Tennessee State Agency Says It’s Not Possible To Track Impact Of Broadband Sales Tax Exemption

Photo: The Tennessee House of Representatives on the first day of the 2024 legislative session. Photo Credit: John Partipilo

By Adam Friedman [Tennessee Lookout -CC BY-NC-ND 4.0] –

Tennessee has no way of knowing if a $31 million and counting sales tax exemption for broadband companies is working as intended, the state’s intergovernmental relations agency told lawmakers in a memo filed last week. 

The exemption — first reported in detail by the Lookout last year and passed unanimously by state lawmakers in 2022 — gives broadband companies a three-year sales tax exemption for purchasing high-speed internet network equipment.

The tax cut will likely benefit some of the largest businesses in the state, such as AT&T and Comcast. AT&T has been the top political spender in Tennessee since 2009, according to a database maintained by the Lookout.  

Former Federal Communications Commission official Blair Levin told the Lookout last year that lawmakers would ideally analyze the effectiveness of the tax exemption, whom it benefited and whether it is worth it. 

The Tennessee Advisory Commission on Intergovernmental Relations (TACIR) said in an update on broadband internet access that there were no conditions or reporting requirements as part of the exemption, making it impossible track its effectiveness. 

“No state agency is monitoring whether they have resulted in coverage expansions or whether the savings to providers resulting from these exemptions have been reinvested in Tennessee,” TACIR executive director Cliff Lippard wrote in his memo. 

State lawmakers passed the exemption as part of the 2022 Tennessee Broadband Maximization Act, which came as the federal government was poised to give Tennessee $650 million to pay for more broadband expansion. 

The act’s goal was to exempt these funds from state sales taxes. But the broad nature of the exemption meant companies could use it to purchase equipment to improve their already existing network in large cities like Nashville, Memphis, and Chattanooga, not just expand it into underserved communities. 

Original estimates put the exemption at potentially costing the state $204 million, but through 18 months, the exemptions claimed have been around $31 million, according to the Tennessee Department of Revenue. 

Kermit Moore, a member of Tennessee For All, a coalition formed to oppose tax breaks for large corporations, said it’s not surprising that Tennessee passed a tax cut without monitoring how it works.

“Once again, Tennessee proves that it’s a great state for corporations and not for working people,” Moore said in an email response.

Tennessee ranks middle of the pack in broadband access

TACIR’s memo came as result of a request by Rep. Patsy Hazlewood, R-Signal Mountain, for an update on broadband access, the effectiveness of the recent tax exemption and the state’s grant incentive program that started in 2017.

The grant program’s goal was to bring higher internet speeds to 179,100 households in the state. Roughly 98,460 of these households have received connections so far, with more than two-thirds of those coming because of federal dollars as part of the 2021 federal Bipartisan Infrastructure Law.

The only Tennessee federal delegation members to vote for the legislation were Democrats U.S. Reps. Steve Cohen, Memphis, and Jim Cooper, Nashville. 

Overall, FCC data shows 94% of Tennessee households have access to higher internet speeds, ranking 31 among all states, the TACIR report found. 

TACIR’s Memo can be viewed HERE.