Tennessee retailers will have a longer window to make sales tax adjustments to their POS and other operating systems. In April 2017, the state passed legislation that delayed the adoption of a streamlined sales tax initiative that affects how retailers calculate sales tax.
Sales tax changes to come as part of Tennessee’s involvement in the Streamlined Sales and Use Tax Project, which seeks to simplify sales tax calculations under the Streamlined Sales and Use Tax Agreement (SSUTA), a set of standards, definitions and policies. Tennessee joined the Streamlined Sales and Use Tax Project in 2005 and has adopted some of the SSUTA provisions.
The change to destination sourcing has been delayed for several years because of its complexity. Tennessee originally planned to adopt the change in 2009, then delayed it July 1, 2015, and delayed it for July 1, 2017. Legislation signed by Tennessee Governor Bill Haslam pushes the implementation back to July 1, 2019.
Tennessee currently uses origin-based sourcing, which charges sales tax based on the brick-and-mortar location of the seller. SSUTA requires members to calculate tax based on buyer’s shipping location. It also would change the single article limitation on local option sales tax, require a single sales and use tax return for multiple dealer locations and implement certain privilege taxes in lieu of sales tax.
Making the change to destination source will require significant modifications to POS systems and a state software system that will allow retailers to account for sales tax rates based on the buyer’s location. Tennessee approved the destination sourcing software in 2016, but further detail are needed about the destination sourcing transition plan.
CBIZ will continue to keep you informed as developments emerge. For information on how your businesses can prepare for the sales tax changes, please contact Sonya Daniels. Sonya can be reached at email@example.com or 901.842.2830.
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