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Can I collect sales tax from customers in different states without violating tax laws in Tennessee? What are the requirements?

Can I collect sales tax from customers in different states without violating tax laws in Tennessee? What are the requirements?

According to TNCO 67-6-805, the commissioner of revenue is authorized to enter into the Streamlined Sales and Use Tax Agreement on behalf of the state of Tennessee. This agreement provides a mechanism among the member states to establish and maintain a cooperative, simplified system for the application and administration of sales and use taxes under the duly adopted law of each member state.

Therefore, if you are a member of the Streamlined Sales and Use Tax Agreement, you can collect sales tax from customers in different states without violating tax laws in Tennessee. However, implementation of any condition of the agreement in the state of Tennessee must be authorized by the general assembly by legislative enactment.

To become a member of the Streamlined Sales and Use Tax Agreement, you must meet certain requirements. According to the Streamlined Sales Tax Governing Board, Inc., to become a member, a state must:

  • Enact legislation to implement the Agreement;
  • Have a central, electronic registration system for all member states;
  • Have a uniform sales and use tax base;
  • Use destination-based sourcing for all taxable transactions;
  • Provide free software for managing sales tax compliance;
  • Provide indemnification of sellers for errors and omissions made by the state; and
  • Simplify the state and local tax rates and administration.

Therefore, if you meet these requirements, you can become a member of the Streamlined Sales and Use Tax Agreement and collect sales tax from customers in different states without violating tax laws in Tennessee.

However, it is important to note that there are certain exemptions to the sales tax in Tennessee. For example, according to TNCO 57-6-111, the tax levied on beer and/or ale shall not be applicable to any beer and/or ale sold to any post exchange, ship service store, commissary, open mess, officers’ club, N.C.O. club or other organization recognized by and located on any fort, base, camp or post of the armed forces of the United States. Wholesalers and brewers duly licensed in Tennessee shall be relieved of the tax imposed herein on all beer and/or ale sold at any fort, base, camp or post of the armed forces of the United States.

Additionally, TNCO 57-6-201 imposes an additional tax upon the sale of alcoholic beverages at wholesale in the amount of fifteen cents (15¢) per case for each case of alcoholic beverages sold at wholesale in Tennessee. The tax imposed herein shall be paid monthly by the wholesaler upon the number of cases of alcoholic beverages sold by the wholesaler during the preceding month to the department, and all of which tax shall be used or spent by the alcoholic beverage commission.

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Source(s):
Jurisdiction

Tennessee