Authority: T.C.A. §§ 67-1-102(a), 67-1-102, 67-4-811, 67-4-2012.
Administrative History: Original rule certified June 7, 1974. Repealed and refiled July 22, 1977; effective August 22, 1977. Amendment filed November 6, 1984; effective December 6, 1984. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-06-01-.31 PAYROLL FACTOR — COMPENSATION PAID IN THIS STATE

(1) Compensation is paid in this state if any one of the following tests, applied consecutively, are met:

(a) The employee’s service is performed entirely within the state.

(b) The employee’s service is performed both within and without the state, but the service performed without the state is incidental to the employee’s service within the state. The word “incidental” means any service which is temporary or transitory in nature, or which is rendered in connection with an isolated transaction.

(c) If the employee’s services are performed both within and without this state, the employee’s compensation will be attributed to this state:

if the employee’s base of operations is in this state; or 2. if there is no base of operations in any state in which some part of the service is performed, but the place from which the service is directed or controlled is in this state; or 3. if the base of the operations or the place from which the service is directed or controlled is not in any state in which some part of the service is performed but the employee’s residence is in this state.

(2) The term “base of operations” is the place of more or less permanent nature from which the employee starts his work and to which he customarily returns in order to receive instructions from the taxpayer or communications from his customers or other persons or to replenish stock or other materials, repair equipment, or perform any other functions necessary to the exercise of his trade or profession at some other point or points. The term “place from which the service is directed or controlled” refers to the place from which the power to direct or control is exercised by the taxpayer.

History

Authority: T.C.A. §§ 67-101(2), 67-1-102, and 67-4-2012.
Administrative History: Original rule certified June 7, 1974. Repealed and refiled July 22, 1977; effective August 22, 1977. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-06-01-.32 SALES FACTOR

(1) In General.

(a) T.C.A. § 67-4-2004 defines the term “sales” to mean all gross receipts of the taxpayer not allocated under § 67-4-2011. Thus, for the purposes of the sales factor of the apportionment formula, the term “sales” means all gross receipts derived by the taxpayer from transactions and activity producing business earnings. The following are rules for determining “sales” in various situations:

In the case of a taxpayer engaged in manufacturing and selling or purchasing and reselling goods or products, “sales” includes all gross receipts from the sales of such goods or products (or other property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the tax period) held by the taxpayer primarily for sale to customers. Gross receipts for this

purpose means gross sales, less returns and allowances, and includes all interest income, service charges, carrying charges, or time-price differential charges incidental to such sales. Federal and state excise taxes (including sales taxes) shall be included as part of such receipts if such taxes are passed on to the buyer or included as part of the selling price of the product.

In the case of cost plus fixed fee contracts, such as the operation of a government-owned plant for a fee, “sales” include the entire reimbursed cost, plus the fee.
In the case of a taxpayer engaged in providing services, such as the operation of an advertising agency, or the performance of equipment service contract, research and development contracts, “sales” includes the gross receipts from the performance of such services including fees, commissions, and similar items.
In the case of a taxpayer engaged in renting real or tangible property, “sales” includes the gross receipts from the rental, lease, or licensing the use of the property.
In the case of a taxpayer engaged in the sale, assignment, or licensing of intangible personal property such as patents and copyrights, “sales” includes the gross receipts therefrom.
If a taxpayer derives receipts from the sale of equipment used in its business, such receipts constitute “sales.” For example, a truck express company owns a fleet of trucks and sells its trucks under a regular replacement program. The gross receipts from the sales of the trucks are included in the sales factor.

(b) In some cases certain gross receipts should be disregarded in determining the sales factor in order that the apportionment formula will operate fairly to apportion to this state the business earnings of the taxpayer’s trade or business. For example, where substantial amounts of gross receipts arise from the sale of fixed assets used in the trade or business, such as the sale of a factory or plant, gross receipts will be excluded from the sales factor. In order to give proper recognition to the apportionment of business earnings (loss) in such instances, the net gain arising from the transaction or activity will be included in the sales factor.

(2) Zero Denominator. In the use of any apportionment formula, where the denominator of a factor is zero, such factor must be eliminated entirely and the average then computed from the remaining factor or factors.

History

Authority: T.C.A. §§ 67-1-102(a), 67-1-102, 67-4-804, 67-4-810, 67-4-2004, and 67-4-2011.
Administrative History: Original rule certified June 7, 1974. Repealed and refiled July 22, 1977; effective August 22, 1977. Amendment filed November 6, 1984; effective December 6, 1984. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-06-01-.33 SALES FACTOR — SALES OF TANGIBLE PERSONAL PROPERTY

(1) Sales Of Tangible Personal Property Are In This State.

(a) Gross receipts from the sales of tangible personal property (except sales to the United States Government; see Rule 1320-06-01-.33(2)) are in this state if the property is delivered or shipped to a purchaser within this state regardless of the f.o.b. point or other conditions of sale.

(b) Property shall be deemed to be delivered or shipped to a purchaser within this state if the recipient is located in this state, even though the property is ordered from outside this state.

Example: The taxpayer, with inventory in State A, sold $100,000 of its products to a purchaser having branch stores in several states including this state. The order for the purchase was placed by the purchaser’s central purchasing department located in State B. $25,000 of the purchase order was shipped directly to purchaser’s branch store in this state. The branch store in this state is the “purchaser within this state” with respect to $25,000 of the taxpayer’s sales.

(c) Property is delivered or shipped to a purchaser within this state if the shipment terminates in this state, even though the property is subsequently transferred by the purchaser to another state.

Example: The taxpayer makes a sale to a purchaser who maintains a central warehouse in this state at which all merchandise purchases are received. The purchaser reships the goods to its branch stores in other states for sale. All of taxpayer’s products shipped to the purchaser’s warehouse in this state are property “delivered or shipped to a purchaser within this state”.

(d) The term “purchaser within this state” shall include the ultimate recipient of the property if the taxpayer in this state, at the designation of the purchaser, delivers to or has the property shipped to the ultimate recipient within this state.

Example: A taxpayer in this state sold merchandise to a purchaser in State A. Taxpayer directed the manufacturer or supplier of the merchandise in State B to ship the merchandise to the purchaser’s customer in this state pursuant to purchaser’s instructions. The sale by the taxpayer is “in this state”.

(e) When property being shipped by a seller from the state of origin to a consignee in another state is diverted while en route to a purchaser in this state, the sales are in this state.

Example: The taxpayer, a produce grower in State A, begins shipment of perishable produce to the purchaser’s place of business in State B. While en route the produce is diverted to the purchaser’s place of business in this state where the taxpayer is subject to tax. The sale by the taxpayer is attributed to this state.

(2) Sales Factor – Sales of Tangible Personal Property to United States Government in this State. Gross receipts from the sales of tangible personal property to the United States Government are in this state if the property is shipped from an office, store, warehouse, factory, or other place of storage in this state. For the purposes of this regulation, only sales for which the United States Government makes direct payment to the seller pursuant to the terms of a contract constitute sales to the United States Government. Thus, as a general

rule, sales by a subcontractor to the prime contractor, the party to the contract with the United States Government, do not constitute sales to the United States Government. However, sales made to a prime contractor will be considered sales to the United States Government where the prime contractor is authorized to act as agent for the United States Government and for this reason qualifies to purchase only under Federal Supply Contracts entered into between the taxpayer and the United States Government.

Example 1: A Taxpayer contracts with General Services Administration to deliver X number of trucks which were paid for by the United States Government. The sale is a sale to the United States Government.

Example 2: The taxpayer as a subcontractor to a prime contractor with the National Aeronautics and Space Administration contracts to build a component of a rocket for $1,000,000. The sale by the subcontractor to the prime contractor is not a sale to the United States Government

History

Authority: T.C.A. §§ 67-1-102(a), 67-1-102, 67-4- 811, and 67-4-2012.
Administrative History: Original rule filed July 22, 1977; effective August 22, 1977. Amendment filed November 6, 1984; effective December 6, 1984. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-06-01-.34 SALES FACTOR – QUALIFIED MEMBER OF A QUALIFIED GROUP

(1) In General. T.C.A. § 67-4-2012(j) states that for any qualified member of a qualified group, the numerator of the sales factor equals the receipts from all sales of tangible personal property attributed to Tennessee under the sourcing rules for tangible personal property plus the arithmetical average of receipts from all sales other than sales of tangible personal property that are in Tennessee as determined under (1) market-based sourcing, and (2) where the earnings producing activity is performed (a) in this state or (b) both in and outside of Tennessee and a greater proportion of the earnings-producing activity is performed in Tennessee than any other state, based on cost of performance.

(2) Earnings Producing Activity; Defined. The term “earnings producing activity” applies to each separate item of income and means the transactions and activity directly engaged in by the taxpayer in the regular course of its trade or business for the ultimate purpose of obtaining gains or profit. Such activity does not include transactions and activities performed on behalf of a taxpayer, such as those conducted on its behalf by an independent contractor.

Accordingly, the earnings producing activity includes but is not limited to the following:

(a) The rendering of personal services by employees or the utilization of tangible and intangible property by the taxpayer in performing a service.

(b) The sale, rental, leasing, or licensing or other use of real property.

(d) The sale, licensing or other use of intangible personal property. The mere holding of intangible personal property is not, of itself, an earnings producing activity.

(3) Costs of Performance; Defined. The term “costs of performance” means direct costs determined in a manner consistent with generally accepted accounting principles and in accordance with accepted conditions or practices in the trade or business of the taxpayer.

History

Authority: T.C.A. §§ 67-1-102(a), 67-1-102, 67-4-811, 67-4-2012.
Administrative History: Original rule filed July 22, 1977; effective August 22, 1977. Amendment filed November 6, 1984; effective December 6, 1984. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-06-01-.35 VARIANCES

(1) T.C.A. §§ 67-4-2112 and 67-4-2014 provide that if the allocation and apportionment provisions do not fairly represent the extent of the taxpayer’s business activity in this state, the taxpayer may petition for or the Commissioner of Revenue may require, in respect to all or any part of the taxpayer’s business activity, if reasonable:

(a) Separate accounting;

(b) The exclusion of any one or more of the factors;

(c) The inclusion of one or more additional factors which will fairly represent the taxpayer’s business activity in this state; or (d) The employment of any other method to effectuate an equitable allocation and apportionment of the taxpayer’s capital and net earnings for purposes of computing franchise and excise taxes. §§ 67-4-2112 and 67-4-2014 permit a departure from the allocation and apportionment provisions only in limited and specific cases. §§ 67-4- 2112 and 67-4-2014 may be invoked only in specific cases where unusual fact situations (which ordinarily will be unique and nonrecurring) produce incongruous results under the apportionment and allocation provisions contained in the Franchise and Excise Tax Laws.

(2) As provided by law, the Commissioner is given authority to require combined reports covering members of an affiliated group of corporations. In the event of inter-company activity in the manufacture, production or sales of products, the Commissioner may require a combined report if such is necessary to obtain an equitable and appropriate result.

(3) Application for relief must be addressed to the Commissioner with the filing of a petition, in writing, setting forth the reasons why application of the statutory allocation and apportionment provisions do not fairly represent the extent of the taxpayer’s business activity in this state. It must be shown by clear and cogent evidence that peculiar or unusual circumstances exist which would cause application of the said statutory provisions to work a hardship or injustice.

Such application must also include a proposed alternative method of allocation or apportionment to be used by the corporation, and be submitted by the taxpayer on or before the statutory due date of the return. In the event that a variation from the statutory provisions is adopted, then such method shall continue in effect so long as the circumstances justifying the variation remain substantially unchanged. It shall be the duty of the taxpayer to furnish each subsequent year such information with the filing of its return as will establish the fact that the circumstances remain substantially unchanged.

History

Authority: T.C.A. §§ 67-1-102(a), 67-1-102, 67-4-905, 67-4-811, 67-4-812, 67-4-814, 67-4-815, 67-4- 816, 67-4-910, 67-4-2012, 67-4-2013, 67-4-2014, and 67-4-2111.
Administrative History: Original rule filed July 22, 1977; effective August 22, 1977. Amendment filed November 6, 1984; effective December 6, 1984. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-06-01-.36 REPEALED

History

Authority: T.C.A. §§ 67-1-102(a), 13-28-11, and 67-4-808.
Administrative History: Original rule filed July 22, 1977; effective August 22, 1977. Amendment filed November 6, 1984; effective December 6, 1984. Repeal filed April 3, 1997; effective August 28, 1997.

Tenn. Comp. R. & Regs. 1320-06-01-.37 REPEALED

History

Authority: T.C.A. §§ 67-1-102 and 67-4-817.
Administrative History: Original rule filed July 22, 1977; effective August 22, 1977. Amendment filed November 6, 1984; effective December 6, 1984. Amendment filed March 9, 1990; effective April 23, 1990. Repeal filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-06-01-.38 CONSTRUCTING OR IMPROVING REAL PROPERTY — SPECIAL APPORTIONMENT

RULES.

Earnings from construction contracts must be apportioned to Tennessee pursuant to the property, payroll, and sales apportionment factors set forth in T.C.A. § 67-4-2012. Property, payroll, and sales apportionment factors for the apportionment of income from construction contracts shall be determined as follows:

(1) Property Factor. In general, the numerator and denominator of the property factor shall be determined as set forth in T.C.A. § 67-4-2012(b), (c) and (d), and Rules 1320-06-01-.27 through .29, inclusive. However, the following special rules are also applicable.

(a) Rents paid for the use of equipment are included in the property factor at eight times the net annual rental rate even though such rental expense may be capitalized into the costs of construction.

(b) “Rents paid” shall include rent expense in the income year for which it is deductible under the taxpayer’s method of accounting for federal income tax purposes.

(c) Rent expense which is capitalized to a particular construction project shall be attributed to the state in which the construction project is located.

(2) Payroll Factor. In general, the numerator and denominator of the payroll factor shall be determined as set forth in T.C.A. § 67-4-2012 (e) and (f) and Rules 1320-06-01-.30 and .31.

However the following special rules are also applicable.

(a) Compensation paid to employees which is attributable to a particular construction project is included in the payroll factor even though capitalized into the costs of construction.

(b) The payroll factor is computed by including compensation in the income year for which it is deductible under the taxpayer’s method of accounting for federal income tax purposes.

(c) Compensation paid to employees which is capitalized to a particular construction project shall be attributed to the state in which the construction project is located.

(3) Sales Factor. In general, the numerator and denominator of the sales factor shall be determined as set forth in T.C.A. § 67-4-2012(g), (h) and (i), Rules 1320-06-01-.32 through .34, inclusive, and Rule 1320-06-01-.42. However, the following special rules are also applicable:

(a) The sales factor is computed by including gross receipts in the income year for which it is includable under the taxpayer’s method of accounting for federal income tax purposes.

(b) Gross receipts derived from the performance of a contract are attributable to Tennessee if the construction project is located in Tennessee. If the construction project is located partly within and partly without Tennessee, the gross receipts, payroll and property factors attributable to Tennessee are based upon the ratio which construction costs for the project in Tennessee bear to the total of construction costs for the entire project or any other method, such as engineering cost estimates, which will provide a reasonable apportionment.

