Tennessee Out-of-State Retailers Nexus (Summary)

July 14, 2015

Effective July 1, 2015, Tennessee law amended Tennessee code title 67, chapter 6, part 5 by including a provision that out-of-state retailers have a rebuttable presumption that they have nexus and must collect sales and use tax from Tennessee customers.  This is applicable if a dealer has a representative, agent, salesperson, or the like operating in Tennessee for the purpose of making sales.  An out-of-state dealer is presumed to have substantial nexus in Tennessee if:

  1. The dealer enters into an agreement or contract with one or more persons located in Tennessee for which the person, for a commission or other consideration, refers the potential customers to the dealer by a link on a website or by other means; and
  2. The dealer’s cumulative gross receipts from the retail sales made because of the above agreement exceed $10,000 during the preceding 12 months.

It is possible for the out-of-state dealer to rebut the presumption that it has substantial nexus and an agreement with an in state representative to refer potential customers.  This is done by proving that the referring entity’s activities did not substantially contribute to its market in Tennessee during the past year.  It is stated that a dealer may rebut the presumption only by clear and convincing evidence that the person with whom it has an agreement did not conduct activities in Tennessee during the time period that would substantially contribute to the dealer’s market in Tennessee.

For more information regarding the new standard click here.

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