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 5 - COLLECTION AND ENFORCEMENT GENERALLY (§§ 67-6-501 — 67-6-541) › Section 67-6-507 - Credits to dealers - Credits to prevent multistate taxations - Credits for resale of telecommunication services

(a)
This chapter does not apply with respect to the use, consumption, distribution or storage of tangible personal property, computer software, or computer software maintenance contracts for use or consumption in this state, upon which a like tax equal to or greater than the amount imposed by this chapter has been paid in another state, the proof of payment of such tax to be according to rules and regulations made by the commissioner. If the amount of tax paid in another state is not equal to or greater than the amount of tax imposed by this chapter, then the dealer shall pay to the commissioner an amount sufficient to make the tax paid in the other state and in this state equal to the amount imposed by this chapter.
(b)
If the dealer can show by reasonable proof that the dealer has paid any Tennessee sales or use tax to a vendor on personal property or taxable service that such dealer has subsequently sold without collecting tax on the resale of the personal property or taxable service, then the dealer shall be given credit for any such payment in computing any liability to the department for sales or use tax. Reasonable proof can be supplied by invoices and other records that the dealer may obtain from the vendors from which the dealer has made purchases.
(c)
In the event purchases are returned to the dealer by the purchaser or consumer after the tax imposed by this chapter has been collected, or charged to the account of the consumer or user, or, if the dealer actually refunds the purchase price and the sales tax thereon, to the purchaser or consumer for any other reason, the dealer shall be entitled to reimbursement of the amount of tax so collected or charged by the dealer, in the manner prescribed by the commissioner; and in case the tax has not been remitted by the dealer to the commissioner, the dealer may deduct the tax in submitting the dealer's return upon receipt of a signed statement of the dealer as to the gross amount of such refunds during the period covered by the signed statement, which period shall not be longer than ninety (90) days.
(d)
(1)
In the event a dealer shall sell any article of personal property on a security agreement or other title retained instrument and the dealer shall thereafter be required to repossess or enforce the dealer's lien on the article or personal property at a time when the balance due on the unpaid purchase price shall exceed five hundred dollars ($500), the dealer shall be entitled to a credit on the sales tax that the dealer shall be required to collect and remit to the commissioner, in an amount equal to the difference between the amount of the sales tax collected and paid at the time of the original purchase and the amount of sales tax that would be owed on that portion of the purchase price that has actually been paid by the purchaser, plus the sales tax on the first five hundred dollars ($500) of the unpaid balance of the purchase price. The commissioner shall issue to the dealer an official credit memorandum equal to the net amount remitted by the dealer for such tax collected. Such memorandum shall be accepted by the commissioner at full face value from the dealer to whom it is issued, in the remittance for subsequent taxes accrued under this chapter; provided, that, in cases where a dealer has retired from business and has filed a final return, a refund of tax may be made, if it can be established to the satisfaction of the commissioner that the tax was not due.
(2)
The credit authorized by subdivision (d)(1) is available to a dealer principally selling used automobiles to retail purchasers if the dealer assigns the security agreement or other title retained instrument resulting from the sale to an affiliate finance company occupying the same physical headquarters location in this state as the dealer, and if:
(A)
The dealer collects from its retail purchasers a down payment averaging not more than five percent (5%) of the total used automobile sales price;
(B)
The dealer advances from its own funds the sales tax amount on each purchase and remits that tax amount to the commissioner;
(C)
The dealer assigns one hundred percent (100%) of its security agreements or other title retained instruments solely to the affiliate finance company in exchange for consideration that includes a sum intended to reimburse the dealer for sales tax amounts remitted to the commissioner;
(D)
The dealer remains obligated to and reimburses the finance company for those amounts attributable to sales taxes that the finance company is unable to collect from the retail purchaser;
(E)
The finance company has the right to repossess or enforce any lien as to the subject automobile; and
(F)
As a precondition to the dealer utilizing the credit authorized by subdivision (d)(1), the dealer first obtains the commissioner's agreement based on information satisfactory to the commissioner that the dealer and the assignee finance company are affiliates and satisfy the other conditions of this subdivision (d)(2).
(3)
As used in this subsection (d):
(A)
"Affiliate" has the same meaning as defined in §
48-103-102
; and
(B)
"Down payment" means any payment the dealer collects in net trade-in allowance, cash, or a cash equivalent from a retail purchaser at the time of purchase or delivery of a used automobile, whether categorized as a payment, tax, fee, or otherwise.
(e)
(1)
A deduction from taxable sales shall be allowed for bad debts arising from a sale on which the tax imposed by this chapter was paid.
(2)
Any deduction taken that is attributed to bad debts shall not include interest.