History

Authority: T.C.A. §§ 67-1-102, 67-1-811, and 67-4-2012.
Administrative History: Original rule filed March 9, 1990; effective April 23, 1990. Amendments filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-06-01-.39 REPEALED

History

Authority: T.C.A. §§ 67-1-102 and 67-4- 905(b).
Administrative History: Original rule filed September 4, 1992; effective December 29, 1992. Repeal filed June 28, 2016; effective September 26, 2016.

Tenn. Comp. R. & Regs. 1320-06-01-.40 DISREGARDED ENTITIES

(1) Disregarded Limited Liability Companies. A limited liability company is disregarded for franchise and excise tax purposes only if it is disregarded for federal income tax purposes and its single member is classified as a corporation for federal income tax purposes. If a limited liability company does not meet both of these requirements, it will be treated separately for franchise and excise tax purposes and must file its own separate franchise and excise tax return.

(2) Other Federally Disregarded Entities. Only a limited liability company meeting the requirements of (1) will be disregarded for franchise and excise tax purposes. All other taxpayers subject to the franchise or excise tax will be treated separately, regardless of whether they are otherwise disregarded for federal income tax purposes.

(3) Tiered Ownership of Limited Liability Companies. To determine whether a limited liability company is disregarded for franchise and excise tax purposes when it is only indirectly owned by a corporation, the analysis must take a “top down” approach and begin with the corporation and all directly-owned entities that directly or indirectly own the limited liability company.

Example 1: Corporation X is the single member of LLC1. LLC1 is the single member of LLC2.

Corporation X is classified as a corporation for federal income tax purposes. Both LLC1 and LLC2 are disregarded for federal income tax purposes. LLC1 is disregarded for franchise and excise tax purposes to Corporation X. As a disregarded entity, LLC1 is treated as a division of Corporation X and not as a separate entity. As a result, the ownership interest held by LLC1 in LLC2 is treated as owned directly by Corporation X. LLC2 is disregarded for franchise and excise tax purposes to Corporation X because its single member for tax purposes is Corporation X, a corporation.

Example 2: Corporation X is the single member of LLC1 and LLC2, each of which has a 50% ownership interest in LLC3. Corporation X is classified as a corporation for federal income tax purposes. LLC1, LLC2, and LLC3 are each disregarded for federal income tax purposes.

LLC1 and LLC2 are each disregarded for franchise and excise tax purposes to Corporation X. As disregarded entities, LLC1 and LLC2 are each treated as a division of Corporation X and not as separate entities. As a result, the ownership interests held by LLC1 and LLC2 in LLC3 are treated as owned directly by Corporation X. LLC3 is disregarded to Corporation X for franchise and excise tax purposes because Corporation X is treated as its single member.

(4) Not-For-Profit Subsidiaries. Except as provided in T.C.A. §§ 67-4-2007 and -2105, a not-forprofit entity is generally exempt from franchise and excise taxes. T.C.A. § 67-4-2004 defines a “not-for-profit” entity as “any person described in §401, §408, §408A, §409, §501, §526, §527, §528, §529 or §530 of the Internal Revenue Code, codified in 26 U.S.C. §401, §408, §408A, §409, §501, §526, §527, §528, §529 or §530.” If a taxpayer is disregarded for federal income tax purposes to an entity meeting the definition of a not-for-profit, the taxpayer also meets the definition of a not-for-profit and is exempt from franchise and excise taxes to the extent provided by T.C.A. §§ 67-4-2007 and -2105, regardless of whether the taxpayer is treated as a separate or disregarded entity for franchise and excise tax purposes.

History

Authority: T.C.A. §§ 67-1-102, 67-4-2004, 67-4-2007, 67-4-2105, 67-4-2106, and 48-249-1003.
Administrative History: New rules filed June 28, 2016; effective September 26, 2016.

Chapter 1320-07-01 Inspection of Volatile Oils

Tenn. Comp. R. & Regs. 1320-07-01-.01 QUALITY STANDARDS

(1)All volatile substances which are sold, offered for sale, or which are possessed or stored in this state, produced from petroleum, natural gas, oil shales or coal, and which test over 16° gravity on the API scale are subject to inspection and taxation and must meet the minimum specifications listed.

Substances capable of burning as a fuel and meeting the testing limits outlined are considered volatile for purpose on inspection and taxation. Excepted are those substances with a kinematic viscosity over 70 centistokes at 122° Fahrenheit and a flash point over 150° Fahrenheit. Propane is also excluded.

(2)All product subject to inspection as herein provided shall be inspected regardless of whether or not they are subject to the tax.

History

Authority: T.C.A. §§60-415 and 67-101.
Administrative History: Original rule certified June 7, 1974. Amendment filed February 19, 1975; effective March 21, 1975. Repealed and new rule filed August 15, 1979; effective November 27, 1979.

Tenn. Comp. R. & Regs. 1320-07-01-.02 GASOLINE SPECIFICATIONS

All gasoline shall meet either the detailed requirements of the current ASTM Standards Specifications for Gasoline, or any current ASTM emergency specifications.

History

Authority: T.C.A. §§60-415 and 67-101.
Administrative History: Original rule certified June 7, 1974. Amendment filed February 19, 1975; effective March 21, 1975. Repealed and new rule filed August 15, 1979; effective November 27, 1979.

Tenn. Comp. R. & Regs. 1320-07-01-.03 DIESEL FUEL SPECIFICATIONS

(1)No. 1 Diesel Fuel shall meet either the detailed requirements of Grade No 1-D of current ASTM Standard Classification of Diesel Fuel Oils or any current ASTM emergency specifications.

(2)No. 2 Diesel Fuel shall meet either the detailed requirements of Grade No 2-D of current ASTM Standard Classification of Diesel Fuel Oils, or any current ASTM emergency specifications.

History

Authority: T.C.A. §§60-415 and 67-101.
Administrative History: Original rule certified June 7, 1974. Amendment filed February 19, 1975; effective March 21, 1975. Repealed and new rule filed August 15, 1979; effective November 27, 1979.

Tenn. Comp. R. & Regs. 1320-07-01-.04 FUEL OIL SPECIFICATIONS

(1)No. 1 Fuel Oil shall meet either the detailed requirements of Grade No. 1 Fuel Oil of current ASTM Standard Specification for Fuel Oils, or any current ASTM emergency specifications.

(2)No. 2 Fuel Oil shall meet either the detailed requirements of Grade No 2 Fuel Oil of current ASTM Standard Specification for Fuel Oils, or any current ASTM emergency specifications.

History

Authority: T.C.A. §§60-415 and 67-101.
Administrative History: Original Rule certified June 7, 1974. Amendment filed February 19, 1975; effective March 21, 1975. Repealed and new rule filed August 15, 1979; effective November 27, 1979.

Tenn. Comp. R. & Regs. 1320-07-01-.05 KEROSENE SPECIFICATIONS

Kerosene shall be free from water and suspended matter and meet the requirements of the latest version of the American Society for Testing and Materials Standards for Kerosene or any current ASTM emergency specifications.

History

Authority: T.C.A. §§60-415 and 67-101.
Administrative History: Original rule certified June 7, 1974. Amendment filed February 19, 1975; effective March 21, 1975. Repealed and new rule filed August 15, 1979; effective November 27, 1979.

Tenn. Comp. R. & Regs. 1320-07-01-.06 CLEANING FLUIDS

The flash point of cleaning fluids shall not be lower than 100 degrees F., using the TAG closed tester. (TAG) (ASTM D56).

History

Authority: T.C.A. §§60-415 and 67-101.
Administrative History: Original rule certified June 7, 1974. Amendment filed February 19, 1975; effective March 21, 1975. Repealed and new rule filed August 15, 1979; effective November 27, 1979.

Tenn. Comp. R. & Regs. 1320-07-01-.07 LUBRICATING MOTOR OILS

When sold in sealed containers lubricating motor oils will not be considered subject to inspection, or to imposition of either the special tax on petroleum products or the motor vehicle fuel tax regardless of whether said oils meet the minimum standards for inspection consideration as outlined at T.C.A. §67-3204. This exception, however, does not apply to the tax imposed under the Retailers’ Sales Tax Act or any other tax to which these products may be subject.

History

Authority: T.C.A. §§60-415 and 67-101.
Administrative History: Original rule certified June 7, 1974. Amendment filed February 19, 1975; effective March 21, 1975. Repealed and new rule filed August 15, 1979; effective November 27, 1979.

Tenn. Comp. R. & Regs. 1320-07-01-.08 REPEALED

History

Authority: T.C.A. §§60-415 and 67-101.
Administrative History: Original rule certified June 7, 1974. Amendment filed February 19, 1975; effective March 21, 1975. Repealed filed August 15, 1979; effective November 27, 1979.

Chapter 1320-07-02 Gasoline Tax

Tenn. Comp. R. & Regs. 1320-07-02-.01 PERMIT REQUIRED

(1)All gasoline permits previously issued by the department under authority of any law other than

Chapter 761 of the Public Acts of 1978 are void. All dealers, distributors, jobbers or other persons engaged in distributing or storing gasoline or distillate are required to secure either a class "A" or "B" permit pursuant to T.C.A. Section 67-3503.

(2)All gasoline permits are non-transferable and shall be returned to the department for cancellation whenever the person, in whose name the permit was issued, ceases to engage in the business of distributing or storing gasoline or distillate in the State of Tennessee.

History

Authority: T.C.A. §§67-3828 and 67-101.
Administrative History: Original rule certified June 7, 1974. Repealed and new rule filed August 15, 1979; effective November 27, 1979.

Tenn. Comp. R. & Regs. 1320-07-02-.02 SPECIAL ALLOWANCE FOR CASUALTY LOSSES

To sustain a claim for loss under T.C.A.

Section 67-3307 a written report of the loss is required to be made to the commissioner of revenue within seventytwo (72) hours of the date of the loss. In addition, a written claim and statement explaining the occurrence of the loss shall be filed with the commissioner within sixty (60) days of the time of loss. To be collectible a loss must be one over which a distributor has no control. Negligence or any unlawful act, such as overloading a transport vehicle, excessive speed or other like act by a distributor or his agent, which is contributory to a loss shall negate the validity of the claim.

History

Authority: T.C.A. §§67-3828 and 67-101.
Administrative History: Original rule certified June 7, 1974. Repealed and new rule filed August 15, 1979; effective November 27, 1979.

Tenn. Comp. R. & Regs. 1320-07-02-.03 PENALTY AND INTEREST CALCULATION

If any tax or portion thereof is not paid on or before the twentieth (20th) day of the month following the month in which it is due it shall be delinquent and subject to a penalty of one percent (1%) per day up to ten (10) days or a total of ten percent (10%). In no case shall the penalty be less than ten dollars ($10). Interest shall be calculated at the rate provided by law from the date the tax is due until the end of the month in which it is paid. Any penalty incurred by a taxpayer pursuant to T.C.A.

Section 67-3312 may be waived pursuant to T.C.A. Section 67-101(5).

History

Authority: T.C.A. §§67-3828 and 67-101.
Administrative History: Original rule certified June 7, 1974. Repealed and new rule filed August 15, 1979; effective November 27, 1979.

Tenn. Comp. R. & Regs. 1320-07-02-.04 REPEALED

History

Authority: T.C.A. §§67-3828 and 67-101.
Administrative History: Original rule certified June 7, 1974. Repealed filed August 15, 1979; effective November 27, 1979.

Tenn. Comp. R. & Regs. 1320-07-02-.05 REPEALED

History

Authority: T.C.A. §§67-3828 and 67-101.
Administrative History: Original rule certified June 7, 1974. Repeal filed August 15, 1979; effective November 27, 1979.

Tenn. Comp. R. & Regs. 1320-07-02-.06 REPEALED

History

Authority: T.C.A. §§67-3828 and 67-101.
Administrative History: Original rule certified June 7, 1974. Repeal filed August 15, 1979; effective November 27, 1979.

Tenn. Comp. R. & Regs. 1320-07-02-.07 REPEALED

History

Authority: T.C.A. §§67-3828 and 67-101.
Administrative History: Original rule certified June 7, 1974. Repeal filed August 15, 1979; effective November 27, 1979.

Chapter 1320-07-03 Administration of Taxes on Petroleum Products

Tenn. Comp. R. & Regs. 1320-07-03-.01 BOND REQUIREMENTS

The penal amount of a bond shall be for not less than the greater of one thousand dollars ($1,000) or three (3) times the amount of the average monthly tax liability nor more than one hundred thousand dollars ($100,000) except in the case of a taxpayer required to maintain a combination bond which shall have a minimum penal amount of three thousand dollars ($3,000) and a maximum penal amount of two hundred thousand dollars ($200,000). All taxpayers required to post bond for more than one type of activity will provide a combination bond subject to three thousand dollars ($3,000) minimum penal amount. Periodic review shall be made of the bonds in force and, where indicated, demand may be made on the taxpayer to increase the penal amount of the bond in force to an amount which will satisfy the requirement that the penal amount of a bond be equal to at least three (3) times the average monthly taxability. A taxpayer shall be allowed a maximum of thirty (30) days to comply with this provision from the time demand is made upon him to do so. Failure to do so within this time limit will subject the taxpayer to a possible cancellation or revocation of his license or permit. An immediate determination of established liability and demand for payment may also result.

History

Authority: T.C.A. §§67-3828 and 67-101.
Administrative History: Original rule certified June 7, 1974. Amendment filed October 28, 1974; effective November 28, 1974. Repealed and new rule filed August 15, 1979; effective November 27, 1979.

Tenn. Comp. R. & Regs. 1320-07-03-.02 CARRIERS

(1)A carrier who imports or delivers gasoline in Tennessee must be properly registered and bonded.

Said carrier will be provided a class "B" permit in accordance with T.C.A. Section 67-3503.

(2)A carrier who delivers gasoline, distillate, motor vehicle fuel, benzol, kerosene or any other liquid petroleum products or substitutes therefor to any person known by the said carrier not to have a permit to sell, store, use or distribute such products and thereafter fails to notify the department as required by law shall be liable for all privilege taxes, including the special tax, that the consignee would be required to pay in the event collection of this tax liability cannot be effected from the consignee. This liability shall include applicable penalty and interest.

History

Authority: T.C.A. §§67-3828 and 67-101.
Administrative History: Original rule certified June 7, 1974. Amendment filed October 28, 1974; effective November 28, 1974. Repealed and new rule filed August 15, 1979; effective November 27, 1979.

Tenn. Comp. R. & Regs. 1320-07-03-.03 REPEALED

History

Authority: T.C.A. §§67-3828 and 67-101.
Administrative History: Original rule certified June 7, 1974. Amendment filed October 28, 1974; effective November 28, 1974. Repeal filed August 15, 1979; effective November 27, 1979.

Tenn. Comp. R. & Regs. 1320-07-03-.04 REPEALED

History

Authority: T.C.A. §§67-3828 and 67-101.
Administrative History: Original rule certified June 7, 1974. Amendment filed October 28, 1974; effective November 28, 1974. Repeal filed August 15, 1979; effective November 27, 1979.

Chapter 1320-07-04 Exemption and Refund of Taxes on Petroleum Products

Tenn. Comp. R. & Regs. 1320-07-04-.01 REFUNDS AND EXEMPTIONS

(l)In order to be entitled to an exemption or refund pursuant to T.C.A. §67-3-201 et seq. a claimant must have been properly registered and where required, hold a valid permit. If a bond is required it shall be a valid bond of proper amount. This restriction on exemption or refund entitlements applies to all dealers, distributors, sellers, limited users, exporters, governmental agencies, farmers, truck operators or any other handler of gasoline or distillate seeking an exemption from or a refund of taxes.

