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2014 Legislative Summaries

The following are brief summaries of the 2014 legislative changes to statutes administered by or affecting the Tennessee Department of Revenue.  The language used is not quoted from the law and should not be used as a substitute for the formal text.  For a complete copy of a particular public chapter, please visit the Secretary of State’s website at www.tn.gov/sos/acts.  For upcoming notices and other information regarding these changes, please visit the Department’s Web site regularly.

These summaries are organized by subject matter.  Some public chapters cover more than one subject and, therefore, appear in more than one section of the summary.  Only the portions of a public chapter that are relevant to a particular section of the summary are included in that section.

Sales and Use Tax

Business Tax

Inheritance Tax

Professional Privilege Tax

Motor Fuel

Alcoholic Beverage Tax

Tobacco Tax

Emergency 911 Fee

Title and Registration

Administrative

 

 


Sales and Use Tax

Community Gardens
Public Chapter 556 revises the Community Gardening Act to allow the sale of vegetables, nuts, herbs, fruit or flowers grown in a community garden in certain circumstances, and it provides an accompanying sales tax exemption for those items sold.

Effective date : March 21, 2014.

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Boats Imported from Out-of-state
Public Chapter 1012 exempts from use tax boats that residents from other states bring with them when moving to Tennessee. The boat must be used solely for personal use and have a fair market value of $10,000 or less at the time of the move. It also must be properly registered in the other state.

Effective date:July 1, 2014

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Industrial Machinery - Firearms Manufacturing
Public Chapter 994 adds a new definition of “industrial machinery” for sales tax purposes.  The new definition includes machinery necessary and primarily used in manufacturing firearms with certain integral locking devices.

Effective date: July 1, 2014.

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Commercial Development Districts
Public Chapter 985 authorizes the creation of Commercial Development Districts to aid economically distressed rural counties with high rates of unemployment. Those counties or municipalities meeting certain income and employment criteria may apply to the Commissioner of Finance and Administration for the creation of Commercial Development District. If approved, a portion of the sales tax revenues generated by the businesses within the Commercial Development District will be allocated to the district for a period not to exceed 20 years to be used to retire the debt of the district. 

Effective date: May 22, 2014.

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Business Tax

Clarifications Bill
Public Chapter 764 corrects language in the business tax statutes to allow the Department of Revenue to share information about business tax filings with local governments to ensure compliance. It also corrects a provision related to the allocation of funds collected during a business tax audit.

Effective date : April 24, 2014.

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Natural Gas Marketers
Public Chapter 942 adds “natural gas marketers” to Classification 5 for business tax purposes, and it imposes the business tax on such natural gas marketers at the rate of one fiftieth of one percent (1/50 of 1%) of all sales within the state of Tennessee. This law also exempts natural gas marketers from having to obtain a business license.

Effective Date: July 1, 2014. The law applies to tax periods beginning on or after this date.

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Inheritance Tax

Small Estate Filing Exemption
Public Chapter 808 raises the statutory exemption amount for small estates that are not required to file a short form inheritance tax return. For decedents dying in 2014, the gross amount is $1,000,000. For decedents dying in 2015, the gross amount is $2,000,000.

Effective date: April 25, 2014, and the law applies to tax years beginning on or after January 1, 2014.

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Professional Privilege Tax

Professional Privilege Tax Delinquencies
Public Chapter 763 requires professional privilege taxpayers that are 90 days or more delinquent to pay their professional privilege tax before they may renew their professional license. This law does not apply in situations where delinquent taxpayers have entered into a payment plan agreement with the Department of Revenue, have requested an informal review conference or have filed suit. This law does not apply to attorneys, but it does encourage the Tennessee Supreme Court to adopt rules to promote timely payment of the tax by attorneys. 

Effective date: April 24, 2014.

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Professional Privilege Tax on NHL/NBA Athletes
Public Chapter 760 eliminates the professional privilege tax on National Hockey League (“NHL”) players, beginning for regular season games played in Tennessee after April 24, 2014. For National Basketball Association (“NBA”) players, the professional privilege tax is eliminated for regular season games played in Tennessee after June 1, 2016.