(3)
For purpose of calculating the deduction, a "bad debt" is as defined in
26 U.S.C. § 166
. However, the amount calculated pursuant to
26 U.S.C. § 166
shall be adjusted to exclude: financing charges or interest, sales or use taxes charged on the purchase price, uncollectible amounts on property that remain in the possession of the seller until the full purchase price is paid, expenses incurred in attempting to collect any debt, and repossessed property.
(4)
The deduction provided for by this subsection (e) shall be deducted on the return for the period during which the bad debt is written off as uncollectible in the claimant's books and records and is eligible to be deducted for federal income tax purposes. For purposes of this subsection (e), a claimant who is not required to file federal income tax returns may deduct a bad debt on a return filed for the period in which the bad debt is written off as uncollectible in the claimant's books and records and would be eligible for a bad debt deduction for federal income tax purposes if the claimant was required to file a federal income tax return.
(5)
If a deduction is taken for a bad debt and the debt is subsequently collected in whole or in part, the tax on the amount so collected shall be paid and reported on the return filed for the period in which the collection is made.
(6)
When the amount of bad debt exceeds the amount of taxable sales for the period during which the bad debt is written off, the taxpayer may file a refund claim and receive a refund pursuant to §
67-1-1802
. The statute of limitations for filing the claim shall be measured from the due date of the return on which the bad debt could first be claimed.
(7)
Where filing responsibilities have been assumed by a certified service provider, the service provider may claim, on behalf of the seller, any bad debt allowance provided by this section; provided, that the service provider credits or refunds the full amount of any bad debt allowance or refund received to the seller.
(8)
For the purposes of reporting a payment received on a previously claimed bad debt, any payments made on a debt or account shall be applied first proportionally to the taxable price of the property or service and the sales tax thereon, and then to interest, service charges, and any other charges.
(9)
In situations where the books and records of the party claiming the bad debt allowance support an allocation of the bad debts among other states, the allocation shall be permitted.
(f)
A dealer or common carrier who has made sales or purchases subject to the reduced rate provided in part 2 of this chapter, and who is subsequently found to be liable for tax at the full rate, shall be given credit for any tax previously remitted on such sales or purchases.
(g)
A credit shall be granted in the manner provided under subsection (a) for sales tax properly paid to other states on interstate telecommunication charges also taxed by this state, unless the charge is made to a service address in Tennessee.
(h)
(1)
A hotel, motel, college, university or hospital may take as a credit against any liability to the department for sales or use tax, that amount of sales tax paid to a vendor of telecommunication services, when such hotel, motel, college, university or hospital has subsequently resold such service and collected the sales tax thereon.
(2)
The credit shall be limited to tax paid on the portion of telecommunication services resold.
(3)
The credit may only be taken if such hotel, motel, college, university or hospital maintains accurate records that show the portion of telecommunication services used and the portion resold.
(i)
There shall be a credit of one hundred percent (100%) of the sales or use tax paid with respect to purchases of equipment by automobile body paint shops in order to comply with emission control standards imposed by governmental agencies. Applicants shall provide proof as required by the commissioner that the equipment was necessary in order to comply with emission control standards imposed by federal, state or local regulation.
(j)
There shall be a credit of fifty percent (50%) of the sales or use tax paid with respect to purchases of replacement equipment, as determined by the commissioner, when such equipment is purchased by dry cleaners in order to comply with emission control standards imposed by governmental agencies. Applicants shall provide proof as required by the commissioner that the equipment was necessary in order to comply with emission control standards imposed by federal, state or local regulation.
Amended by 2023 Tenn. Acts, ch. 467, s 1, eff. 7/1/2023.
Acts 1947, ch. 3, §§ 4, 8, 13; C. Supp. 1950, §§ 1248.57, 1248.67, 1248.82 (Williams, §§ 1328.25, 1328.30, 1328.35); Acts 1957, ch. 63, § 1; 1965, ch. 285, § 1; 1965, ch. 358, § 1; 1967, ch. 117, § 2; 1974, ch. 798, § 1; 1983, ch. 46, § 1; T.C.A. (orig. ed.), §§ 67-3008, 67-3028, 67-3029; Acts 1984 (Ex. Sess.), ch. 13, § 6; 1984, ch. 581, § 1; 1985, ch. 423, §§ 1, 2; 1987, ch. 428, § 5; 1989, ch. 312, § 8; 1989, ch. 430, § 6; 1990, ch. 1088, § 1; 1991, ch. 38, § 1; 1992, ch. 873, §§ 1, 2; 1993, ch. 68, § 3; 1995, ch. 37, §§ 1, 2; 2003 , ch. 357, § 59; 2004, ch. 959, § 68; 2005, ch. 311, § 1; 2007 , ch. 602, §§ 51, 107; 2011 , ch. 467, § 6.