(2)To secure a refund, a claimant must file a claim on a form authorized by the department within the period authorized for the type of claim being sought. Unless otherwise required by law or rule, refunds shall be claimed within ninety (90) days from the ending date covered by the report on which the claim is based. Where a credit is being taken it must be taken on a report filed within the same ninety (90) day period. Refund claims pursuant to T.C.A. §67-3-90l et seq. on products exported outside the state for resale may be filed at any time within one (l) year of the time the export on which the claim is based was made.

(3)Copies of invoices, bills of lading or other detailed documentation required to support the accuracy of a claim, credit, or exemption may be destroyed by the department after the claim has been approved and processed for payment or the approval of the credit or exemption has been granted. The properly approved copy of the claim form or report on which credit or exemption is taken will be maintained by the department for a minimum of four (4) years as proof of payment and for audit verification.

History

Authority: T.C.A. §67-1-102.
Administrative History: Original rule certified June 7, 1974. Repealed and new rule filed August 15, 1979; effective November 27, 1979. Amendment filed July 18, 1984; effective October 14, 1984. Amendment filed March 21, 1986; effective June 14, 1986.

Tenn. Comp. R. & Regs. 1320-07-04-.02 AVIATION GASOLINE

(1)The department shall make available to vendors of aviation gasoline an exemption certificate which shall be properly completed and signed by a vendee receiving aviation gasoline in order for the vendee to be entitled to purchase the gasoline without payment of the regular privilege tax. The vendor shall keep the exemption certificate on file for a period of three (3) years from December 31 of the year in which the return reflecting such final sale was filed. These certificates shall be available for examination by properly authorized members of the department.

(2)Failure of a vendor to receive and maintain an exemption certificate shall subject the vendor to payment of the gasoline tax on the aviation gasoline. A vendor selling fuel for aviation use, which the commissioner determines is not used for aviation purposes, shall be subject to payment of tax, penalty and interest on all fuel sold to the vendee regardless of the fact that an exemption certificate is on file.

(3)The special tax imposed under T.C.A. §67-3-901 et seq. is payable on aviation gasoline.

History

Authority: T.C.A. §67-1-102.
Administrative History: Original rule certified June 7, 1974. Repeal and new rule filed August 15, 1979; effective November 27, 1979. 1320-7-4 .03 REFINERY EXEMPTION. The refinery exemption shall apply only to a refinery and to sales made by it in accordance with the law. Secondary sales by a person purchasing or otherwise receiving interest in refinery stored products, and who thereafter either sells, exchanges, or transfers title to it to others shall be taxable. These secondary sales shall be taxable regardless of whether or not the product has been removed from refinery storage. Authority: T.C.A. §67-1-102.

Tenn. Comp. R. & Regs. 1320-07-04-.04 GOVERNMENTAL REFUNDS

(1)Beginning January 1, 1979, a dealer or distributor may claim a refund on any tax paid gasoline or other petroleum products sold to a governmental unit holding a valid exemption permit.

(a)Applicable gasoline tax and the special tax shall not be passed on in sales to a governmental unit holding a valid exemption permit.

(b)A refund of all but one and one half percent (1 1/2%) of the tax paid per gallon of gasoline will be made to persons entitled to a refund for tax-exempt sales to governmental units. This reflects the normal gallonage allowance.

(c)All governmental units are exempt from payment of the motor vehicle fuel use tax.

(2)The storage facilities required to be used by governmental units shall be subject to inspection by the department or by any person duly authorized by the commissioner of revenue. Purchase records of governmental units shall be subject to inspection to insure compliance with exemption requirements of the law.

(3)A sale to a governmental unit by a retail filling station is not a sale eligible for a tax refund. A retail filling station selling to a governmental unit may, however, charge and collect all applicable taxes from the purchasing unit.

(4)Any person using gasoline purchased for governmental use, for any purpose other than governmental use shall be subject to all penalties under existing statutes. In no instance may gasoline purchased for governmental use be placed in any vehicle or equipment owned by a private individual firm or corporation even if such individual, firm or corporation is engaged in activities on behalf of the governmental unit, exclusive of equipment lease agreements.

History

Authority: T.C.A. §67-1-102.
Administrative History: Original rule certified June 7, 1974. Repeal and new rule filed August 15, 1979; effective November 27, 1979. Amendment filed July 18, 1984; effective October 14, 1984.

Tenn. Comp. R. & Regs. 1320-07-04-.05 AGRICULTURAL USE

(1)A refund of all but one cent (1¢) per gallon of the gasoline tax paid on gasoline used or agricultural purposes may be secured if such use is properly documented. No refund may be made, however, of any part of the special tax. Pursuant to T.C.A. §67-3-302, a refund may be made only on fuel purchased with the semi-annual period for which a claim is filed or on fuel purchased within the annual period if a claim for refund is filed on an annual basis. All persons claiming refund shall be the holder of a valid refund permit secured before the purchase of the gasoline on which refund is sought. All invoices supporting the claim must indicate that the gasoline had color added at the time of delivery.

(2)Sales of gasoline for agricultural purposes shall not be made from a customer controlled pump unless prior written approval is granted by the department. A person who has been granted this written approval shall also comply with the following:

(a)Storage for the customer controlled pump shall be separate from any other storage and the gasoline delivered to the storage tank shall be colored at the time of delivery.

(b)A customer controlled pump shall have a separate meter and key for each customer.

(c)The person selling gasoline for agricultural use shall furnish an invoice to each customer on the last day of each month as provided by law.

(3)Any person found in violation of any law or rule relating to sales from a customer controlled pump shall lose the right to make sales from a customer controlled pump for a period of not less than two (2) years and be subject to all other penalties as outlined by T.C.A. §§67-3-301 through 67-3-313.

(4)When a person holding an Agricultural Refund permit fails to file a claim within any two-year period the permit shall be canceled. The holder of a permit which has been canceled for this reason may qualify for a permit at a future date in the same manner as if he had never qualified. The department shall notify, by mail, a holder of a permit which has been canceled that this action has been taken and that he shall be required to reapply for a permit if he desires to seek refunds in the future. This notice shall be directed to the last known mailing address of the permittee as shown on departmental records and this mailing shall be deemed to constitute sufficient notice to the permittee of the cancellation.

History

Authority: T.C.A. §67-1-102.
Administrative History: Original rule filed August 15, 1979; effective November 27, 1979.

Tenn. Comp. R. & Regs. 1320-07-04-.06 AUXILIARY ENGINES

(1)A claim for refund submitted by persons using fuel for truck refrigeration, cement mixing and unloaders shall be supported by evidence of either purchase or withdrawal from storage, or both of them, as hereinafter provided:

(a)In the case of fuel dispensed by a retail service station into either the separate tank of a refrigeration unit, cement mixer or the tank of a motor vehicle with a power take-off unit, the claim for refund shall be supported by the original copy of the credit card or cash sales ticket of the dispensing retail service station.

(b)In the case of fuel withdrawn from bulk storage of the user, the claim for refund shall be supported by a daily withdrawal summary of tax paid fuel removed from bulk purchase storage.

Such summary shall list each individual withdrawal, the unit identification number, the number of gallons withdrawn, and the beginning and ending inventory amounts of fuel for each semi-annual period. In addition, all bulk purchases shall be listed on the reverse site of each copy of the claim; and there shall be shown thereon the date of purchase, name of vendor, invoice number and the number of gallons of each bulk purchase from which the fuel used is taken. A holder of permit required to operate an interstate freight motor vehicle under T.C.A. §67-3403 shall not be allowed a percentage refund on any amount greater than the net liability shown to be due the State of Tennessee on his quarterly highway-user fuel tax return.

(c)In lieu of furnishing a daily withdrawal summary of tax paid fuel as stated in subparagraph (b) of this paragraph, a claimant for refund may substitute a monthly consumption reading taken from the totallizers of a multiple key controlled pump which is located on the premises of the permittee. The multiple key controlled pump method shall be used only with a motor vehicle exhibiting a power takeoff unit Only one key shall be assigned to each using unit. A permittee using a multiple key controlled pump for his using units in removing tax paid fuel shall furnish to the department in writing and prior to placing the pump in operation, a complete list of keys by number and the assigned using unit for each key. A schedule shall be provided with the claim listing the using unit, corresponding key reference, and the total fuel withdrawn by month from the key pump and placed in the using unit. A key unit assignment shall not be altered unless prior written notice is given to the department. All other information requirements stated in subparagraph (b) of this paragraph shall also be applicable to a permittee using this operating methodology.

(2)A refund is authorized for fuel used for the generation of power which is:

(a)provided either by an auxiliary engine attached to a self-propelled motor vehicle or by a power take-off auxiliary unit operating from a self-propelled vehicle's motor for the purpose of operating a concrete miser, or a pneumatic, boom, or pump unloader, or (b)provided exclusively by an auxiliary engine for the purpose of operating a refrigeration unit or cement mixer.

(3)If a refund permit holder is also qualified to operate an interstate freight motor vehicle under T.C.A. Section 67-3403 and files a quarterly highway user fuel tax return, the original copy of the evidence of purchase from a retail service station shall be:

(a)filed with a claim for refund if the permittee is a holder of a refund permit designated with an “A.M.” prefix. or (b)filed with the quarterly highway user fuel tax return if the permittee is a holder of a refund permit designated otherwise.

(4)There shall be no refund allowed under this rule of the special tax imposed under T.C.A. Section 67- 3801 et seq.

History

Authority: T.C.A. §67-101.
Administrative History: Original rule filed August 15, 1979; effective November 27, 1979.

Tenn. Comp. R. & Regs. 1320-07-04-.07 RECORDS OF USE

(1)With respect to fuel used by a permit holder which is dispensed by a retail service station, there shall be completed and furnished to the user a sales ticket by the vendor at the time of each purchase. The sales ticket shall reflect the following information:

(a)a machine printed serial number (b)Name and station address of the vendor which is either machine printed or card imprinted, (c)name and address of purchaser, (d)date of purchase, (e)number of gallons purchased, (f)type of product, (g)state tax rate charged, (h)unit identification, and (i)signature of purchaser or his agent In addition to the foregoing requirements, in order to be acceptable for refund claim purposes each invoice or retail service station sales ticket shall show the name of the permit holder as the purchaser, and have indicated thereon a date of sale which is within the same semi-annual time period for which the claim for refund is applicable.

(2)With respect to fuel used by a permit holder which is withdrawn from bulk purchase storage, there shall be a detailed record kept of each unit using refund fuel. This record shall reflect the mileage readings taken from the odometer of each using unit at the beginning and ending date of each semiannual time period. A permit holder applying for a refund on fuel used in pump unloading on the basis of two and one-half (2 1/2) gallons for each unloading shall file a detailed record in support of his claim reflecting the date of each unloading and the name and location of each customer receiving cargo unloaded through use of such two and one-half (2 1/2) gallons of fuel allowed for the total capacity of such vehicle unloaded.

History

Authority: T.C.A. §67-101.
Administrative History: Original rule filed August 15, 1979; effective November 27, 1979.

Tenn. Comp. R. & Regs. 1320-07-04-.08 PERMIT REVOCATION

The permit of a permit holder may be suspended or revoked if such person is found to be in violation of any applicable law or rule promulgated by the commissioner. Such revocation or suspension shall be made pursuant to the procedural requirements of the Uniform Administrative Procedures Act.

History

Authority: T.C.A. §67-101.
Administrative History: Original rule filed August 15, 1979; effective November 27, 1979.

Chapter 1320-07-05 Repealed

Tenn. Comp. R. & Regs. 1320-07-05-.01 REPEALED

History

Authority: T.C.A. § 67-101.
Administrative History: Original rule certified June 7, 1994. Repeal and new rule filed August 15, 1979; effective November 27, 1979. Repeal filed July 18, 1984; effective October 14, 1984.

Tenn. Comp. R. & Regs. 1320-07-05-.05 REPEALED

History

Authority: T.C.A. §§ 67-101 and 67-1-102.
Administrative History: Original rule filed August 15, 1979; effective November 27, 1979. Repeal filed October 30, 2025; effective January 28, 2026.

Tenn. Comp. R. & Regs. 1320-07-05-.02 REPEALED

History

Authority: T.C.A. §§ 67-101 and 67-3739.
Administrative History: Original rule certified June 7, 1974. Repeal and new rule filed August 15, 1979; effective November 27, 1979. Repeal filed July 18, 1984; effective October 14, 1984.

Tenn. Comp. R. & Regs. 1320-07-05-.03 REPEALED

History

Authority: T.C.A. § 67-101.
Administrative History: Original rule filed August 15, 1979; effective November 27, 1979. Repeal filed July 18, 1984; effective October 14, 1984.

Tenn. Comp. R. & Regs. 1320-07-05-.04 REPEALED

History

Authority: T.C.A. § 67-101.
Administrative History: Original rule filed August 15, 1979; effective November 27, 1979. Repeal filed July 18, 1984; effective October 14, 1984.

Chapter 1320-07-06 Repealed

Tenn. Comp. R. & Regs. 1320-07-06-.01 REPEALED

History

Authority: T.C.A. §§ 67-101 and 67-1-102.
Administrative History: Original rule certified June 7, 1974. Repeal and new rule filed August 15, 1979; effective November 27, 1979. Repeal filed October 30, 2025; effective January 28, 2026.

Tenn. Comp. R. & Regs. 1320-07-06-.02 REPEALED

History

Authority: T.C.A. §§ 67-101 and 67-1-102.
Administrative History: Original rule filed August 15, 1979; effective November 27, 1979. Repeal filed October 30, 2025; effective January 28, 2026.

Chapter 1320-07-07 Production of Fuel Alcohol

Tenn. Comp. R. & Regs. 1320-07-07-.01 LICENSING REQUIREMENTS FOR PRODUCTION OF FUEL ALCOHOL

(1)The term "fuel alcohol" is defined by T.C.A. §67-3-602 (5). Prior to the production of fuel alcohol in this state and for each calendar year thereafter, every Tennessee producer of fuel alcohol shall apply for licensing pursuant to T.C.A. §60-4-101. Licenses shall be issued for each calendar year or portion thereof for which fuel alcohol is to be produced upon payment of the statutory fee, based upon the producer's estimate of production for the year. On or before January 15, all producers shall have applied for a renewal of the license previously issued upon forms prescribed by the Commissioner of Revenue and shall indicate on that renewal application the total production of fuel alcohol for the previous year. In the event total production for the calendar year exceeds that upon which the producer has previously paid his license fee, any additional fee due plus penalty and interest provided by law shall be remitted with the report.

(2)Producers of less than one thousand (1,000) gallons of fuel alcohol shall not be required to pay a fee.

However, such producers shall be required to register with the Department of Revenue prior to entering into production, and shall complete the reports required of other producers as provided in subsection (1) of this rule.

History

Authority: T.C.A. §§60-4-101 and 67-1-101.
Administrative History: Repeal effective November 1, 1979. New rule filed March 21, 1986; effective June 14, 1986.

Tenn. Comp. R. & Regs. 1320-07-07-.02 DENATURING

(1)Any person or persons distilling, manufacturing or producing fuel alcohol shall denature such liquid as required by T.C.A. §60-3-103 (b).

