Thursday, October 6, 2011

Attorney General Opinion: Out-of-State Dealer's Nexus as a Result of Activities of In-State Distribution Center

In this opinion, the Attorney General discussed whether an out-of-state dealer that maintains an in-state distribution center or warehouse is required to collect Tennessee sales tax from Tennessee consumers. The AG concluded that, "if a retailer directly maintains or owns an in-state distributing house or warehouse, then the retailer has a physical presence within the State of Tennessee and, thus, has nexus with Tennessee for Commerce Clause purposes. On the other hand, if the in-state distributing house or warehouse is owned by a retailer’s subsidiary, instead of the retailer directly, nexus is established only if the subsidiary’s in-state activities are significantly associated with the retailer’s ability to establish and maintain a market in Tennessee for its sales."

The Attorney General also concluded that the fact that the dealer accepts purchase orders through electronic means does not release it of liability from collecting sales tax. Finally, he states that although the "State of Tennessee cannot contractually waive a taxpayer’s obligation to pay sales taxes where the Retailers’ Sales Tax Act unambiguously establishes an obligation to pay such taxes," the Commissioner of Revenue may exercise discretion in determining the best methods of enforcing Tennessee's tax laws.

Read the full opinion here: