Tennessee Business Tax Cuts Introduced In Senate Subcommittee

Image Credit: Phillip Ingham / CC

The Center Square [By Jon Styf] –

A bill that would eliminate Tennessee’s business tax moved out of Senate subcommittee with a negative recommendation on Tuesday.

The fiscal note on Senate Bill 1310 said it would cost the state $336 million in annual taxes and local governments $323.2 million for a total impact of $659.2 million, The tax cut would begin on Jan. 1.

The bill received a negative recommendation from the Senate Finance, Ways and Means Revenue Subcommittee because it was not funded in Gov. Bill Lee’s budget proposal. It was one of several bills that received negative recommendations for that reason.

Sen. Paul Bailey, R-Sparta, is sponsoring the bill and said Tennessee is one of seven states that tax businesses on gross receipts. Bailey said the tax has a large impact on businesses, up to a 10% tax, yet it doesn’t have a large impact on the state budget. He said any business with more than $10,000 in sales is subject to the tax.

“If you aren’t profitable, you still have to pay this tax,” Bailey said.

Another bill, Senate Bill 275, was deferred for a week after Department of Revenue Commissioner David Gerregano explained the amended bill that is Lee’s business tax cut proposal, including changing the state franchise and excise taxes to single sales factor taxes like 32 other states. Those taxes are based only on a business’s sales within the state of Tennessee.

The bill will also create a standard $50,000 net earnings reduction ($37.8 million cost) from excise taxes while exempting $500,000 of property from franchise taxes ($20.3 million cost) and increases the filing threshold for business tax from $10,000 to $100,000 ($7.9 million cost).

The bill includes a three-month grocery tax holiday and a family leave tax credit for businesses that give employees from two to 12 weeks of paid leave, providing at least 50% of normal wages over that period. If a business provides 50% of wages, it receives a 12.5% credit for those wages and it maxes out at a 25% credit if full wages are paid. The program is not mandatory for businesses.

A bill that would give Tennessee businesses up to a $25 credit per sales tax report to compensate for the cost of collections and accounting was proposed and received a negative recommendation by the subcommittee because it was not funded in Lee’s proposed budget.

Senate Bill 1140 would continue a one-year program involving the credits and would result in $4.5 million annual cost to the state and $5.8 million cost for local governments.

“This is a great bill but it does have a fiscal note,” said subcommittee chair Joey Hensley, R-Hohenwald. “Hopefully we can find some funding for it somewhere.”

About the Author: Jon Styf, The Center Square Staff Reporter – Jon Styf is an award-winning editor and reporter who has worked in Illinois, Texas, Wisconsin, Florida and Michigan in local newsrooms over the past 20 years, working for Shaw Media, Hearst and several other companies. Follow Jon on Twitter @JonStyf.

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