(2)Denaturing shall consist of exposing the fuel alcohol to any substance that will render the fuel alcohol unfit for human consumption, such as unleaded gasoline, methyl isobutyl ketone or any other substance approved as a denaturing agent by the United States Treasury Department, Bureau of Alcohol, Tobacco and Firearms.

History

Authority: T.C.A. §§60-4-102 and 67-1-101.
Administrative History: Repeal effective November 1, 1979. New rule filed March 21, 1986; effective June 14, 1986.

Tenn. Comp. R. & Regs. 1320-07-07-.03 INSPECTION

(1)The Commissioner of Revenue or his designated agent may come on to the premises of any producer of fuel alcohol within the state in order to inspect, sample and test fuel alcohol to determine that it complies with the laws of this state. Said inspection shall be done, whenever possible, at a time and in a manner so as to minimize any interference with or delay of business operations.

History

Authority: T.C.A. §§60-3-105, 60-4-102, and 67-1-101.
Administrative History: Repeal effective November 1, 1979. New rule filed March 21, 1986; effective June 14, 1986.

Tenn. Comp. R. & Regs. 1320-07-07-.04 RECORDS

(1)Any person or persons who produces within the state shall keep permanent records of the amount produced. In the case of fuel alcohol imported into the state, the importer shall also keep a record of from whom said fuel alcohol was purchased or received. Such records shall be required to be kept for a period of three (3) years following the end of the year in which the records were originated and shall be available to the Commissioner of Revenue or his designated agent for inspection at any reasonable time during business hours without prior notice or the necessity of obtaining a search warrant.

History

Authority: T.C.A. §§60-4-102 and 67-1-101.
Administrative History: Repeal effective November 1, 1979. New rule filed March 21, 1986; effective June 14, 1986.

Chapter 1320-07-08 Repealed

Tenn. Comp. R. & Regs. 1320-07-08-.01 THROUGH 1320-7-8-.06 REPEALED

History

Authority: T.C.A. §67-1-102(a) and Acts of 1997, Public Chapter 316, §1.
Administrative History: Original rule filed February 5, 1990; effective March 25, 1990. (For Administrative History prior to March, 1990 see pages 3- 3.003.) Repeal and new rule filed May 7, 1991; effective June 21, 1991. Repeal filed May 15, 2003; effective September 26, 2003.

History

Authority: T.C.A. §§55-4-301 and 55-4-306, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-01-.02 PERSONALIZED PLATES

(1) All applications for personalized plates shall be submitted to the Motor Vehicle Division by the first day of the month proceeding the expiration date of the current registration. The application shall contain the name and complete residence address of the applicant, the name of the county to which the plates are to be sent, the legend desired thereon, and a second and third choice, if so desired, and the signature of the applicant. A remittance made payable to the Tennessee Department of Revenue in the amount of twenty-five dollars ($25.00) must accompany each application.

(2) Approval of applications for personalized plates shall be in accordance with the provisions of T.C.A. §55-4-301 et seq. If the applicant’s first choice of legend is not available or acceptable as a personalized plate, then the second and third choices will be considered in that order. In the event none of the three choices are available or acceptable, the application shall be rejected and the applicant so advised by letter giving the reason for its rejection. A claim for refund shall be processed and fees will be refunded. When an application has been formally approved by the Director, the applicant shall be so notified and there shall be no refund made of the application fee.

History

Authority: T.C.A. §§55-4-302, 55-4-303, and 55-4-306, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-01-.03 COLLEGE PLATES

(1) Proposals for the issuance of college plates must be made by the college or university referenced and must include a proposed format or design for the plates, which is subject to the approval of the Motor Vehicle Division under the provisions of T.C.A. §55-4-301. Individuals may then submit applications for such college plates.

(2) Applications for college plates shall be submitted to the Motor Vehicle Division by the first day of the month proceeding the expiration date of their current registration. The application shall contain the name and complete residence address of the applicant, the name of the county to which the plates are to be sent, the college to be referenced, and the signature of the applicant. A remittance made payable to the Tennessee Department of Revenue in the amount of twenty-five ($25.00) dollars must accompany each application.

(3) An applicant may also request that a college plate be personalized. In that case, the application must provide, in addition to the information required by this rule, information required by Rule 1320-8-1- .02. A remittance made payable to the Tennessee Department of Revenue in the amount of fifty dollars ($50.00) must accompany each application for a personalized college plate.

(4) Approval of applications for college plates shall be in accordance with the provisions of T. C.A. §55-4- 301 et seq. In order for any proposed college plate to be issued, the Motor Vehicle Division must receive at least one hundred (100) applications for such plates by September 30 of the year preceding the registration year for which the college plates are to be issued. If at least one hundred (100) applications are not timely received, any applications which have been received shall be returned and any amounts paid refunded.

History

Authority: T.C.A. §§55-4-302, 55-4-303, and 55-4-306, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-01-.04 RENEWAL

All fees payable under these rules upon application for cultural plates shall also be due and payable upon application for renewal of such plates.

History

Authority: T.C.A. §§55-4-302, 55-4-303, and 55-4-306, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority under the authority of Executive Order Number 36 dated April 19, 2006.

Authority: T.C.A §§55-2-103, 55-4-121, and 67-1-102, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-02-.04 REPEALED

History

Authority: T.C.A §§55-4-121 and 64-4-101, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Chapter 1320-08-03 Proportional Registration of Rental Trucks

Tenn. Comp. R. & Regs. 1320-08-03-.01 APPLICATION FOR REGISTRATION

An owner of a fleet, having five (5) or more trucks and truck tractors and such units of which are maintained exclusively for rental purposes for a period of less than thirty (30) days, desiring to register in this state a proportional part of such fleet under applicable statutes, shall on or before January 6, preceding the registration period, file application for registration with the Department of Revenue.

History

Authority: T.C.A §§55-2-103 and 64-4-101, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-03-.02 FORMS

The application shall be upon forms furnished by the Department except, that for good cause, the Commissioner may approve the use of and receive an application on a form furnished by the fleet owner.

The approval for the substitute form must be secured at least thirty (30) days prior to its use. Also, the request for such form must be in writing, setting forth circumstances to show why the standard forms would work a hardship.

History

Authority: T.C.A §§55-2-103 and 64-4-101, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-03-.03 APPLICATION INFORMATION

The application shall be supported by (a), a copy of the owner’s certificate of registration for each unit to be registered, and (b), a listing of all units in the rental fleet. Such units shall be arranged in ascending sequential order by the identifying fleet unit number and reflect the following data for each unit: year, make, manufacturer’s vehicle identification number, and declared gross weight. The Department shall have forty-five (45) days in which to examine, approve or reject and return such application. During the period commencing March 1 and ending at midnight on April 15, the owner shall present approved application and certificates of registration together with appropriate fees to either (a), the Department in the instance of a nonresident owner, or (b), a county court clerk in the instance of a resident owner.

History

Authority: T.C.A §§55-2-103 and 64-4-101, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-03-.04 RECORD OF MILES TRAVELED

The registrant hereunder shall maintain a complete record of the total miles traveled in all jurisdictions and such records shall be subject to inspection by an authorized agent of the Department of Revenue. The mileage records and other records supporting the sworn application required by law and not filed with the application shall be maintained for a period of not less than three (3) years.

History

Authority: T.C.A §§55-2-103 and 64-4-101, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-03-.05 PROPORTION OF UNITS IN EACH WEIGHT CLASS

The applicant shall compute the proportional number of units in each weight class in the fleet that shall be registered in this state by dividing the total miles traveled in Tennessee by all units in each weight class for the year ending on the preceding August 31, by the total miles traveled in all jurisdictions by the same units for the same period of time, the resulting quotient, rounded to the nearest ten thousandth, shall be multiplied by the total number of units in such weight class, provided, however, any fractional part shall be rounded and reported as one unit. The weight classes shall be in accordance with the schedule of weight classes set forth in T.C.A. §55-4-113.

History

Authority: T.C.A §§55-2-103 and 67-4-101, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-03-.06 ADDED UNITS

If units are added to the fleet after August 31, the owner may make application to register a proportional part of the units added in the same manner and using the same miles traveled ratio and quotient used in the original application for the fleet currently qualified with the Department. Provided, however, the proportional number of units added subject to registration in this state, may be reduced by the number of registrations which may be reassigned as hereinafter provided.

History

Authority: T.C.A §§ 55-2-103 and 67-4-101, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-03-.07 REPLACEMENT UNITS

If, by reason of the transfer of ownership, a unit registered in this state is withdrawn from fleet during the period for which it is registered, the registration therefor may be reassigned to a replacement unit under the provisions of T.C.A. §55-4-101.

History

Authority: T.C.A §§55-2-103 and 67-4-101, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-03-.08 IDENTIFICATION

The name or identification of the rental fleet, which appears in the application, and the identifying fleet unit number, which appears in the listing of the rental fleet units, shall be displayed on both sides of the power unit of each rental unit. The display of the fleet name or identification and unit number shall be in letters and figures in sharp contrast to the background and be of such size, color and shape as to be readily legible during daylight hours for a distance of fifty (50) feet while the vehicle is not in motion and such display shall be kept and maintained in such manner as to remain legible. Trucks or truck tractors, which do not meet the identification, legibility and display location requirements, shall be considered as not being assigned to the owner’s rental fleet.

History

Authority: T.C.A §§55-2-103 and 67-4-101, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Chapter 1320-08-04 Purple Heart Recipient Vehicle License Plates

Tenn. Comp. R. & Regs. 1320-08-04-.01 ISSUANCE OF PLATES

The application for a plate must be filed with the owner’s or lessee’s resident county clerk, and must be supported by a photocopy of form DD-214 or WWK 53-55, or any other similar document issued by the Department of Defense and approved by the Commissioner of Revenue which shows receipt of a Purple Heart by the applicant. The county clerk will issue the plate, and forward a copy of the supporting documentation with the application to the Motor Vehicle Division.

History

Authority: T.C.A. §§ 55-2-103, 55-4-205, 55-4-239, and 67-1-102; Executive Order Number 37 (2000); and Executive Order 36 (2006).
Administrative History: Original chapter 1340-05 transferred from chapter 1320-08 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-08 transferred from chapter 1340-05 under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-04-.02 REPEALED

History

Authority: T.C.A. §§ 55-2-103, 55-4-111, 55-4-239, and 67-1-102; Executive Order Number 37 (2000); and Executive Order 36 (2006).
Administrative History: Original chapter 1340-05 transferred from chapter 1320-08 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-08 transferred from chapter 1340-05 under the authority of Executive Order Number 36 dated April 19, 2006. Repeal filed October 30, 2025; effective January 28, 2026.

Tenn. Comp. R. & Regs. 1320-08-04-.03 LOST OR DEFACED PLATES

If a special plate shall become lost or defaced, the special plate may be replaced upon payment of the regular replacement fee set forth in T.C.A. § 55-4-103.

History

Authority: T.C.A. §§ 55-2-103, 55-4-103, and 67-1-102; Executive Order Number 37 (2000); and Executive Order 36 (2006).
Administrative History: Original chapter 1340-05 transferred from chapter 1320-08 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320- 08 transferred from chapter 1340-05 under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-04-.04 DEATH OF A RECIPIENT

Upon the death of a recipient of a Purple Heart special plate, the plate shall be surrendered to the local county clerk. A regular plate may be obtained by a surviving spouse for the remainder of that year without payment of an additional fee.

History

Authority: T.C.A. §§ 55-2-103, 55-4-205, and 67-1-102; Executive Order Number 37 (2000); and Executive Order 36 (2006).
Administrative History: Original chapter 1340-05 transferred from chapter 1320-08 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320- 08 transferred from chapter 1340-05 under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-04-.05 BUSINESS INTERESTS OF RECIPIENT

The registration of the special plate must be in the name and for the individual use of the recipient. The Division shall not issue a special plate in the name of or for use by a corporation, partnership or professional corporation regardless of whether a recipient has an interest in such entity.

History

Authority: T.C.A. §§ 55-2-103, 55-4-205, and 67-1-102; Executive Order Number 37 (2000); and Executive Order 36 (2006).
Administrative History: Original chapter 1340-05 transferred from chapter 1320-08 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320- 08 transferred from chapter 1340-05 under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-04-.06 REGISTRATION OF VEHICLE BY LESSEE

The registration may be issued to a recipient of a Purple Heart in his capacity as a lessee if the registrar is provided with documentation showing that authority to register the vehicle in the recipient’s name has been granted to the recipient by the lessor.

History

Authority: T.C.A. §§ 55-2-103, 55-4-205, and 67-1-102; Executive Order Number 37 (2000); and Executive Order 36 (2006).
Administrative History: Original chapter 1340-05 transferred from chapter 1320-08 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320- 08 transferred from chapter 1340-05 under the authority of Executive Order Number 36 dated April 19, 2006.

Chapter 1320-08-05 Dismantled Vehicles

Tenn. Comp. R. & Regs. 1320-08-05-.01 DEFINITIONS

(1) For purposes of additional definitions for rebuilt motor vehicles under T.C.A. §55-3-205, (a) Major components of a pick-up truck are as follows:

Cowl or firewall;
Front-end assembly;
Cab;
Bed;
Frame, or in the case of a unitized body, the supporting structure which serves as the frame; and 6. Any combination of five (5) minor components.

(b) Major components of a truck tractor are as follows:

Cowl or firewall;
Front-end assembly;
Cab;
Engine;
Frame; and 6. Any combination of five (5) minor components.

Front fork;
Frame;
Engine.

(2) For purposes of additional definitions for rebuilt motor vehicles under T.C.A. §55-3-205, DISMANTLED VEHICLES CHAPTER-1320-8-5 (a) Minor components of a pick-up truck are as follows:

Each door;
Hood;
Cab clip;
Each fender;
Tailgate;
Each bumper;
Motor or engine;
Transmission/Transaxle; and 9. Interior.

(b) Minor components of a truck tractor are as follows:

Each door;
Hood;
Each fender;
Each bumper;
Transmission;
Rear axle; and 7. Interior.

Each wheel;
Transmission;
Handlebars;
Fuel tank.

History

Authority: T.C.A §§55-2-103, 55-3-205, and 67-1-102, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority under the authority of Executive Order Number 36 dated April 19, 2006. DISMANTLED VEHICLES CHAPTER-1320-8-5

Tenn. Comp. R. & Regs. 1320-08-05-.02 PERMIT TO DISMANTLE

(1) Each dealer or person, before dismantling or wrecking any motor vehicle, shall apply to the Department of Revenue for a permit to dismantle on a form to be supplied by the Commissioner. This application shall be supported by the motor vehicle certificate of title properly assigned to the applicant or, if the vehicle was owned by a resident of a non-title state, by a bill of sale or evidence of current registration. The application shall include an odometer statement, if applicable. The application shall indicate whether the vehicle was subject to collision, fire, water damage and/or other damage. In the case of water damage, the application shall indicate the level of water in the vehicle. Upon receipt of the proper documentation, a permit authorizing the dealer or person to dismantle or wreck the motor vehicle shall be issued.

(2) An insurance company which obtains title to a motor vehicle as a result of paying a total loss claim resulting from collision, fire or water damage shall obtain a permit to dismantle for such vehicle. The provisions of this paragraph shall not apply to vehicles ten (10) years old or older with a value of one thousand five hundred dollars ($1,500) or less or with damage which requires the replacement of four (4) or fewer minor components. Transfer of ownership of these vehicles shall be made by endorsement on the certificate of title. When transferring ownership of such vehicle, the insurance company shall indicate on the title that the vehicle is being transferred pursuant to T.C.A. §55-3-206.

