2023 Tennessee Code › Title 67 - TAXES AND LICENSES (§§ 67-1-101 — 67-10-107) › Chapter 6 - SALES AND USE TAXES (§§ 67-6-101 — 67-6-907) › Part 2 - TAXES IMPOSED (§§ 67-6-201 — 67-6-235) › Section 67-6-221 - Tax imposed on interstate or international telecommunications services sold to businesses - Privilege tax imposed on modern market telecommunications providers - Penalty

(a)
Notwithstanding any other provision of the law to the contrary, interstate or international telecommunication services sold to businesses shall be subject to a tax imposed at the rate of seven and one-half percent (7.5%).
(b)
The revenue from a rate equal to one-half percent (0.5%) of the tax shall be deposited in the general fund. The remainder of the revenue generated from the tax imposed by subsection (a) shall be distributed to municipalities and counties in accordance with subsection (c) to mitigate the impact on local governments as the result of assessing the operating property of modern market telecommunications providers as commercial and industrial property rather than as public utility property. The department of revenue shall hold all such revenue until it is first distributed to the local governments on March 20, 2018, or as soon thereafter as possible, to allow sufficient time to determine the correct distribution of revenue under subsection (c).
(c)
On or before January 1, 2018, the office of state assessed properties in the office of the comptroller of the treasury shall calculate, for each local government levying an ad valorem property tax, the difference in property tax revenue or comparable in lieu of tax payments received for tax year 2017 that results from assessing the operating property of modern market telecommunications providers as commercial and industrial property rather than as public utility property. These calculations shall be used to calculate each local government's percentage share of the total reduction in such revenue for tax year 2017 and these percentages shall be forwarded to the department of revenue by January 1, 2018. For all periods beginning on or after June 1, 2017, the department shall distribute the revenue generated from the tax imposed under subsection (a), other than the revenue earmarked for the general fund under subsection (b), to the local governments in proportion to each local government's percentage share of the total difference in property tax and in lieu of tax revenue for tax year 2017, as reported to the department by the office of state assessed properties pursuant to this subsection (c).
(d)
(1)
Beginning January 1, 2018, notwithstanding any law to the contrary, every modern market telecommunications provider shall pay an annual privilege tax for the privilege of competing with public utilities to provide telecommunications services in this state.
(2)
Except as otherwise provided in subdivision (d)(3), the amount of tax imposed under this subsection (d) shall be equal to the sum of:
(A)
The taxpayer's pro rata share percentage multiplied, as applicable, by:
(i)
Four million dollars ($4,000,000), for the tax imposed in 2018;
(ii)
Three million dollars ($3,000,000), for the tax imposed in 2019;
(iii)
Two million dollars ($2,000,000), for the tax imposed in 2020;
(iv)
One million dollars ($1,000,000), for the tax imposed in 2021; and
(v)
Zero dollars ($0.00), for the tax imposed in 2022; and
(B)
The taxpayer's pro rata share percentage multiplied, as applicable, by:
(i)
Seven hundred fifty thousand dollars ($750,000), for the tax imposed in 2018, 2019, and 2020; and
(ii)
Five hundred thousand dollars ($500,000), for the tax imposed in 2021 and 2022.
(3)
The total privilege tax imposed on a taxpayer under this subsection (d) shall not exceed the difference between:
(A)
The aggregate ad valorem taxes and in lieu of tax payments paid by such taxpayer to political subdivisions of this state during the prior tax year; and
(B)
The net amount of ad valorem tax and in lieu of tax payments such taxpayer would have paid in the prior tax year had its operating property been classified as public utility property, less the amount of the most recent payment such taxpayer received under §
67-6-222(b)
.
(4)
Any taxpayer claiming that subdivision (d)(3) applies to limit its privilege tax liability for a particular tax year shall notify the department of revenue of such claim in the manner prescribed by the department and must prove by clear and convincing evidence that such limitation applies.
(5)
The privilege tax shall be reported and paid annually to the department of revenue on or before April 20 of each year in the manner prescribed by the department. On or before March 1, 2018, the department shall coordinate with the office of state assessed properties in the office of the comptroller of the treasury to calculate the pro rata share percentage of each taxpayer subject to the privilege tax imposed by this subsection (d) and shall send notice to each such taxpayer providing the taxpayer with its pro rata share percentage and prescribing the manner in which the taxpayer must report and pay the privilege tax imposed by this subsection (d).
(6)
Notwithstanding any law to the contrary, all moneys received by the department of revenue under this subsection (d) shall be distributed in the following manner:
(A)
The revenue from the portion of the tax calculated under subdivision (d)(2)(A) shall be deposited in the general fund; and
(B)
The revenue from the portion of the tax calculated under subdivision (d)(2)(B) shall be distributed to the local governments in the same proportion that revenue is distributed to local governments under subsection (c).
(7)
Any moneys received from a taxpayer that prove by clear and convincing evidence that the limit set forth in subdivision (d)(3) applies for a particular tax year shall be deposited in the general fund and distributed to the local governments in the same relative proportion as those moneys would have been deposited in the general fund under subdivision (d)(6)(A) and distributed to the local governments under subdivision (d)(6)(B) in the same tax year if the limitation on privilege tax liability had not applied.
(8)
This subsection (d) shall be repealed on December 31, 2022. No privilege tax shall be levied under this subsection (d) after December 31, 2022. This subdivision (d)(8) shall not absolve any taxpayer of liability for any tax levied under this subsection (d) prior to December 31, 2022.
(9)
This subsection (d) shall not apply to a municipal or similar provider of broadband services that makes in lieu of tax payments pursuant to title 7, chapter 52, part 4 or 6, or that makes similar in lieu of tax payments pursuant to a private act.
(e)
When any person fails to correctly report on a return the person's sales of interstate or international telecommunications services subject to tax under subsection (a), there shall be imposed a penalty in the amount of ten percent (10%) of the taxes due on such sales or twenty-five percent (25%) of the taxes due on such sales if the commissioner determines that the failure to correctly report such sales is the result of gross negligence. The commissioner may waive such penalty, in whole or in part, if the commissioner determines that the failure is not due to gross negligence, intentional disregard for any tax law or rule promulgated under this title, or fraud.
(f)
As used in this section:
(1)
"Modern market telecommunications provider" means a modern market telecommunications provider, as defined in §
67-5-501
, that was operating within the state as of January 1, 2017, and that received an ad valorem tax equity payment under §
67-6-222(b)
in at least one (1) of the three (3) years prior to January 1, 2017; and
(2)
"Pro rata share percentage" means a taxpayer's pro rata share of the total assessed value of all operating property used by modern market telecommunications providers in the state during tax year 2017.
Amended by 2021 Tenn. Acts, ch. 285, s 2, eff. 4/30/2021.
Amended by 2019 Tenn. Acts, ch. 157, s 1, eff. 4/23/2019.
Amended by 2017 Tenn. Acts, ch. 490, s 12, eff. 6/6/2017.
Acts 1989, ch. 312, § 10; 1992, ch. 529, § 5; 1993, ch. 190, §§ 1, 2; 1999, ch. 413, § 4; 2001, ch. 195, § 1; 2003, ch. 357, § 33; 2004, ch. 592, § 10; 2004, ch. 782, § 9; 2004, ch. 959, § 68; 2005, ch. 311, § 1; 2005, ch. 500, § 9.