Is the online free ride over?

Hank Hayes • Mar 4, 2019 at 8:30 AM

You buy a baseball at the athletics store in Tennessee, and you owe the purchase price plus 7 percent state sales tax and up to 2.75 percent for the local option sales tax.

The same purchase made through the store’s internet website also is subject to those same sales taxes.

Likewise, out-of-state retailers with a physical presence in Tennessee are required to collect and give the state sales tax owed on items purchased.

But businesses without a physical presence in the state making the same sales over the internet are getting a free ride.

The state of Tennessee is looking into terminating that free ride.

A June 2018 U.S. Supreme Court decision overturned that physical presence rule and opened the way for states to expand sales tax collection requirements to more out-of-state sellers, according to an interim report from the Tennessee Advisory Commission on Intergovernmental Relations (TACIR).

The TACIR report recommends the Tennessee General Assembly enable so-called Department of Revenue “Rule 129,” which would require out-of-state sellers with no physical presence in the state and with more than $500,000 in sales in Tennessee to collect and remit sales tax.

“In the future the state should consider lowering this threshold,” the report noted.

A big bundle of cash is at stake.

The report suggests that enforcing the rule would result in the state receiving an additional $160.5 million in state sales tax and local governments getting $59.4 million.

“Local government members of (TACIR) raised concerns about the ability of local governments to sustain current levels of education funding and to implement education-related mandates without this additional revenue source,” the report said.

Those sources interviewed for the report included Kingsport City Attorney Mike Billingsly and Kingsport City Schools Superintendent Dr. Jeff Moorhouse.

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