March 25, 2019
By: Dwayne Page
Are rural counties getting short changed from the state’s distribution of sales tax revenue from out-of-state sellers including internet sales?
Some say the current distribution of a uniform local sales tax rate for out-of-state sellers is not equitable and should be eliminated.
Under current tax laws, if an out-of-state retailer ships goods into the state, it has to pay state sales taxes after $500,000 in sales. That’s the use tax that applies to property imported by a customer for use in Tennessee, including internet sales. That revenue is doled out to the state, which distributes it locally at a percentage based on brick-and-mortar sales.
Representatives of counties and cities on the Tennessee Advisory Commission on Intergovernmental Relations recently formed a working group to study the issue and is recommending that local sales tax revenue from out-of-state sellers be distributed based on the destination of the purchaser.
The TACIR is asking counties to adopt a resolution urging the Tennessee General Assembly to adopt a law making the change. It is also being recommended for passage by the Tennessee County Services Association and the Association of County Mayors.
The county commission Monday night adopted the resolution.
“What is happening right now, if you buy something out of state and it is shipped to your home and there is sales tax involved, the state sales tax portion goes to the state but the local option part of the sales tax goes into a pool and it is distributed according to how much sales tax that county collected for the state of Tennessee. For example, Davidson County collects about 12% of the total sales tax for the state so Davidson County would get 12% of this money from this pool. What the TACIR is saying is the local sales tax should return to the county from where the purchase originated in order to give each county its fair share,” said County Mayor Tim Stribling.
“That would have meant an extra $376,000 for DeKalb County according to 2017 figures. That isn’t chump change. If this resolution is adopted by the state it will mean a significant amount of money for the county,” added fourth district commissioner Dr. Scott Little.
“This equates to about eight cents of the property tax rate,” said County Mayor Stribling.