Michael Cottone Comments on Developments in Tennessee Business Tax Classification

April 4, 2019
State Tax Notes

How should a company classify itself for tax purposes if they provide both products and services? Michael Cottone discussed a case that asks this question in State Tax Notes. Read more.In an article for State Tax Notes, Bass, Berry & Sims attorney Michael Cottone discussed the recent decision in Auto Glass Co. of Memphis Inc. v. Gerregano.  The Tennessee Court of Appeals ruled in Auto Glass that a company selling automobile glass and related installation services should be categorized as a seller of tangible personal property — and not a seller of services — because the majority of the company’s sales came from the selling of glass instead of the installation of glass.

Michael noted that, in reaching this conclusion, the court did not allow the Department of Revenue to apply a regulation that would have treated both the company’s sales of tangible personal property and its sales of related services as “service charges.”  While “it remains to be seen whether or not that’s going to apply to other taxpayers or whether it will apply equally to other taxpayers,” Michael said, taxpayers that sell and separately itemize tangible personal property and services should reevaluate their business tax classification in light of Auto Glass.

The full article, “Tax Classification Based on Majority Sales, Court Rules,” was published by State Tax Notes on April 1, 2019, and is available online (subscription required).