Effective Date: The tax on NHL players is repealed effective April 24, 2014; the tax on NBA players will be repealed effective June 1, 2016.

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Motor Fuel Tax

Transportation Fuel Equity Act
Public Chapter 908 exempts the diesel fuel used by railroad carriers from the sales tax. It replaces that tax with a 17 cent per gallon diesel tax. This public chapter also allows a credit for any sales taxes paid in another state on fuel subject to the Tennessee diesel tax.

Effective date: July 1, 2014. 

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Liquified Gas
Public Chapter 772 establishes a diesel gallon equivalent factor of six and six one-hundredths pounds (6.06 lbs) per gallon for purposes of calculating the tax on liquified gas. This public chapter also eliminates the requirement that users of liquified gas in a motor vehicle prepay a tax based on the weight classification of the vehicle.

Effective date: April 24, 2014. 

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Alcoholic Beverages Taxes

Wine in Grocery Stores
Public Chapter 554 authorizes the sale of wine in retail establishments that generate at least 20 percent of their sales from food products and that acquire the necessary license. The locality where the retail establishment is located must also have authorized wine sales by referendum vote no sooner than the November 2014 election.

Public Chapter 554 also enacts the “Unfair Wine Sales Law” to prevent wine sales at below cost which would impair competition.

Effective Date: The authorization for the sale of wine in retail establishments is effective March 20, 2014; the Unfair Wine Sales Law is effective July 1, 2016; a number of other regulatory provisions are effective July 1, 2014.

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High Gravity Beer
Public Chapter 861 revises the definition of “beer” from anything having a maximum of five percent alcohol by weight to anything having a maximum of eight percent alcohol by weight. In addition, this public chapter allows manufacturers to sell high alcohol content beer on their premises.

Public Chapter 861 also clarifies that agreements between wholesalers and suppliers regarding beer with an alcohol content of higher than five percent alcohol by weight are governed by Tenn. Code Ann. Section 47-25-1501, et seq.

Effective date: The change in the definition of “high alcoholic content beer” is effective January 1, 2017. Manufacturers may begin selling high alcohol content beer on their premises effective July 1, 2014; all other provisions of the law are effective May 1, 2014.

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Liquor by the Drink Allocation
Public Chapter 901 provides a detailed schedule for the allocation of liquor by the drink tax collections.

This public chapter also authorizes county legislative bodies, municipal legislative bodies and local boards of education to enter into agreements by August 31, 2014, regarding the transfer of previously paid taxes that were not remitted to the correct school fund or system. Disputes still outstanding as of September 1, 2014, may be resolved in either the Davidson County Chancery Court or by arbitration with the Tennessee Comptroller’s Office.

Effective date: The allocation schedule is effective July 1, 2014; all other provisions are effective May 13, 2014.

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Tobacco Tax

Tobacco Manufacturers' Escrow Act Enforcement
Public Chapter 749 preserves the Tobacco Master Settlement Agreement by: including a bonding requirement for non-participating manufacturers; requiring tobacco product manufacturers to make quarterly escrow deposits; allowing the sharing of sales data with a data clearinghouse for compliance purposes; and by clarifying the Department of Revenue’s audit authority.

Effective Date: April 21, 2014, except for certain bonding changes that are effective October 1, 2014.

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Emergency 911 Fee

911 Funding Modernization and IP Transition Act of 2014
Public Chapter 795 modernizes the funding of emergency 911 services by incorporating definitions in the Tennessee sales tax statutes.

Public Chapter 795 modernizes the funding of emergency 911 services by incorporating definitions in the Tennessee sales tax statutes.

Of particular import to the Department of Revenue, this public chapter sets the surcharge for emergency 911 services at $1.16, instead of having different surcharges for prepaid and post-paid wireless plans. Therefore, for prepaid communication services, the surcharge will increase from 53 cents per transaction to $1.16 per transaction, effective January 1, 2015. Dealers are responsible for collecting this surcharge from customers and remitting it to the Department on the sales and use tax return.

Effective Date: January 1, 2015.

