Tennessee Tax Issue of the Year and Year in Review

State & Local Tax Alert: Tennessee Edition


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The Tennessee state and local tax year would not be complete without the obligatory year-end summary, which reflects on the Tennessee tax developments from the past year and unveils the “Tennessee Tax Issue of the Year.”

This year there were numerous Tennessee tax issues that were in the spotlight, including:

  1. The Multistate Tax Commission’s successful effort to participate as co-counsel (pro hac vice) in a Tennessee tax dispute involving Pfizer;
  2. Scholastic Book Club’s valiant fight to defeat a nexus claim asserted by Tennessee (including a petition for certiorari to the United States Supreme Court);
  3. Three trial court decisions involving the interpretation of Tennessee’s tax on “telecommunications services;”
  4. A Tennessee letter ruling that broadly interpreted the scope of the digital download tax to include online services that allow users to access information which only nominally include “digital books”;
  5. Legislation that passed, repealing the Tennessee gift tax and adopting a phase-out of the Tennessee inheritance tax; and
  6. Online travel companies prevailing in federal court on the application of local Tennessee hotel occupancy taxes to online travel companies.

So many Tennessee tax issues to choose from, but there can only be one “Tennessee Tax Issue of the Year.” So move over LeBron James(Sports Illustrated’s 2012 Sportsman of the Year) and President Obama (Time magazine’s 2012 Person of the Year), the Tennessee Tax Issue of the Year is …

The state’s passage of legislation that will require companies to file an application with the Tennessee Commissioner of Revenue to seek pre-approval to deduct intangible expenses paid to affiliates.

This approach, as detailed in linked materials, was an unprecedented effort by Tennessee to address perceived abuses by companies with affiliates that manage intangibles. So congratulations to the Tennessee Department of Revenue and its Intangible Expense Deduction Legislation for being the “Tennessee Tax Issue of the Year.”

The following is a list of Tennessee tax articles that the attorneys of Bradley Arant Boult Cummings published in 2012.

Next year should present a similar list of worthy candidates with several cost-of-performance cases that will likely be decided, potential fights brewing in the state legislature over the property tax treatment of solar property, the scope of Tennessee’s locally-imposed business tax, and appeals involving the sales tax and business tax treatment of Internet access.

Happy New Year from the State And Local Tax Team at Bradley Arant Boult Cummings!