In a recent Tax Notes State article, Bass, Berry & Sims attorneys Steve Jasper, Sara Morgan, and Robert Guth examined the evolution of Tennessee’s business tax, describing its transformation from an often-overlooked and inconsistently enforced levy into a more structured, actively administered gross receipts tax. The authors explain that legislative changes beginning in 2009 and 2013 shifted enforcement authority to the Tennessee Department of Revenue, while subsequent guidance, including the 2021 Business Tax Manual, and a wave of court decisions and policy updates have clarified long-standing ambiguities. Together, these developments have brought greater visibility and coherence to the tax, positioning it as a more conventional, though still complex, component of Tennessee’s tax regime.
Steve, Sara, and Robert highlighted that despite these improvements, the tax remains administratively burdensome due to its classification-based rates, location-specific registration requirements, and overlapping sourcing rules. They point to recent judicial guidance, including the Tennessee Court of Appeals’ decision in SAP America v. Gerregano, which narrowed the scope of taxable services and reinforced the exemption for transactions where the true object is an intangible. Looking ahead, the authors suggest Tennessee could simplify its approach by learning from other states’ gross receipts tax models, but caution that without modernization, the business tax will continue to present structural, practical, and constitutional challenges for taxpayers and policymakers alike.
The full article, “Tennessee’s Business Tax: From Mystery to Respectable Headache,” was published by Tax Notes State on June 15 and is available online (subscription required).