By Michelle Price
UCBJ Managing Editor
UPPER CUMBERLAND – Beginning this week, consumers will notice more online businesses collecting sales taxes on purchases from the Volunteer State. Online marketplace facilitators, such as eBay Inc. and Etsy Inc., are now required to collect and remit taxes on remote sales.
The new law helps level the playing field for local small businesses. It prevents online retailers using online marketplace facilitators from taking business from local retailers, such as Poppie’s and Cigi’s, strictly on the basis of being tax free.
During the pandemic, Gov. Bill Lee signed S.B. 2182 into law. This law imposes an obligation to collect taxes on online marketplaces with more than $500,000 of annual sales into the Volunteer State, the same threshold the state previously set for remote sellers.
Public Chapter 759 further dropped that limit to $100,000. The law took effect Oct. 1.
This is a big deal for small businesses that previously would have been exempted from having to collect and remit sales taxes on their purchases if they fell under the previous threshold. In conjunction with its new marketplace law, Tennessee’s new economic nexus threshold is expected to generate $113 million annually in state revenue plus $38 million in local tax revenue in fiscal year 2021-22 and beyond.