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Title and Registration

Disabled Veteran Decal
Public Chapter 720 permits a disabled veteran receiving a license plate to also receive a disabled veteran decal, free of charge, to affix to the license plate. This decal will afford them the same parking privileges as a placard.

Effective Date: April 16, 2014.

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County Clerk Title Fee Schedule
Public Chapter 718 authorizes the Commissioner of Revenue to delegate title and registration functions to the county clerks, which they are free to accept or reject.

It also says the Department will pay a county clerk $2.35 for each title issued, with 35 cents earmarked for office supplies and equipment. In addition, the Department will pay the county clerk $250 per month for issuing certificates of title, or $400 per month, if the county clerk forwards title application information to the Department electronically, subject to certain exceptions.

Finally, Public Chapter 718 promotes the use of electronic data sharing between the county clerks and the Department.

Effective Date: April 16, 2014.

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County Clerk Title Fee Remittance
Public Chapter 553 changes the requirement that county clerks remit and report motor vehicle title applications to the Department of Revenue from a same-day requirement to a monthly reporting requirement. The law also revises the contents of the report to be submitted.

Effective Date: March 17, 2014.

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County Clerk Mail Order Fees
Public Chapter 1005 authorizes the county clerks to raise the fee for handling mail orders of license plates from $2 to $3 to cover rising postage costs.

Effective Date: July 1, 2014.

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Motor Vehicle License Plate Vouchers
Public Chapter 869 authorizes the Department of Revenue to authorize the State Treasurer to sell nonrefundable gift vouchers or cards to be used for purchasing specialty license plates.

Effective Date: July 1, 2014.

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Medium Speed Vehicles
Public Chapter 871 allows medium speed vehicles not equipped with a windshield to be registered and driven on public roads. This includes off-highway motor vehicles that qualify as medium speed vehicles, provided the occupants wear a helmet and safety glasses.

Effective Date: July 1, 2014.

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18-Month Rental Car Registration
Public Chapter 958 allows the Department of Revenue to issue motor vehicle registrations that are valid for 18 months to any business that registers at least 15,000 vehicles annually and rents them to customers for a period of 31 days or less at a time. The Department is further authorized to stagger the renewal dates. The fee for such registrations shall be an amount that offsets revenue that would otherwise be generated by 12-month registration fees in effect prior to January 1, 2015.

Effective Date: May 19, 2014, and applies to any registration or renewal made on or after January 1, 2015.

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Military License Plates
Public Chapter 966 significantly overhauls the structure of military license plates in Tennessee. The following changes are made with respect to the hierarchy of military plates:

  • Any Air Medal license plates issued prior to May 13, 2013, remain free.
  • Any Air Medal (Meritorious) license plates issued on or after May 13, 2013, are subject to registration fees (Tenn. Code Ann. Section 55-4-111, -203(c)(1)).
  • Any Air Medal (Valor) license plates issued after May 13, 2013 but prior to May 19, 2014, become free upon their next renewal date.
  • Any Air Medal (Valor) license plates issued after May 19, 2014 are free.
  • Any Silver Star or Bronze Star (Valor) license plates issued prior to May 19, 2014 become free upon their next renewal date.
  • Any Silver Star or Bronze Star (Valor) issued after May 19, 2014 are free.
  • Any Bronze Star (Meritorious) license plates are subject to registration fees.

Persons acquiring the following license plates are allowed one free plate:

  • Congressional Medal of Honor, Distinguished Service Cross, Navy Cross, Air Force Cross, Distinguished Flying Cross, Silver Star, Bronze Star (Valor), Air Medal (Valor), Prisoner of War, Disable Veteran memorial license plate

After receiving one free plate, a second may be purchased with payment of the fee in Tenn. Code Ann. Section 55-4-111 and one half of the fee in Tenn. Code Ann. Section 55-4-203(c)(1). Any subsequent license plates are subject to the regular registration fees.

This public chapter also deletes the Legion of Valor license plate, and it requires former holders of that plate to receive the license plate reflective of the medal actually received by  the person. The Handicapped Veteran license plate is also deleted.