The insurance company shall also indicate whether the vehicle was subject to collision, fire, water and/or other damage. In the case of water damage, the insurance company shall indicate the level of water in the vehicle.

History

Authority: T.C.A §§55-2-103, 55-3-120, 55-3-202, 55-3-206, and 67-1-102, , Executive Order Number 37 (2000), under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-05-.03 APPLICATION FOR CERTIFICATE OF TITLE FOR REBUILT VEHICLE

(1) Any person who has rebuilt a vehicle for which the certificate of title or other ownership documents have been surrendered and a permit to dismantle has been issued as herein provided shall, prior to the sale or operation of such vehicle, make application to the office of the county clerk or directly to the Department of Revenue for a new certificate of title.

(2) This application must include or be supported by the following:

(a) The permit to dismantle or like foreign certificate.

(b) A color photograph of the vehicle in wrecked or stripped condition. Such photograph must clearly show the condition of the vehicle prior to rebuilding.

(d) A sworn statement that the application is not being filed to circumvent the title requirements of any foreign state.

(e) An invoice for all major or minor replacement parts (as defined in T.C.A. §55-3-132). If the parts are used parts, the invoice shall state the complete name and address of the vendor and the VIN of the vehicle or vehicles from which the part or parts were taken.

(f) A certificate from the rebuilder that the vehicle has been repaired in accordance with the manufacturer’s specifications.

DISMANTLED VEHICLES CHAPTER-1320-8-5

(g) An odometer statement, if applicable.

(h) The driver license number of an individual applicant or, if the applicant is a business, the sales tax number or Federal Employer Identification Number of the business.

(3) The Department may request information in addition to that required by paragraph (2), where such additional information is deemed necessary by the Department in order properly to determine the applicant’s eligibility for title. This information may include records of insurance companies regarding damage claims on the vehicle or any other information deemed necessary by the Commissioner.

History

Authority: T.C.A §§55-2-103, 55-3-206, 55-3-207, and 67-1-102, Executive Order Number 37 (2000), and under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-05-.04 REASONS FOR NON-COMPLIANCE

Whenever any person is, because of conditions beyond his control, unable to fully comply with these rules and/or requirements of the Tennessee Motor Vehicle Title and Registration Law, he shall nevertheless comply to the extent possible and set forth the reasons for his inability to comply in a written statement attached to the application for certificate of title or permit to dismantle.

History

Authority: T.C.A §§55-2-103 and 67-1-102, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-05-.05 RECORDS

Every dealer, including any person or junk dealer, who purchases motor vehicles for dismantling shall maintain for three (3) years a legible record, in written or electronic form, of every vehicle bought or sold, dismantled or exchanged by him, or received by him for sale, exchange, or dismantling, which shall be open to inspection by a representative of the Department during reasonable business hours.

History

Authority: T.C.A. §§55-2-103, 55-3-202, and 67-1-102, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-05-.06 WATER DAMAGE FOR REBUILT VEHICLE

(1) There shall be a brand affixed to a certificate of title issued by the Department of Revenue for a motor vehicle, which has sustained substantial water damage. For the purpose of this rule and T.C.A. §55-3- 210, a vehicle has sustained substantial water damage if it has water damage above the bottom of the dashboard or instrument panel or any salt water damages whatsoever.

(2) If a vehicle has been previously issued a water damage branded title by a foreign state, then such brand shall be carried over to any Tennessee title issued for such vehicle.

History

Authority: T.C.A §§55-2-103, 55-3-210, and 67-1-102, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Authority: T.C.A. §§55-2-103, 55-4-205, and 67-1-102, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority under the authority of Executive Order Number 36 dated April 19, 2006.

Authority: T.C.A. §§55-4-103, 4-2-1903, 67-1-102, 67-1-103, 67-1-105, 67-1-703, 67-1-802, and 67-1-803, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Chapter 1320-08-08 User Fee Facilities

Tenn. Comp. R. & Regs. 1320-08-08-.01 DEFINITIONS

(1) “Registrant” means the owner or lessee of a motor vehicle subject to title and registration requirements under T.C.A. § 55-3-101(a).

(2) “User fee” shall have the same meaning as provided in T.C.A. § 54-3-103(20) and shall refer to fees established and implemented pursuant to T.C.A. § 54-3-107.

(3) “User fee facility” shall have the same meaning as provided in T.C.A. § 54-3-103(21).

(4) “Nonpayment event” means a single instance in which a registrant drives through a user fee facility without the payment of the user fee, where the fee remains unpaid or partially unpaid 30 days or more following the postmark date of an invoice or notice issued pursuant to T.C.A. § 54-3-114(d).

(5) “Habitual violator” means a registrant that drives through a user fee facility without payment of the user fee three or more times within a 12-month period, consistent with T.C.A. § 54-3- 114(j)(1), provided the following conditions are met:

(a) The registrant’s failures to remit user fees when due remain uncured for a period of 30 days or more such that the unpaid fees constitute a nonpayment event;

(b) The nonpayment events attributable to the registrant occurred on at least three separate calendar days; and (c) The total amount of unpaid user fees owed by the registrant is greater than or equal to $100, excluding administrative fees.

(6) Vehicle Title and Registration System (“VTRS”) means the system maintained by the Department of Revenue as the system of record for state motor vehicle titles and registrations pursuant to Tennessee Code Annotated, Title 55.

History

Authority: T.C.A. §§ 54-3-103, 54-3-107, 54-3-114, 55-2-101, and 55-3-101(a).
Administrative History: Original chapter 1340-05-08 was transferred from chapter 1320-05-08 under the authority of Executive Order number 37 dated June 29, 1990. Original chapter 1320-08 transferred from chapter 1340-05 under the authority of Executive Order Number 36 dated April 19, 2006. New rules filed April 13, 2026; effective July 12, 2026.

Tenn. Comp. R. & Regs. 1320-08-08-.02 NOTICE OF NONPAYMENT OF USER FEES

(1) Registrants subject to payment of user fees established under T.C.A. § 54-3-107 are required by T.C.A. § 54-3-114(a) to pay such fees upon passage through the user fee facility. The Department of Transportation or its contractor is required by T.C.A. § 54-03-114(c) and (d) to send written notice of nonpayment to registrants who fail to submit user fees when due, including notice of applicable administrative fees.

(2) The Department of Revenue is authorized and directed to provide motor vehicle registration data, including registrant name and address information, to the Department of Transportation or its contractor for use in furtherance of the objectives described in subsection (a) or other purposes related to the program established in T.C.A. §§ 54-3-101, et seq.

History

Authority: T.C.A. §§ 54-3-101, et seq., 55-2-101, and 55-25-107.
Administrative History: New rules filed April 13, 2026; effective July 12, 2026.

Tenn. Comp. R. & Regs. 1320-08-08-.03 HABITUAL VIOLATIONS

(1) As required by T.C.A. § 54-3-114(j)(2)(B), the Department of Transportation has established a process for the Department of Transportation or its contractor to notify the Department of Revenue of the determination that a registered owner is a habitual violator. The established process provides that the Department of Transportation will notify the Department of Revenue of the determination that a registered owner is a habitual violator via VTRS. This notification will include documentation of the nonpayment events that resulted in the habitual violator determination.

(2) Upon receipt of the notification described in subsection (a), the Department of Revenue shall cause to be issued, directly, through a contractor, or otherwise, a notice of intention to suspend the motor vehicle registration of any habitual violator owing user fees pursuant to its

authority under T.C.A. § 54-3-114(j)(1) and T.C.A. § 55-5-117(a)(1). Such notice shall include the following information:

(a) The reason for the proposed suspension, including the dates and times of nonpayment events giving rise to the determination that the registrant is a habitual violator, or other relevant considerations;

(b) A statement explaining that if the habitual violator does not remit payment for outstanding user fees and other applicable charges to the Department of Transportation or its contractor within 60 days of the date of the notice of the intention to suspend, the Department of Revenue shall suspend the registration of the habitual violator until such time as user fees and associated charges are paid;

(c) The process by which the habitual violator can avoid the registration suspension, including payment methods for outstanding fees;

(d) Notice that the habitual violator shall have the right to contest the registration suspension within 10 days of the notice of suspension via administrative hearing with the Department of Revenue conducted under the Uniform Administrative Procedures Act, pursuant to T.C.A. § 54-3-114(j)(4) and T.C.A. § 67-1-105; and (e) The amount of any fee not to exceed $35.00 imposed by the Department of Revenue to cover administrative costs pursuant to T.C.A. § 54-3-114(d).

(3) The notice described in subsection (2) shall direct registrant inquiries regarding unpaid user fees and other charges to the Department of Transportation or its contractor.

(4) Upon receiving a request from the Department of Transportation or its contractor to suspend the registration of a habitual violator who has not remitted payment of outstanding user fees and other charges to the Department of Transportation or its contractor within 60 days of the notice of intention to suspend specified by the notice described in subsection (2), the Department of Revenue shall promptly suspend the habitual violator’s registration as authorized under T.C.A. § 54-3-114(j)(1).

(5) Upon receiving a request from the Department of Transportation or its contractor to reinstate the registration of a habitual violator whose registration was suspended as described in subsection (d) following receipt by the Department of Transportation or its contractor of payment of outstanding user fees and other applicable charges from the habitual violator, the Department of Revenue shall promptly reinstate the suspended registration.

(6) The Department of Revenue shall not suspend any registration for noncompliance with T.C.A. §§ 54-3-101, et seq., as described in subsection (4), nor reinstate any suspended registration once a habitual violator has cured the noncompliance as described in subsection (5), unless the Department of Transportation or its contractor initiates a request as detailed therein.

History

Authority: T.C.A. §§ 54-3-101, et seq., 55-2-101, 55-5-117, and 67-1-105.
Administrative History: New rules filed April 13, 2026; effective July 12, 2026.

Chapter 1320-08-09 Title Bonds

Tenn. Comp. R. & Regs. 1320-08-09-.01 QUALIFIED APPLICANTS MAY APPLY

Subject to the limitations and conditions hereinafter set forth, duly qualified applicants may apply to the Motor Vehicle Division, Title Section of this Department for a new "certificate of title" as provided or authorized by the provisions of T.C.A. §55-3-103.

History

Authority: T.C.A. §§55-4-103, 4-2-1903, 67-1-102, 67-1-103, 67-1-105, 67-1-703, 67-1-802, and 67-1-803, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of executive order 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-09-.02 CERTIFICATE OF OWNERSHIP BY BOND

Whenever an applicant for a new "certificate of title" is unable to satisfy the Department that he is entitled thereto as provided in Chapter 3 of the Motor Vehicle Title and Registration Law, the applicant may nevertheless obtain issuance of such certificate of ownership by filing a bond with the Department as a condition to the issuance thereof: Such bond may be executed by a Corporate Surety Company duly licensed to transact business in the State of Tennessee, or a personal bond with two solvent personal sureties thereon. The bond shall be in an amount equal to one and one-half times the value of the vehicle as determined by the Department. The Surety Bond shall be executed on a form prescribed by the Department. (See Exhibits (a) and (b) which are also a part of this regulation.)

(1) RS-51 MOTOR VEHICLE TITLE BOND PERSONAL SURETY

SURETY BOND

STATE OF TENNESSEE

COUNTY OF _________________

KNOW ALL MEN BY THESE PRESENTS:

That we, __________________________________________________________________________, PRINCIPAL, and, __________________________________________________________________________ and, ________________________________________________________________________, Surety and, ________________________________________________________________________, Surety are jointly and severally held and bound into the Commissioner of Revenue of the State of Tennessee, and his successors in office, hereinafter referred to as the Commissioner, for the use and benefit of the State of Tennessee, in the just and penal sum of ____________________________________________________________________.

The conditions of this obligation are such that the above bounded _____________________________ Principal, said Principal having made application to the State of Tennessee, Department of Revenue for a motor vehicle Certificate of Title to cover ___________________________ as authorized by T.C.A. §55-3-103, as amended. Whereas, the Surety is held and firmly bound to indemnify any prior owner or lienholder, any subsequent purchaser of the vehicle or persons acquiring any security interest therein, and their respective successors in interest, TITLE BONDS CHAPTER-1320-8-9 against any expense, loss or damage by reason of the issuance of a Certificate of Title or an account of any defect in or undisclosed interest in the right, title and interest of the Principal in and to said motor vehicle, for the payment whereof well and truly to be made, we bind ourselves, our heirs, executors, successors and assigns, jointly and severally, firmly by these presents.

WHEREAS, the said Principal states that he is unable to present a Certificate of Title to said motor vehicle because the same has been lost, or is being unlawfully retained by one in possession, or is not otherwise available; and WHEREAS, the Department of Revenue, has advised said Principal that a Certificate of Title would be issued upon the filing of a bond as authorized by T.C.A. §55-3-103, and WHEREAS, an action for damages on said bond may be instituted by any person injured by the issuance of the certificate of Title to said Principal;

NOW, THEREFORE, and in consideration of the issuance of a Certificate of Title by the Department of Revenue, this bond is given by the above bound Principal in compliance with T.C.A. §55-3-103 and conditioned upon the rights and remedies provided therein.

It is hereby agreed and understood by the sureties on this bond:

(1) That action may be maintained on said bond against any one or all of said sureties without making the Principal a party thereto, same being a joint and several obligation.

(2) The bond is being held by the Department of Revenue for examination, use and benefit of any prior owner or lienholder or any person acquiring any security interest in the vehicle listed herein.

Upon issuance of said Certificate of Title, this bond shall become effective and remain in full force and effect for a period of three years unless it is surrendered to the State of Tennessee, Department of Revenue, as provided in T.C.A. §55-3-103.

PROVIDED, HOWEVER, that the aggregate liability of the surety to all persons for damage by reason of the issuance of said Certificate of Title shall not exceed the amount of the bond.

WITNESS our signature on this the _____ day of , 20 _______ PRINCIPAL _________________________ BY______ _____________________________SURETY _____________________________SURETY Sworn to and subscribed before me this _____ day of ____________, 20.

Signature of Notary Public _________________________________________ My Commission expires ___________________________________________ (2) MOTOR VEHICLE TITLE CORPORATE SURETY BOND TITLE BONDS CHAPTER-1320-8-9 SURETY BOND STATE OF TENNESSEE COUNTY OF DAVIDSON KNOW ALL MEN BY THESE PRESENTS:

That we, ___________________________________________________________________________ (Name and Address of Applicant)

Principal, said Principal having made application to the State of Tennessee, Department of Revenue, for a Motor Vehicle Certificate of Title to cover ____________________________________________________________ (Make of Vehicle) (Identification Number) in accordance with T.C.A. §55-3-103, as amended, and ________________________________________________ (Name and Address of Surety)

Surety, a corporation duly authorized and licensed to write official surety bonds in the State of Tennessee, are jointly and severally held and firmly bound to indemnify any prior owner or lienholder, any subsequent purchaser of said vehicle or person acquiring any security interest therein, and their respective successors in interest, against any expense, loss damage by reason of the issuance of a Certificate of Title or on account of any defect in or undisclosed interest in the right, title and interest of the Principal in and to said motor vehicle; in the sum of ________ Dollars ($_______) lawful money of the United States of America, for the payment whereof well and truly to be made, we bind ourselves, our heirs, executors, successors and assigns, jointly and severally, firmly by these presents.

