2023 Tennessee Code › Title 67 - TAXES AND LICENSES (§§ 67-1-101 — 67-10-107) › Chapter 4 - PRIVILEGE AND EXCISE TAXES (§§ 67-4-101 — 67-4-3206) › Part 7 - BUSINESS TAX ACT (§§ 67-4-701 — 67-4-730) › Section 67-4-702 - Part definitions

(a)
As used in this part, unless the context otherwise requires:
(1)
"Affiliated business entity" means a business entity:
(A)
In which the taxpayer, directly or indirectly, has more than fifty percent (50%) ownership interest;
(B)
That, directly or indirectly, has more than fifty percent (50%) ownership interest in the taxpayer; or
(C)
In which a person described in subdivision (a)(1)(B) directly or indirectly has more than fifty percent (50%) ownership interest. For purposes of this subdivision (a)(1)(C), a noncorporate entity is more than fifty-percent owned if upon liquidation more than fifty percent (50%) of the assets of the noncorporate entity directly or indirectly accrue to the entity having the ownership interest;
(2)
"Business" includes any activity engaged in by any person, or caused to be engaged in by the person, with the object of gain, benefit, or advantage, either direct or indirect. "Business" does not include occasional and isolated sales or transactions by a person not routinely engaged in business. "Business" does not include an individual property owner who utilizes a property management company to manage a vacation lodging for overnight rentals; provided, however, that "business" shall include any other activity of such individual property owner that is subject to any tax levied by this part;
(3)
"Commissioner" means the commissioner of revenue or the commissioner's duly authorized assistants, except as otherwise provided in this part;
(4)
"Department" means the department of revenue, except as otherwise provided in this part;
(5)
"Dominant business activity" means the business activity that is the major and principal source of taxable gross sales of the business;
(6)
"Fabricating or processing tangible personal property for resale" includes only tangible personal property that is fabricated or processed for ultimate use or consumption off the premises of the one engaging in such fabricating or processing;
(7)
"Gross sales" means the sum total of all sales under this part as defined in this section, without any deduction whatsoever of any kind or character, except as provided in this part;
(8)
"Individual property owner" means a person who owns a vacation lodging;
(9)
"Inventories of merchandise held for sale or exchange" includes tangible personal property held by a merchant or business for lease or rental, but does not include such property in the possession of a lessee;
(10)
"Lease or rental" means the leasing or renting of tangible personal property and the possession or use of the property by the lessee or renter for a consideration, without transfer of the title of such property;
(11)
"Natural gas marketer" means any business that is not regulated as to rates and services by the Tennessee public utility commission; that provides natural gas to customers located within this state through the procurement and shipping or transportation of such natural gas, and any ancillary services thereto; and that is required by the Federal Energy Regulatory Commission to take title to the natural gas, pursuant to Federal Energy Regulatory Commission Order No. 636-A, 57 Fed. Reg. 36128 (1992), in connection with the sale of such gas to its customers;
(12)
"Overnight rentals" means rental of a vacation lodging to one (1) or more individuals for temporary human lodging not to exceed a period of one hundred eighty (180) consecutive days; provided, however, that a tenancy or lease to an individual who has no other place of residence or abode during the lease period to which such individual may return after the lease terminates is not "overnight rentals";
(13)
"Person" includes any individual, firm, partnership, joint venture, association, corporation, estate, trust, business trust, receiver, syndicate, or other group or combination acting as a unit, and the plural as well as the singular number;
(14)
"Property management company" means a person who, for consideration, manages a vacation lodging for an individual property owner that provides such lodging for a rental fee to consumers;
(15)
"Resale" means a subsequent, bona fide sale of the property, services or taxable item by the purchaser. "Sale for resale" means the sale of the property, services, or taxable item intended for subsequent resale by the purchaser. Any sales for resale shall, however, be in strict compliance with rules and regulations promulgated by the commissioner. Sales of tangible personal property or taxable services made by a dealer to an out-of-state vendor who directs that the dealer act as the out-of-state vendor's agent to deliver or ship tangible personal property or taxable services to the out-of-state vendor's customer, who is a user or consumer, are sales for resale;
(16)
"Retail sale" or "sale at retail" means any sale other than a wholesale sale;
(17)
"Retailer" means any person primarily engaged in the business of making retail sales. For purposes of this subdivision (a)(17), "primarily" means that at least fifty percent (50%) of the taxable gross sales of the business are retail sales;
(18)
(A)
(i)
"Sale" means any transfer of title or possession, or both, exchange, barter, lease or rental, conditional or otherwise, in any manner or by any means whatsoever of tangible personal property for a consideration, and includes the fabrication of tangible personal property for consumers who furnish, either directly or indirectly, the materials used in fabrication work, and the furnishing, repairing or servicing for a consideration of any tangible personal property consumed on the premises of the person furnishing, preparing or serving such tangible personal property;
(ii)
A transaction whereby the possession of property is transferred but the seller retains title as security for the payment of the price is deemed a sale;
(iii)
"Sale" includes the furnishing of any of the things or services taxable under this part;
(B)
"Sale" does not include the transfer of tangible personal property from a wholesaler to another wholesaler or from a retailer to another retailer where the amount paid by the transferee to the transferor does not exceed the transferor's cost including freight in and storage costs, and transportation costs incurred in the transfer from the transferor to the transferee;
(19)
"Sales price" means the total amount for which tangible personal property or services rendered is sold, including any services that are a part of the sale, valued in money, whether paid in money or otherwise, and includes any amount for which credit is given to the purchaser by the seller, without any deduction from the price on account of the cost of the property sold, the cost of materials used, labor or service cost, losses, or any other expense whatsoever; provided, that "sales price" does not include any additional consideration given by the purchaser for the privilege of making deferred payments, regardless of whether such additional consideration shall be known as interest, time price differential on conditional sales contracts, carrying charges or any other name by which it shall be known, and does not include any additional consideration received by a motor vehicle dealer from a lender for the sale or assignment to the lender of a chattel lease or conditional sales contract. "Sales price" for services rendered by a person for an affiliated business entity does not include any amount that is accounted for as a reasonable allocation of cost incurred in providing the service. "Sales price" does not include any advertising cost paid by a seller to an auctioneer for the purpose of advertising an auction, when no portion of such payment is retained as profit by the auctioneer, and when such payment has been placed in an escrow or a trust account by the auctioneers on behalf of the seller;
(20)
(A)
"Seller" means every consignee, bailee, factor or auctioneer having either actual or constructive possession of tangible personal property, or having possession of the documents of title to tangible personal property, with power to sell such tangible personal property in the consignee's, bailee's, factor's or auctioneer's own name and actually so selling, is deemed the seller of such tangible personal property within the meaning of this part; and further, the consignor, bailor, principal or owner is deemed the seller of such tangible personal property to the consignee, bailee, factor or auctioneer;
(B)
The burden shall be upon the taxpayer in every case to establish the fact that the taxpayer is not engaged in the business of selling tangible personal property, but is acting merely as broker or agent in promoting sales for a principal. Such claim will be allowed only when the taxpayer's accounting records are kept in such manner as the commissioner shall by regulation provide;
(21)
"Services" means and includes every activity, function or work engaged in by a person for profit or monetary gain, except as otherwise provided in this part. Services for profit or monetary gain does not include services rendered by a person for an affiliated business entity; provided, that the services are accounted for as allocations of cost incurred in providing the service without any markup whatsoever. "Services" does not include sales of tangible personal property;
(22)
(A)
"Substantial nexus in this state" means any direct or indirect connection of the taxpayer to this state such that the taxpayer can be required under the Constitution of the United States to remit the tax imposed under this part. Such connection includes, but is not limited to, any of the following:
(i)
The taxpayer is organized or commercially domiciled in this state;
(ii)
The taxpayer owns or uses its capital in this state;
(iii)
The taxpayer has systematic and continuous business activity in this state that has produced gross receipts attributable to customers in this state; or
(iv)
The taxpayer has bright-line presence in this state. A person has bright-line presence in this state for a tax period if any of the following applies:
(a)
The taxpayer's total receipts in this state during the tax period, as determined consistent with §
67-4-2012
, exceed the lesser of five hundred thousand dollars ($500,000) or twenty-five percent (25%) of the taxpayer's total receipts everywhere during the tax period;
(b)
The average value of the taxpayer's real and tangible personal property owned or rented and used in this state during the tax period, as determined consistent with §
67-4-2012
, exceeds the lesser of fifty thousand dollars ($50,000) or twenty-five percent (25%) of the average value of all the taxpayer's total real and tangible personal property; or
(c)
The total amount paid in this state during the tax period by the taxpayer for compensation, as determined consistent with §
67-4-2012
, exceeds the lesser of fifty thousand dollars ($50,000) or twenty-five percent (25%) of the total compensation paid by the taxpayer;
(B)
Notwithstanding subdivision (a)(22)(A), no company that is treated as a foreign corporation under the Internal Revenue Code and that has no income effectively connected with a United States trade or business shall be considered to have a "substantial nexus in this state." For these purposes, whether a company has income effectively connected with a United States trade or business shall be determined in accordance with the Internal Revenue Code;
(23)
"Tangible personal property" means and includes personal property that may be seen, weighed, measured, felt or touched, or is in any other manner perceptible to the senses. "Tangible personal property" does not include stocks, bonds, notes, insurance or other obligations or securities, nor does it include any materials, substances or other items of any nature inserted or affixed to the human body by duly licensed physicians or dentists or otherwise dispensed by them in the treatment of patients;
(24)
"Transient vendor" means any person who brings into temporary premises and exhibits stocks of merchandise to the public for the purpose of selling or offering to sell the merchandise to the public. "Transient vendor" does not include any person selling goods by sample, brochure or sales catalog for future delivery; or to sales resulting from the prior invitation to the seller by the owner or occupant of a residence. For purposes of this definition, "merchandise" means any consumer item that is or is represented to be new or not previously owned by a consumer, and "temporary premises" means any public or quasi-public place, including a hotel, rooming house, storeroom, building or part of a building, tent, vacant lot, railroad car or motor vehicle that is temporarily occupied for the purpose of exhibiting stocks of merchandise to the public. Premises are not temporary if the same person has conducted business at those premises for more than six (6) consecutive months or has occupied the premises as the person's permanent residence for more than six (6) consecutive months;
(25)
"Vacation lodging" means real property, other than the primary and regular residence or abode of an individual property owner, that is utilized, or can be utilized, for overnight rentals in the absence of the individual property owner;
(26)
(A)
"Wholesale sale" or "sale at wholesale" means any sale to a retailer for resale;
(B)
"Wholesale sale" or "sale at wholesale" includes the sale of industrial materials for future processing, manufacture or conversion into articles of tangible personal property for resale where the industrial materials become a component part of the finished product. This subdivision (a)(26)(B) shall not apply to raw or unprocessed agricultural products;
(C)
"Wholesale sale" or "sale at wholesale" includes the sale by a wholesaler of tangible personal property to the state of Tennessee or any county or municipality or subdivision thereof, or the sale to any religious, educational or charitable institution as defined in §
67-6-322
; and
(D)
"Wholesale sale" or "sale at wholesale" includes the sale by a franchised motor vehicle dealer to a manufacturer or distributor of motor vehicles or an obligor under an extended service contract of parts or repair services, or both, necessary for repairs performed by the dealer under the manufacturer's, distributor's or obligor's warranty, and also includes predelivery inspection charges paid to a franchised motor vehicle dealer by a manufacturer or distributor of the motor vehicle; and
(27)
"Wholesaler" means any person primarily engaged in the business of making wholesale sales. For purposes of this subdivision (a)(26), "primarily" means that more than fifty percent (50%) of the taxable gross sales of the business are wholesale sales.
(b)
In any county where a metropolitan government prevails, the general services district constitutes the county and the urban services district, as well as any incorporated towns therein, constitutes the municipalities insofar as this part is concerned.
Amended by 2015 Tenn. Acts, ch. 514, s 3, eff. 1/1/2016.
Amended by 2014 Tenn. Acts, ch. 942,s 1, eff. 7/1/2014.
Acts 1971, ch. 387, §§ 2, 4, 22; 1972, ch. 850, §§ 2, 4; 1982, ch. 844, § 1; 1983, ch. 386, § 7; 1983, ch. 466, §§ 3-7; T.C.A., §§ 67-5802, 67-5804, 67-5821; Acts 1984, ch. 563, § 1; 1986, ch. 699, § 1; 1988, ch. 726, § 1; 1988, ch. 941, §§ 1, 3; 1990, ch. 1075, §§ 4, 5; 2000, ch. 920, § 1; 2001, ch. 224, §§ 1, 2; 2001, ch. 386, § 1; 2004, ch. 592, §§ 11, 12; 2004, ch. 924, §§ 8, 15; 2009 , ch. 530, § 69.