Out-of-State Sales Tax Act (SB1489/HB1912)

Sponsored by Senator Marrero and Representative Stewart

The state sales and use tax is the largest source of funding for TN state government. In order to fund our public structures adequately we must be efficient at collecting the taxes that are due. Many out-of-state vendors (internet and catalogue) tempt Tennesseans to dodge sales tax by not collecting it. TN relies on individual taxpayers to voluntarily report their purchases from out-of-state vendors who do not collect TN sales taxes, but few taxpayers do so. Only 2500 taxpayers filed use (sales) tax returns in 2009, compared to over 3.1 million individual federal tax returns filed by Tennesseans each year. The bill:

Asserts taxing authority over out-of-state companies (who sell more than $4,800 of merchandise to Tennesseans) on the basis of their use of in-state affiliates to solicit business.

Impact: The revenue can be used to avoid layoffs of state employees and cuts to critical state functions. According to a UT Center on Business and Economic Research report, an estimated $365 Million will be lost in 2010 through online purchases by Tennessee residents. That does not include losses from mail order, direct television marketing or cross-border shopping. “State and Local Government Sales Tax Revenue Losses from Electronic Commerce.” 2009.