The condition of the foregoing obligation is such that, WHEREAS, the said Principal states that he is unable to present a Certificate of Title to said motor vehicle because the same has been lost, or is being unlawfully retained by one in possession, or is not otherwise available; and WHEREAS, the Department of Revenue, has advised said Principal that a Certificate of Title would be issued upon the filing of a bond as authorized by T.C.A. §55-3-103.

WHEREAS, an action for damages on said bond may be instituted by any person injured by the issuance of the Certificate of Title to said Principal;

NOW, THEREFORE, and in consideration for the issuance of a Certificate of Title by the Department of Revenue, this bond is given by the above bound principal in compliance with T.C.A. §55-3-103 and It is hereby agreed and understood by the sureties on this bond:

(1) That action may be maintained on said bond against any one or all of said sureties without making the Principal a party thereto, same being a joint and several obligation.

(2) The bond is being held by the Department of Revenue for examination, use and benefit of any prior owner or lienholder or any person acquiring any security interest in the vehicle listed herein.

Upon issuance of said Certificate of Title, this bond shall become effective and remain in full force and effect for a period of three (3) years unless it is surrendered to the State of Tennessee, Department of Revenue, as provided in T.C.A. §55-3-103.

TITLE BONDS CHAPTER-1320-8-9

PROVIDED, HOWEVER, that the aggregate liability of the surety to all persons for damage by reason of the issuance of said Certificate of Title shall not exceed the amount of the bond. Witness our signature on this ___ day of _________, 20.

BOND NO. _____________ __________________________PRINCIPAL

BY_________________________________

TITLE_______________________________

(Affix Seal, If Corporation)

_____________________________, SURETY

_____________________________, SURETY _____________________________________

(Affix Corporate Seal)

(If a partnership, each member of partner ship sign below): _______________________________________ _______________________________________ _______________________________________ _______________________________________ APPROVED: ___________________________ Commissioner of Safety (NOTE): Surety bond must be executed by a surety company authorized to do business in the State of Tennessee; must be executed by an attorney-in-fact and a copy of the power of attorney must be attached. If the attorney-in-fact is not licensed in Tennessee the bond must be countersigned by resident Tennessee Agent.

History

Authority: T.C.A. §§55-4-103, 4-2-1903, 67-1-102, 67-1-103, 67-1-105, 67-1-703, 67-1-802, and 67-1-803, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-09-.03 REQUIREMENTS AND LIMITATIONS

A copy of the Power of Attorney, for the attorney in fact, must be attached when the bond is executed by a Corporate Surety Company. The Commissioner may require letters of credit or such other like proof of financial condition as he may deem requisite for any person executing as surety on a personal surety bond.

History

Authority: T.C.A. §§55-4-103, 4-2-1903, 67-1-102, 67-1-103, 67-1-105, 67-1-703, 67-1-802, and 67-1-803, , Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006. TITLE BONDS CHAPTER-1320-8-9

Tenn. Comp. R. & Regs. 1320-08-09-.04 DOCUMENTS HELD BY STATE

The Surety Bond, application, and all existing documents pertaining to the issuance of the “certificate of title” in question will be maintained in the files of the Motor Vehicle Division for inspection of any interested party. Upon payment of suitable fee, the Department will furnish certified copies of’ the documents in file. The State of Tennessee acts only as a depository for the Surety Bonds and is not a party to any action against the principal or sureties.

History

Authority: T.C.A. §§55-4-103, 4-2-1903, 67-1-102, 67-1-103, 67-1-105, 67-1-703, 67-1-802, and 67-1-803, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-09-.05 RULES DO NOT PRECLUDE OTHER REQUIREMENTS

It is not intended that these rules and regulations be inclusive or that the Commissioner be restrained from requiring a personal surety bond to be supported by a deed of trust to realty lying within the State of Tennessee if in his opinion the public interest requires it.

History

Authority: T.C.A. §§55-4-103, 4-2-1903, 67-1-102, 67-1-103, 67-1-105, 67-1-703, 67-1-802, and 67-1-803, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Chapter 1320-08-10 Temporary Tags

Tenn. Comp. R. & Regs. 1320-08-10-.01 DEALERS APPLY

Subject to the limitations and conditions hereinafter set forth, duly qualified dealers may apply to the Motor Vehicle Division of this Department for and be issued the “temporary tags” authorized by the provisions of subsection (d) of T.C.A §55-4-205.

History

Authority: T.C.A. §55-4-103, 4-2-1903, 67-1-102, 67-1-103, 67-1-105, 67-1-703, 67-1-802, and 67-1-803, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-10-.02 REMITTANCE

The dealer's application for “temporary tags” shall be accompanied by a remittance in that amount sufficient for the statutory fee for each such “tag” for which he has applied.

History

Authority: T.C.A. §55-4-103, 4-2-1903, 67-1-102, 67-1-103, 67-1-105, 67-1-703, 67-1-802, and 67-1-803. , Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-10-.03 TAG FOR DELIVERY

A dealer may assign and issue a “temporary tag” to himself for a vehicle which he, his servant, salesman or agent must remove from the place of purchase to the dealer’s place of business or for delivering a vehicle to the purchaser.

History

Authority: T.C.A. §55-4-103, 4-2-1903, 67-1-102, 67-1-103, 67-1-105, 67-1-703, 67-1-802, and 67-1-803, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-10-.04 LIMITATIONS ON TAGS

A dealer may assign and issue a temporary tag to a bona fide purchaser for the vehicle sold to such person by the dealer, or to a person for an automobile loaned or rented to him by the dealer for use as a private passenger vehicle during such period as the person is awaiting delivery of an automobile for which he has contracted or awaiting return of his own vehicle from the dealers repair shop or garage provided that a third temporary tag may not be issued to a person for the same vehicle except upon authorization from the Commissioner.

History

Authority: T.C.A. §55-4-103, 4-2-1903, 67-1-102, 67-1-103, 67-1-105, 67-1-703, 67-1-802, and 67-1-803, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. TEMPORARY TAGS CHAPTER-1320-8-10 Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-10-.05 EXECUTION OF TAGS

(1) Every dealer who issues a “temporary tag” shall execute it clearly, indelibly and fully on its face except that (2) Every dealer or person lawfully entitled to hold and issue “temporary tags” may deliver such “tags” unexecuted to any Tennessee dealer who is eligible to use or issue them. Delivery shall be made to the second dealer only upon securing a signed release identifying the “tags” as to serial number and delivery date along with a receipt for any payment, a copy of which shall be mailed within twenty-four (24) hours to the Motor Vehicle Division of the Department of Revenue.

History

Authority: T.C.A. §§55-4-103, 4-2-1903, 67-1-102, 67-1-103, 67-1-105, 67-1-703, 67-1-802, and 67-1-803, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-10-.06 RECORDS

(1) Every dealer who assigns and issues “temporary tags” shall maintain a record of each issue to include the name and address of the licensee, a description of the vehicle and the date of issuance.

(2) Each record of an issuance and each release for a delivery to another dealer shall be kept for a period of not less than fifteen (15) months from the date of the transaction. Full and free access to such records shall be afforded at the dealer's place of business during regular business hours to peace officers and authorized representatives of this Department.

History

Authority: T.C.A. §§55-4-103, 4-2-1903, 67-1-102, 67-1-103, 67-1-105, 67-1-703, 67-1-802, and 67-1-803. under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-10-.07 REIMBURSEMENT

Every dealer shall be entitled to reimbursement from the purchaser in the amount of the statutory fee for each “tag” issued but he is not authorized to collect additional amounts as service or other charges.

History

Authority: T.C.A. §§55-4-103, 4-2-1903, 67-1-102, 67-1-103, 67-1-105, 67-1-703, 67-1-802, and 67-1-803, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-10-.08 PERIOD OF VALIDITY INCLUDES HOLIDAYS

The statutory “life” or period of validity for each “tag” issued shall be computed to include Sundays or holidays occurring during such period.

History

Authority: T.C.A. §§55-4-103, 4-2-1903, 67-1-102, 67-1-103, 67-1-105, 67-1-703, 67-1-802, and 67-1-803, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-10-.09 RESTRICTIONS ON USE

A “temporary tag” may be used only by (or for) the person to whom it was assigned and displayed only on the vehicle for which it was issued.

TEMPORARY TAGS CHAPTER-1320-8-10

History

Authority: T.C.A. §§55-4-103, 4-2-1903, 67-1-102, 67-1-103, 67-1-105, 67-1-703, 67-1-802, and 67-1-803, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-10-.10 REFUND

In the event the Department discontinues the issuance of “temporary tags” refund may be made to the dealer of the fee paid for all “tags” held by him as of that date. Application for refund must be supported by the unissued “tags”.

History

Authority: T.C.A. §§55-4-103, 4-2-1903, 67-1-102, 67-1-103, 67-1-105, 67-1-703, 67-1-802, and 67-1-803, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-10-.11 CLEARLY DISPLAYED

Every “temporary tag” shall at all times be displayed in a horizontal position on the vehicle for which it is issued in a manner to be clearly visible from the rear of such vehicle.

History

Authority: T.C.A. §§55-4-103, 4-2-1903, 67-1-102, 67-1-103, 67-1-105, 67-1-703, 67-1-802, and 67-1-803, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-10-.12 NONCOMPLIANCE RESULTS IN FORFEITURE

Every dealer or person failing to comply with the provisions of these regulations shall forfeit his right to hold, assign and issue the "temporary tags” for such period as the Commissioner may deem prudent.

History

Authority: T.C.A. §§55-4-103, 4-2-1903, 67-1-102, 67-1-103, 67-1-105, 67-1-703, 67-1-802, and 67-1-803, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-10-.13 NONCOMPLIANCE CONSTITUTES VIOLATION

Violation of or non-compliance with any of the requirements set forth above shall constitute a violation of the provisions of T.C.A.§55-4-205.

History

Authority: T.C.A. §§55-4-103, 4-2-1903, 67-1-102, 67-1-103, 67-1-105, 67-1-703, 67-1-802, and 67-1-803, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-10-.14 NOT INCLUSIVE

It is not intended that these rules and regulations be inclusive or that any inapplicable requirements by implication affect or in any way be construed to supplant the provisions of any reciprocal motor vehicle agreement binding upon the Department or other regulations given under any statutory provision or established rule of law relating to the registration for or operation of motor vehicles.

History

Authority: T.C.A. §§55-4-103, 4-2-1903, 67-1-102, 67-1-103, 67-1-105, 67-1-703, 67-1-802, and 67-1-803, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Chapter 1320-08-11 Repealed

Tenn. Comp. R. & Regs. 1320-08-11 Repealed

RULES

OF DEPARTMENT OF REVENUE

VEHICLE SERVICES DIVISION

Administrative History: Original Chapter 1340-5-11 was transferred from chapter 1320-8-11 under the authority under the authority of Executive Order Number 36 dated April 19, 2006.

Chapter 1320-08-12 Repealed

Tenn. Comp. R. & Regs. 1320-08-12 Repealed

RULES

OF DEPARTMENT OF REVENUE

VEHICLE SERVICES DIVISION

Administrative History: Original Chapter 1340-5-12 was transferred from chapter 1320-8-12 under the authority under the authority of Executive Order Number 36 dated April 19, 2006.

Chapter 1320-08-13 Titles

Tenn. Comp. R. & Regs. 1320-08-13-.01 ORIGINAL APPLICATIONS

(1) Applications for Certificate of Title on new vehicles must be accompanied by a bill of sale or dealer’s invoice showing all liens, if any, and a manufacturer’s certificate of origin, properly assigned by the dealer to the purchaser.

(2) Applications for Certificate of Title for other than new vehicles for which there is not currently in existence a Tennessee Certificate of Title, or pending application for same, must be accompanied by a notarized bill of sale and sworn statement, certifying as to why the vehicle has not heretofore been titled, or certificate of title from the state in which previously registered.

(3) When the vehicle is registered in a jurisdiction which does not have a Certificate of Title Law, the application for Tennessee Certificate of Title shall be accompanied by a notarized bill of sale as evidence of title, together with the next past bill of sale showing ownership to have been transferred to the Party seeking title, which said bill of sale shall be notarized.

History

Authority: T.C.A. §§55-2-203, 55-4-101, 55-4-205, 4-2-1903, 67-1-102, 67-1-103, 67-1-105, 67-1-703, 67-1-802, and 67-1-803, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-13-.02 TRANSFERS

(1) In cases of transfer by ordinary sale, applications for Certificate of Title for a new owner must be accompanied by surrendered certificate of title or carbon copy of pending application properly assigned by the seller to the purchaser.

(a) All applications for Certificate of Title on vehicles for which a Certificate of Title is outstanding must be accompanied by the surrendered Certificate of Title and Title Card except in transfers covered by sub-paragraph (c) below.

(b) Any application for title accompanied by a copy of a previous application where a Certificate of Title has already been issued will be rejected by the division.

TITLES CHAPTER-1320-8-13

(c) Any owner transferring title to any motor vehicle, whose Certificate of Title is being held by a lienor may, in lieu of executing the assignment on the reverse side of his Certificate, execute and deliver to the purchaser a separate notarized bill of sale which shall show the name and address of the lienor in whose possession the Certificate is being held and notify the lienor of the sale. The above is in addition to the requirement that the assignment on reverse side of Title Card must be properly executed and surrendered to the purchaser.

(2) In case of transfer by other than ordinary sale, the following will apply in addition to the provision of T.C.A. §§55-3-121 and 55-4-119.

(a) Applications for Certificate of Title must be supported by affidavit of safe under lien not dependent upon possession, affidavit of sale by holder of lien dependent upon possession, affidavit of seller in cases of bankruptcy, insolvency, attachment, replevin or other judicial sale, or affidavit of repossession without process of law, whichever is applicable. If the person being dispossessed is other than the titleholder of record, the chain of ownership must be completed by notarized bills of sale.

(b) Where the registered owner of a motor vehicle dies testate or intestate, the Certificate of Title thereto must be assigned by the duty qualified executor or administrator of the deceased with certified copy of letters of administration attached. If no administration of the estate of the deceased is contemplated, an affidavit of inheritance must be filed, together with Certificate of Title and Title Card. The Affidavit of Inheritance must fully describe the motor vehicle, the date of the death of the deceased and indicate that the deceased left no will and that by mutual agreement of all heirs and next of kin, any and all claims are relinquished on said motor vehicle to the applicant.

History

Authority: T.C.A. §§55-2-203, 55-4-101, 55-4-205, 4-2-1903, 67-1-102, 67-1-103, 67-1-105, 67-1-703, 67-1-802, and 67-1-803, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-13-.03 SALE BY DEALER TO DEALER

In addition to the requirements as outlined in Rule 1320-8-13- .02(1), any ownership passed from dealer to dealer transfer must be effected by means of notarized bill of sale. In the event of a new car sale, transfer must be effected by assignment of Manufacturer’s Certificate of Origin.

