On June 2, Tennessee Governor Bill Lee announced the Tennessee Business Relief Program (Business Relief Program) aimed at helping small businesses during the COVID-19 pandemic. The Business Relief Program will be managed by the Tennessee Department of Revenue (Department) and will use funds from the Coronavirus Relief Funds to issue business relief payments to small businesses that incurred costs as a result of mandatory business closures. In the days following the announcement, the Department provided guidance and additional details on the Business Relief Program.

Business Relief Program – Eligible Businesses

Per guidance provided on the Department’s website, businesses eligible for the Business Relief Program do not need to apply. The Department will proactively identify eligible businesses using taxpayer information, including industry codes and sales data. The Department has provided that the following businesses are eligible for the Business Relief Program:

  • Barbershops.
  • Beauty shops.
  • Nail salons.
  • Tattoo parlors, spas, and other personal care services.
  • Gyms and fitness centers.
  • Restaurants.
  • Bars.
  • Hotels and other travel accommodations.
  • Theaters, auditoriums, performing arts centers, and similar facilities.
  • Museums, zoos, and other similar attractions.
  • Amusement parks.
  • Bowling centers and arcades.
  • Marinas.
  • Amusement, sports, and recreational industries.
  • Promoters of performing arts, sports, and similar events.
  • Agents and managers of artists, athletes, and entertainers.
  • Independent artists, writers, and performers.

Additionally, the following small businesses are eligible if their sales were reduced by at least 25% as shown on their April sales tax returns (filed in May):

  • Furniture stores.
  • Home furnishing stores.
  • Clothing stores.
  • Shoe stores.
  • Jewelry, luggage, and leather goods stores.
  • Sporting goods, hobby, and musical instrument stores.
  • Book stores.
  • Department stores.
  • Office supply, stationery, and gift stores.
  • Used merchandise stores.
  • Other miscellaneous stores.

The focus of the Business Relief Program is on small retail businesses. Businesses with over $10 million in annual gross sales are ineligible. The Department’s website provides that it expects that more than 28,000 Tennessee small businesses will qualify for the program and that more than 73% of those businesses will have annual gross sales of $500,000 or less.

Business Relief Program – Payment Process

The Department anticipates distributing approximately $200 million in funds beginning in early July. Payments will be made by direct deposit if the business has previously provided bank account information and authorized the Department to save that information. Otherwise, payments will be made by check. The Department is encouraging businesses to update their mailing addresses in its TNTAP database.

The amount of relief payment distributed to small businesses will be determined on a sliding scale based on annual gross sales. Annual gross sales will be determined by looking at the greater of the reported gross sales on its calendar year 2019 sales tax returns or the reported gross receipts on its most recent business tax return. In a recent presentation to the Tennessee Chamber of Commerce, the Department provided that the current expected amounts of relief payments are as follows:

  • Annual gross sales of $100,000 or less = $2,500 relief payment.
  • Annual gross sales of $100,000-$500,000 = $5,000 relief payment.
  • Annual gross sales of $500,000-$1 million = $10,000 relief payment.
  • Annual gross sales of $1 million-$5 million = $20,000 relief payment.
  • Annual gross sales of $5 million-$10 million = $30,000 relief payment.
  • Annual gross sales of $10 million or more = ineligible for relief payment.

Relief payments made to Tennessee small businesses are not loans and do not have to be repaid. The Department has indicated that relief payments may or may not be subject to tax depending on the business structure of the small business.

The Department is continuing to update its website with more details about the Business Relief Program, and we encourage you to visit it for the most recent information. If you have questions or need assistance related to the Business Relief Program, please contact the authors of this alert.