Disabled veterans may now choose one free Purple Heart license plate in lieu of a Disabled Veteran license plate, if they meet the requirements. A second plate may be purchased with payment of the fee in Tenn. Code Ann. Section 55-4-111 and one half of the fee in Tenn. Code Ann. Section 55-4-203(c)(1). Any subsequent license plates are subject to the regular registration fees. A surviving spouse of Purple Heart license plate holders may receive a Purple Heart license plate, but it is subject to the regular registration fees, except for those that were surviving spouses with Purple Heart license plates issued prior to May 19, 2014.

This public chapter now requires holders of memorial military license plates and cultural military license plates to verify proof of their residency annually.

In addition, this public chapter creates a surviving spouse decal for certain military license plates. This decal may be subject to a one-time fee.

Finally, this public chapter establishes that people with Handicapped Veteran, Legion of  Valor, Silver Star, Bronze Star, Distinguished Flying Cross or Air Medal plate prior to the effective date can keep the plate.  But if an owner of a Handicapped Veteran plate sells the vehicle to which the plate is registered, then the plate expires.

People with Prisoner of War, Congressional Medal of Honor, Distinguished Service Cross, Distinguished Flying Cross, Navy Cross, Air Force Cross, Disabled Veteran or Purple Heart license plates issued prior to May 19, 2014, can keep the plate, and it remains free.

Effective Date: May 19, 2014.

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Special License Plates Omnibus Bill
Public Chapter 941 authorizes the following new special license plates (subject to minimum order requirements): Chambliss Center for Children; McCallie School; National Wild Turkey Federation; Tennessee Vietnam Veterans, Inc.; Memphis Grizzlies; Lung Cancer Alliance; and Historic Gallatin.

The public chapter also extends the time for meeting the minimum order requirement to July 1, 2015, for the following plates: I RECYCLE; Juvenile Diabetes Research Foundation; Niswonger Children’s Hospital; Tennessee Federation of Garden Clubs; Native American Indian Association; and Tennessee Tech University.

The public chapter converts the Tennessee Walking Horse license plate from a cultural plate to a new specialty earmarked plate.

Finally, this public chapter creates new World War II Era Veteran, Vietnam Era Veteran, Korean War Era Veteran, Desert Storm Era Veteran, Bosnia Era Veteran, Operation Iraqi Freedom Era, Operation Enduring Freedom Era and Operation New Dawn Era license plates for honorably discharged veterans who served during those eras.

Effective date: May 19, 2014.

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Administrative

Informal Conference Process
Public Chapter 854 makes several significant changes to the Department of Revenue’s informal conference process.

This public chapter clarifies that findings by the Department’s Audit Division are not final until after the taxpayer has had an opportunity to meet in an informal conference with the Commissioner of Revenue or his designee. It also codifies existing policies and procedures to assure taxpayers of a fair and open review process.

The public chapter sets forth a process for the Department to issue public guidance regarding prior conference decisions. Finally, the law allows the Comptroller and Attorney General to authorize the Department to compromise small assessments or certain classes of assessments.

The Department will provide additional information closer to the effective date of this law.

Effective date: January 1, 2015.

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Department of Revenue Sunset
Public Chapter 666 extends the operation of the Department of Revenue until June 30, 2018.

Effective date: April 14, 2014.

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Baccalaureate Education System Trust Fund Program
Public Chapter 910 revises the baccalaureate education system trust fund program and,  and more pertinently, it requires the Department of Revenue to assist in promoting the state’s college savings incentives by including information in motor vehicle renewal notices, both electronic and paper, and by publishing information on the Department’s website.

Effective date: May 13, 2014.

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Four Lakes Regional Development Allocation
Public Chapter 955 extends the allocation of Tennessee Valley Authority funds to the Four Lakes Regional Development from 2014 to 2018.

Effective date: May 19, 2014.

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Clarifications Bill
Public Chapter 764 makes the penalty imposed by the Department for attempting to pay a tax liability with a bad check or money order to be applicable to electronic funds transfers as well.

Effective date: April 24, 2014.

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