History

Authority: T.C.A. §§55-2-203, 55-4-101, 55-4-205, 4-2-1903, 67-1-102, 67-1-103, 67-1-105, 67-1-703, 67-1-802, and 67-1-803, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-13-.04 LOST OR DAMAGED CERTIFICATE OF TITLE

In all cases where the former Certificate of Title has been lost, damaged or destroyed, the seller must execute an Affidavit of Lost or Damaged Certificate of Title and a notarized bill of sale, both to be surrendered to the purchaser with proper fee for reproducing the lost or damaged Certificate. The affidavit shall be properly notarized and contain a statement that the Certificate of Title has been lost or damaged and include complete description of the vehicle. The applicant filing such affidavit must furnish notarized bill of sale from the title owner to the next purchaser.

History

Authority: T.C.A. §§55-2-203, 55-4-101, 55-4-205, 4-2-1903, 67-1-102, 67-1-103, 67-1-105, 67-1-703, 67-1-802, and 67-1-803, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006. TITLES CHAPTER-1320-8-13

Tenn. Comp. R. & Regs. 1320-08-13-.11 REPLACEMENT OF ENGINE OR BODIES WHICH HAVE PREVIOUSLY BEEN

DISMANTLED OR JUNKED. In cases where an engine or body is replaced by another engine or body which has been previously dismantled or junked, the applicant for a corrected Certificate of Title shall present, in addition to the affidavit required for a change of engine or body, a notarized bill of sale from the person selling the dismantled or junked engine or body with an indication thereon of the permit number given for the dismantling or junking of the motor vehicle by the Division. The notarized bill of sale shall note thereon any assignments if any have been made.

History

Authority: T.C.A. §§55-2-203, 55-4-101, 55-4-205, 4-2-1903, 67-1-102, 67-1-103, 67-1-105, 67-1-703, 67-1-802, and 67-1-803, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-13-.05 LIENS CREATED BY TRANSACTIONS INVOLVING CHANGE OF OWNERSHIP:

CONDITIONAL SALES CONTRACT, TITLE RETAINED NOTE, ETC. It shall be the duty of the county court clerks accepting an application for a Certificate of Title to note on the application any lien or conditional sale which may be indicated on the dealer’s bill of sale or invoice. Failure to comply with this provision of the law may make the county court clerks personally liable for any damages which may be caused because of this failure or neglect to perform this duty.

History

Authority: T.C.A. §§55-2-203, 55-4-101, 55-4-205, 4-2-1903, 67-1-102, 67-1-103, 67-1-105, 67-1-703, 67-1-802, and 67-1-803, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-13-.06 LIENS CREATED BY TRANSACTIONS NOT INVOLVING CHANGE OF OWNERSHIP:

CHATTEL MORTGAGE, TRUST RECEIPT OR OTHER SIMILAR INSTRUMENTS, INCLUDING

MECHANICS LIENS. It shall be the duty of any person in whose favor a lien is given for a chattel mortgage, trust receipt, or otherwise to give notice to the Division of any such lien indicating the amount thereof and file with the Division a certified copy of the instrument creating the lien together with the appropriate fees therefor.

History

Authority: T.C.A. §§55-2-203, 55-4-101, 55-4-205, 4-2-1903, 67-1-102, 67-1-103, 67-1-105, 67-1-703, 67-1-802, and 67-1-803, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-13-.13 FEES DUE THE MOTOR VEHICLE DIVISION OF THE DEPARTMENT OF FINANCE

AND TAXATION.

(1) Reserved.

(2) Reserved.

(3) Reserved.

(4) Reserved.

(5) An Original Certificate of Title describes vehicles purchased new and registered for the first time in Tennessee, and vehicles previously registered in a foreign state being registered for the first time in Tennessee.

(6) Any vehicle previously registered in the State of Tennessee, whether or not there be evidence of previous application for title shall be presumed to involve a new owner following transfer of vehicle for which a Tennessee Certificate of Title has been issued previously.

TITLES CHAPTER-1320-8-13

History

Authority: T.C.A. §§55-2-203, 55-4-101, 55-4-205, 4-2-1903, 67-1-102, 67-1-103, 67-1-105, 67-1-703, 67-1-802, and 67-1-803, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-13-.07 POWER OF ATTORNEY

Where an applicant is unable to file an application for a certificate of title in person, he may authorize an attorney-in-fact to make an application for him, provided a duly executed power of attorney instrument is executed by the owner and filed with the application.

History

Authority: T.C.A. §§55-2-203, 55-4-101, 55-4-205, 4-2-1903, 67-1-102, 67-1-103, 67-1-105, 67-1-703, 67-1-802, and 67-1-803, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-13-.08 CHANGE OF ENGINES AND BODIES

An exchange of the engine or type of body of a motor vehicle for which a Certificate of Title and Title Card have been issued previously shall render Certificate of Title and Title Card invalid.

History

Authority: T.C.A. §§55-2-203, 55-4-101, 55-4-205, 4-2-1903, 67-1-102, 67-1-103, 67-1-105, 67-1-703, 67-1-802, and 67-1-803, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-13-.09 CHANGE OF ENGINES AND BODIES WITH TITLE

It is the duty of the owner of the vehicle installing a replacement engine or changing the type of body of such vehicle to notify the Division on forms to be prescribed by the Division accompanied by notarized bill of sale covering such engine or body type and Certificate of Title and Title Card, and to pay the appropriate fees required by law, at that time.

History

Authority: T.C.A. §§55-2-203, 55-4-101, 55-4-205, 4-2-1903, 67-1-102, 67-1-103, 67-1-105, 67-1-703, 67-1-802, and 67-1-803, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006. TITLES CHAPTER-1320-8-13

Tenn. Comp. R. & Regs. 1320-08-13-.10 CHANGE OF ENGINES AND BODIES WITHOUT TITLE

Where application has not been previously filed for a motor vehicle which has had an engine or body changed since July 1, 1951, the application shall, in addition to the requirements set forth in these rules and regulations for an original application for a Certificate of Title, be accompanied by a notarized bill of sale covering the engine or body involved.

History

Authority: T.C.A. §§55-2-203, 55-4-101, 55-4-205, 4-2-1903, 67-1-102, 67-1-103, 67-1-105, 67-1-703, 67-1-802, and 67-1-803, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-13-.12 ENGINES ACQUIRED FROM FOREIGN STATE

In cases where the replacement engine was acquired from any source outside the State of Tennessee, the purchaser shall require of the seller a notarized bill of sale and evidence of where the replacement engine was acquired by the seller. If acquired from a foreign title law state, a statement from the Motor Vehicle Registration Division of that state that a vehicle bearing the engine number of the replacement engine has not been titled and there is no evidence of lien of record in that state, shall also be required.

History

Authority: T.C.A. §§55-2-203, 55-4-101, 55-4-205, 4-2-1903, 67-1-102, 67-1-103, 67-1-105, 67-1-703, 67-1-802, and 67-1-803, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Chapter 1320-08-14 Students' Home Plates

Tenn. Comp. R. & Regs. 1320-08-14-.01 STUDENTS ALLOWED TO USE HOME PLATES

Bona fide students enrolled in any school in the State of Tennessee may operate passenger motor vehicles owned and licensed in the student’s name in another State during the period in which the student is enrolled in school in Tennessee without being required to have the motor vehicle licensed in Tennessee, provided the State in which the motor vehicle is registered grants like privilege to Tennessee residents who are students in that State.

As evidence of the above, the student must have available for inspection by proper officials a certificate of registration and certificate of the school official showing the period for which the student is enrolled in the school.

History

Authority: T.C.A. §§55-4-122, 4-2-1903, 67-1-102, 67-1-103, 67-1-105, 67-1-703, 67-1-802, and 67-1-803, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Chapter 1320-08-15 Painting Gross Weight on Truck

Tenn. Comp. R. & Regs. 1320-08-15-.01 PAINTING GROSS WEIGHT ON TRUCK

Freight carrying motor vehicles using and maintaining license plates which indicate the maximum gross weight, including motor vehicle and load, shall not be required to paint the maximum gross weight in letters and figures not less than 4-inches in height on right side of vehicle within 5-feet of front wheel.

History

Authority: T.C.A. §§4-2-1903, 67-1-102, 67-1-103, 67-1-105, 67-1-703, 67-1-802, and 67-1-803, Executive Order Number 37 (2000), and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Chapter 1320-08-16 Repealed

Tenn. Comp. R. & Regs. 1320-08-16 Repealed

RULES

OF DEPARTMENT OF REVENUE

VEHICLE SERVICES DIVISION

Administrative History: Original Chapter 1340-5-16 was transferred from chapter 1320-8-16 under the authority under the authority of Executive Order Number 36 dated April 19, 2006.

Chapter 1320-08-17 Registration

Tenn. Comp. R. & Regs. 1320-08-17-.01 DEFINITIONS

(1) “Registration” or “License” shall mean the listing of a vehicle for the purpose of establishing its identity and that of its owner or operator and, upon the payment of a fee, the granting to the same the privilege of using it upon the public ways of this state. The terms may likewise include the certificate and license plate or tag that is issued to the registrant.

(2) “Original registration” shall mean the first running of the license privilege with respect to a particular application for registration.

(3) “Renewal of registration” shall mean the prolongation of a registration for a given term following its statutory expiration.

(4) “Reassignment of registration’’ shall mean the transfer of the license holders privilege to and for a different vehicle following some lapse that occurs during the duration of the registration.

(5) “Re-registration ” shall mean a change in the class or type of an outstanding registration by reason of some change in the design or use of the vehicle so registered.

(6) “Alternative interval registration” shall mean any specifiable procedure under which registrations other than temporary license or permits may be issued either singly or in series for periods of time that do not necessarily coincide with the statutory registration year or conform to any other requirements or allowances relating to the duration of a license, such as the provision for quarterly reduction of license fees.

(7) “Staggered registration” shall be understood to be a general reference term that may be used to describe the alternative interval plan or any certificate or place issued under it.

History

Authority: T.C.A. §§ 4-2-1903, 67-1-102, 67-1-103, 67-1-105, 67-1-703, 67-1-802, 67-1-803, Executive Order Number 37 (2000) and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Tenn. Comp. R. & Regs. 1320-08-17-.02 ALTERNATIVE INTERVAL REGISTRATION

(1) The provisions of this rule apply to registrations that are taken in accordance with the provisions of T.C.A. §55-4-104.

(2) Renewal registrations issued under the percentile grouping set forth in the statute to provide for inauguration of the staggered program shall be in accordance with an alphabetical breakdown of the list of current registrants. At least ninety (90) days prior to the beginning of the statutory renewal period appropriate sets of letters shall be assigned for each of the ten due date periods identified in the statute.

(3) In the event a termination date falls on a Saturday, Sunday or holiday, the date of the next regular work day will be the expiration date.

(4) In the event of reassignment or re-registration being taken of a staggered license, the credit value for the surrendered registration and the duration of the new license term shall be as follows:

(a) Credit for a registration issued under the staggered system and surrendered in application for a registration in a class with uniform annual expiration date will be established by apportioning the year into periods of three months (called quarters), using the expiration date as a base:

For each full quarter remaining in the outstanding registration period, there shall be given a credit of 25 percent of the annual registration tax.
No credit will be given for a registration in its last quarter.
During the transition to the staggered system, appropriate credit shall be allowed based on quarters for those registrations issued for a period in excess of the normal one year period.

(b) When reassigning a registration or re-registering a vehicle between classes issued under the staggered system, the expiration date for the new registration will remain the same as the old one.

(5) Registrations designed for the staggered program that are renewed after the expiration date shall be designated as late renewals and shall retain the same month and day for expiration the next year, provided the registration is renewed within 90 days of the date of expiration. Those registrations renewed 91 or more days after the expiration date shall be issued for one year from the date of issue.

History

Authority: T.C.A. §§4-2-1903, 67-1-102, 67-1-103, 67-1-105, 67-1-703, 67-1-802, 67-1-803, Executive Order Number 37 (2000) and Executive Order 36 (2006).
Administrative History: Original chapter 1340-5 transferred from chapter 1320-8 under the authority of Executive Order Number 37 dated June 29, 1990. Original chapter 1320-8 transferred from chapter 1340-5 under the authority of Executive Order Number 36 dated April 19, 2006.

Chapter 1320-09-01 General Provisions

Tenn. Comp. R. & Regs. 1320-09-01-.01 GENERAL PROVISIONS

(1) This chapter is adopted under the legal authority of Tenn. Code Ann. § 1-3-104, § 4- 4-103, §§ 4-5-201 et seq., § 47-31-102(10), § 67-1-102(a), § 67-4-2604(e) and § 2606(d).

(2) The title of this chapter is “Rules and Regulations Governing Tobacco Product Manufacturers and Wholesalers.”

(3) The purpose of these rules and regulations is to promote compliance with Tenn.

Code Ann. §§ 67-4-2601, et seq., and Tenn. Code Ann. §§ 47-31-101 et seq. and to promote the public health of Tennessee citizens as follows:

(a) By requiring quarterly escrow deposits and quarterly escrow certificates;

(b) To ensure compliance with Tenn. Code Ann. §§ 47-31-101 et seq.;

(4) This chapter has the following scope and limits:

(a) These rules and regulations govern compliance with Tennessee’s Directory Statute, Tenn. Code Ann. §§ 67-4-2601 et seq., and compliance with the Tennessee Escrow Fund Act, §§ 47-31-101 et seq.;

(b) These rules and regulations do not affect, implement or govern the enforcement or application of any tax statute, rule or regulation, except as specifically set forth herein. This limitation includes, but is not limited to, the treatment of cigarettes which may be contraband under other tax statutes.

History

Authority: T.C.A. § 4-4-103, §§ 4-5-201 et seq., § 47-31-102(10), § 67-1-102(a), § 67-4-2604(e) and § 2606(d).
Administrative History: Original Rule filed January 31, 2008; effective May 30, 2008.

Tenn. Comp. R. & Regs. 1320-09-01-.02 DEFINITIONS

(1) As used in this Chapter, the following terms shall have these meanings:

(a) Attorney General. The Office of the Tennessee Attorney General, including, but not limited to, any attorney working on behalf of the Attorney General.

(b) Cigarette. Defined in Tenn. Code Ann. § 47-31-102(4) as amended. The term Cigarette includes RYO (roll-your-own) tobacco (0.09 ounces of which constitutes one individual Cigarette) and those Cigarettes that, despite being sold as little cigars, meet the definition of Cigarette set forth in Tenn. Code Ann. § 47-31-102(4) as amended. Under Tenn. Code Ann. § 47-31-102(4)

Cigarette also means any product that contains nicotine, is intended to be burned or heated under ordinary conditions of use, and consists of or contains the following:

Any roll of tobacco paper wrapped in paper or in any substance not containing tobacco;
Tobacco, in any form, that is functional in the product, and which, either because of its appearance, the type of tobacco used in the filler, or its packaging and labeling is likely to be offered to, or purchased by, consumers as a cigarette; or 3. Any roll of tobacco wrapped in any substance containing tobacco which, because of its appearance, the type of tobacco used in the filler, or its packaging and labeling, is likely to be offered to, or purchased by, consumers as a cigarette, as described in Tenn. Code Ann. § 47-31- 102(4)(A)(i) as amended.

(c) Commissioner. The Commissioner of Revenue, including, but not limited to, any employee working on behalf of the Commissioner.

(d) Certificate. The State’s current, official form found at the Attorney General’s website required for filing under the Escrow Fund Act and/or these rules.

(e) Directory or State Directory. The Directory of compliant Tobacco Product Manufacturers and Brands, as provided for by Tenn. Code Ann. § 67-4-2602(b) as amended and any rules and regulations promulgated thereunder.

(f) Escrow Fund Act or Tennessee Escrow Fund Act. The Tennessee Tobacco Manufacturers’ Escrow Fund Act of 1999, Tenn. Code Ann. §§ 47-31-101, et seq. as amended and any rules and regulations promulgated thereunder.

(e) Non-Participating Manufacturer or NPM. Any tobacco product manufacturer that is not a Participating Manufacturer.

(h) Units Sold. Defined by Tenn. Code. Ann § 47-31-102 (10). Units sold means the number of individual cigarettes sold in the State by the applicable tobacco product manufacturer, whether directly or through a distributor, retailer or similar intermediary or intermediaries, during the year in question, as measured by excise taxes collected by the State on packs or “roll-your-own” tobacco containers bearing the excise tax stamp of the State.

History

Authority: T.C.A. § 4-4-103, § 47-31-102(10), § 67-1-102(a), § 67-4-2604(e) and § 2606(d).
Administrative History: Original Rule filed January 31, 2008; effective May 30, 2008.

Tenn. Comp. R. & Regs. 1320-09-01-.03 CITATION

The official citation of this chapter is Tenn. Comp. R. & Regs. Chapter 1320-9, et seq.

History

Authority: T.C.A. § 4-4-103, § 47-31-102(10), § 67-1-102(a) § 67-4-2604(e) and § 2606(d).
Administrative History: Original Rule filed January 31, 2008; effective May 30, 2008.

Chapter 1320-09-02 Escrow Fund Act Compliance

Tenn. Comp. R. & Regs. 1320-09-02-.01 ESCROW DEPOSITS, CERTIFICATES AND DISPUTES

(1) To promote compliance with Tenn. Code Ann. §§ 67-4-2601 et seq., including the requirement that NPMs comply with the Escrow Fund Act, all Non-Participating Manufacturers selling cigarettes in Tennessee must make escrow deposits required by Tenn. Code Ann. § 47-31-103(a)(2)(A) in quarterly installments, pursuant to these regulations, for a period of not less than (2) years from the effective date of these regulations or two years from the date the NPM is first certified in Tennessee, whichever is later.

All Non-Participating Manufacturers selling cigarettes in Tennessee must certify their compliance with Tennessee’s Escrow Fund Act on a quarterly basis during these two (2) years.

(2) After complying with the quarterly escrow provisions of these regulations for a (2) year period, any Non-Participating Manufacturer may petition the Commissioner of Revenue to request that it be allowed to make its deposits on an annual basis. The Commissioner shall have discretion to decide whether such Non-Participating Manufacturer shall be allowed to make deposits on an annual basis, or shall remain on a quarterly basis. When making such determination, the Commissioner shall consider, among other factors the Commissioner deems relevant, the NPM’s history of escrow payments and compliance; and the NPM’s payment record in other states.

(3) The Commissioner or the Attorney General may also require the production of any information or documents necessary to determine the adequacy of the amount of the installment deposit.

(4) The Attorney General and/or the Commissioner of Revenue may provide or release to any Non-Participating Manufacturer such information necessary to calculate or determine that Non-Participating Manufacturer’s quarterly deposit obligation. The Attorney General and Department of Revenue may develop a form to be used for any Non-Participating Manufacturer to request such information.

(5) If a Tobacco Product Manufacturer disputes the amount that it is required to deposit into a Qualified Escrow Account on a quarterly or annual basis, it must submit a written notice at the time of making its deposit. After receiving the Attorney General or Department's adjustment or release determination, or a notice of failure to make a complete escrow deposit, the Tobacco Product Manufacturer may dispute the decision. The Tobacco Product Manufacturer must file any dispute with the General Counsel of the Department of Revenue and the Tobacco Enforcement Division of the Attorney General’s Office, within twenty (20) business days of the date of the decision or notice. The dispute procedure shall be pursuant to Tenn. Code Ann. §§ 4-5-223 and 4-5-225. The official mailing address, overnight delivery address, telephone and facsimile numbers of the Department and the Attorney General are set forth on the applicable official websites.

(6) To be a valid and ripe dispute, the Tobacco Product Manufacturer shall be required to first place the full escrow deposit amount identified by the Attorney General or Department of Revenue into a Qualified Escrow Account in its Tennessee subaccount and provide proof of that deposit to the Attorney General and Department.

This deposit can be made under protest. The Tobacco Product Manufacturer’s written notice of dispute must include a certification that the full escrow payment demanded by the Department or Attorney General has been deposited and must state with specificity all bases or reasons for the dispute. An escrow agent is required to comply with a final order issued in a dispute proceeding pursuant to Tenn. Code Ann. §§ 4-5-223 and 4-5-225 as described herein. Such compliance shall include, but not be limited to, releasing escrow funds pursuant to the court's final order.

(7) In any dispute, the Licensed Distributor Reports, including all information contained therein, submitted to the State of Tennessee shall be presumed correct. The Non- Participating Manufacturer shall have the burden of proving that the Licensed Distributor Reports are incorrect, incomplete or inaccurate.

History

Authority: T.CA. § 4-4-103, § 47-31-102(10), § 67-1-102(a), § 67-4-2604(e) and § 2606(d).
Administrative History: Original rule filed January 31, 2008; effective May 30, 2008.

Tenn. Comp. R. & Regs. 1320-09-02-.02 DEADLINES FOR QUARTERLY ESCROW DEPOSITS AND QUARTERLY

CERTIFICATION.

(1) Non-Participating Manufacturers must make their quarterly escrow deposits according to the following schedule:

(a) Deposits for sales occurring in the first quarter, January 1 through March 31, are due April 30 of the same year. The Non-Participating Manufacturer must file its quarterly certification with the Attorney General no later than May 15 of the same year.

(b) Deposits for sales occurring in the second quarter, April 1 through June 30, are due July 31 of the same year. The Non-Participating Manufacturer must file its quarterly certification with the Attorney General no later than August 15 of the same year.

(c) Deposits for sales occurring in the third quarter, July 1 through September 30, are due October 31 of the same year. The Non-Participating Manufacturer must file its quarterly certification with the Attorney General no later than November 15 of the same year.

(d) Deposits for sales occurring in the fourth quarter, October 1 through December 31, are due January 31 of the next year. The Non-Participating Manufacturer must file its quarterly certification with the Attorney General no later than February 15 of the next year.

(2) The quarterly escrow deposits for a given year shall be adjusted by inflation pursuant to the formula specified in the Escrow Fund Act, assuming the minimum inflation rate of three percent (3%) for the year in question. Non-Participating Manufacturers shall make a final reconciliation deposit on or before April 15 of the year following the year in which the Cigarettes are sold in order to account for the actual annual adjustment for inflation under the Escrow Fund Act. The final reconciliation deposit shall be included in the Non-Participating Manufacturer’s annual certification, due on or before April 30 of the year following the year in which the Cigarettes are sold.

History

Authority: T.C.A. § 4-4-103, § 47-31-102(10), § 67-1-102(a), § 67-4-2604(e) and § 2606(d).
Administrative History: Original rule filed January 31, 2008; effective May 30, 2008.

Tenn. Comp. R. & Regs. 1320-09-02-.03 PENALTIES FOR UNTIMELY OR INCOMPLETE QUARTERLY

CERTIFICATION OR QUARTERLY ESCROW DEPOSIT.

(1) If an NPM fails to timely make its quarterly escrow deposit in full, or timely file its quarterly certification with the Attorney General, the delinquent NPM and its Brand Families will be removed from the Directory until the Non-Participating Manufacturer fully complies with its obligations. Any Non-Participating Manufacturer that has not fully complied with Tennessee statutes, rules and regulations by submitting its escrow deposits and Certificates of Compliance will not be listed in the Directory or will be removed from the Directory until all past escrow deposits are made, proof of deposit is submitted to the State, all outstanding judgments are fully satisfied, and all other obligations under these Rules, the Escrow Fund Act and the Directory Statute are met.

(2) Failure to make quarterly deposits or to file quarterly certificates shall also subject the Tobacco Product Manufacturer to the penalties for failure to place funds in escrow contained in the Escrow Fund Act or otherwise provided for under State law,

regulation or rule. Such penalties shall be imposed by the court as provided for in Tenn. Code Ann. § 47-31-103(a)(3).

(3) Each failure to make a full annual or quarterly deposit required under the Escrow Fund or rules and regulations promulgated thereunder shall constitute a separate and distinct violation.

History

Authority: T.C.A. § 4-4-103, § 47-31-102(10), § 67-1-102(a), § 67-4-2604(e) and § 2606(d).
Administrative History: Original rule filed January 31, 2008; effective May 30, 2008.

Tenn. Comp. R. & Regs. 1320-09-02-.04 ESCROW ADJUSTMENTS AND RELEASE REQUESTS

(1) The Escrow Fund Act authorizes the release of funds from escrow only under specified circumstances. For example, the Escrow Fund Act authorizes the release of funds from escrow to the extent that an NPM “establishes that the amount it was required to place into escrow on account of units sold in the state in a particular year was greater than the master settlement agreement payments, as determined pursuant to section IX(i) of the master settlement agreement including after the final determination of all adjustments, that such manufacturer would have been required to make on account of such units sold had it been a participating manufacturer”.

Tenn. Code Ann. § 47-31-103(a)(2)(B)(ii). To establish entitlement to an escrow adjustment on this ground, an NPM must calculate the total payments that it would have made as a Participating Manufacturer on account of the Units Sold in Tennessee during a particular year. The current official Tennessee Request for Release Form, located on the Attorney General’s website, must be executed and filed with the Attorney General along with all required documents and information.

(2) Adjustments to escrow accounts paid pursuant to the Escrow Fund Act, including balances due for Deposit, may occur: (a) upon a showing that the adjustment is authorized pursuant to the Escrow Fund Act in response to requests for adjustments or release; and (b) upon a showing, submitted by the Tobacco Product Manufacturer, that it is eligible for a release or adjustment under the Escrow Fund Act.

(3) The Department or the Attorney General may require an additional deposit when additional information not known by the Attorney General or Department arises after the initial or most recent deposit was deemed sufficient or when a release from escrow was authorized and implemented.

(4) All release requests will be governed and reviewed based upon the law, rules and regulations existing as of the date the completed Request for Release Form is filed with the Attorney General. The Attorney General will not consider release requests submitted before the time period has elapsed for which the release is requested. For example, the Attorney General will deny a release request for calendar year 2008 if it is submitted before the end of calendar year 2008.

(5) To be eligible for consideration, a release request for an adjustment by an NPM must be made in writing on the State’s current official Request for Release Form and must be accompanied by supporting documentation which establishes compliance with all other aspects of the Escrow Fund Act requirements and the basis for the escrow release request. The supporting documentation, at a minimum, must include:

(a) A timely filed Certification of Escrow Compliance completed on the State’s current official form and executed in compliance with the State’s official Instructions and Definitions for Certificate of Escrow Compliance;

(b) An affidavit, signed under penalty of perjury by an executive officer of the Tobacco Product Manufacturer responsible for escrow compliance, setting forth the officer’s authority to bind and act on behalf of the Tobacco Product Manufacturer and demonstrating the facts which support the adjustment requested; and (c) All records and/or other documentation demonstrating the facts offered in support of the requested adjustment or release, as well as documentation evidencing the timely and full deposit into escrow prior to the request for adjustment; and any legal argument or analysis in support of the requested adjustment. The NPM shall submit a proposed calculation of the annual deposit due, a proposed calculation of the refund amount and a draft letter of instructions to the Escrow Agent concerning the proposed refund. The Attorney General or Commissioner may require an NPM to provide information or documents regarding the NPM’s national sales, including, but not limited to, the NPM’s bi-monthly Excise Tax Returns filed with the U.S. Treasury, Tobacco Tax and Trade Bureau (TTB), formerly the Bureau of Alcohol, Tobacco & Firearms (BATF), the Importer Trade Activity (ITRAC) data, and/or U.S. Customs Forms 7501. To document its unit sales in Tennessee (as measured by excise taxes paid), the NPM shall include copies of the filed Tennessee excise tax returns for its tobacco products or arrange for equivalent excise tax payment documentation from the State of Tennessee.

(d) The Attorney General or Department may request such further information or documents, as is required in light of the specific facts, including, but not limited to, information on compliance with Escrow Fund requirements and the evidence or basis for any adjustment or release requested.

(6) The Tobacco Product Manufacturer shall have the burden of proof to establish that a release or adjustment from escrow is appropriate, in whole or in part. Further, there is a presumption of correctness with regard to the calculation by the Department of the number of Units Sold in Tennessee in a particular year.

(7) Requests for adjustments to escrow or release from escrow must use the most recent data available for Original Participating Manufacturers’ aggregate percentage of the total market and the total payment due from the OPMs. The only data which will be accepted in such submissions is the data provided to the State from the Independent Auditor under the Master Settlement Agreement. An NPM submitting a request for an adjustment to escrow may obtain this information from the State but must maintain this information in a confidential manner consistent with State law and the confidentiality agreement.

(8) The Department or the Attorney General may require, at any time, an adjustment to escrow should additional facts become available, which show that the escrow amount paid or escrow amount previously released was incorrect in any manner.

Bases for adjustment include, but are not limited to, new information showing inaccurate reporting of the number of Units Sold, new information showing additional Units Sold, or a change in the OPM market share, mistake, inadvertence, or any other failure by the NPM to comply with these rules and regulations or the Escrow Fund Act.

(9) A request for an adjustment of escrow account or release will be decided within a reasonable time of filing of all of the information necessary for its determination. The Tobacco Product Manufacturer has the burden to ensure that all necessary documents are filed with the Attorney General and Department. The Attorney General will send a copy of the adjustment or release determination to the Tobacco Product Manufacturer and, if the release request has been allowed in whole or in

part, to the financial institution holding the funds in escrow. Decisions to deny escrow release requests in whole or in part, shall contain a short statement of the reason(s) for denial.

(10) Except as provided in paragraph 13 below, when a release from escrow occurs to pay a judgment or settlement on any released claim brought against a Tobacco Product Manufacturer by the State or any releasing party located or residing in the State of Tennessee under the Escrow Fund Act, funds shall be released from escrow:

(a) In the order in which they were placed in escrow; and (b) Only to the extent and only at the time it is necessary to make payments required under such judgment or settlement.

(11) When a release from escrow occurs under the Escrow Fund Act due to the passage of twenty-five (25) years, funds shall be released from escrow:

(a) In the order in which they were placed in escrow; and (b) Only if twenty-five (25) years have passed from the date on which the funds were actually placed into escrow. For example, an escrow deposit made during 2005, but related to sales of cigarettes in 1999, will not be eligible for release until 2030 (not 2024).

(12) Upon receipt of a Request for Release form, the Attorney General or Department may elect to contact or notify other states to determine if any other states have judgments which they seek to satisfy by executing, attaching or garnishing such subaccount and to allow any other states sufficient time to take actions to attempt execution against the monies held in the Tennessee sub-account which may be available for release from the Tennessee sub-account.

History

Authority: T. C. A. § 4-4-103, § 47-31-102(10), § 67-1-102(a), §§ 67-4-2602(a)(3)(C), 67-4-2602(a)(3)(D)(i), 67-4-2602(a)(3)(D)(iv), § 67-4-2604 and § 67-4-2606(d).
Administrative History: Original rule filed January 31, 2008; effective May 30, 2008.