Deadline Extensions Possible for Expanded Retail Accountability Program
State & Local Tax Alert: Tennessee Edition
The rollout of the newly expanded Tennessee Retail Accountability Program is meeting with some opposition as the first reporting deadline under the 2015 changes in the program approaches. In response to these concerns, the Department of Revenue recently issued guidance notifying wholesalers and manufacturers that additional time submitting reports beyond the November deadline can be requested to begin.
The General Assembly passed legislation in 2015 expanding the reach of the Retail Accountability Program and granting the Commissioner of Revenue broad discretion to designate other types of tangible personal property sold to Tennessee retailers as subject to the informational reporting requirements under the statute. Previously, this reporting requirement only applied to wholesalers making sales of beer and tobacco products to retailers.
Quickly exercising the authority granted by the 2015 amendment, the Commissioner issued a notice on June 30, 2015 for the “Retail Accountability Program – Changes and Guidance” (June 30 Notice). Through this June 30 Notice, the Commissioner significantly expanded the program in two ways: (1) it increased the types of products to which the information reporting requirements apply; and (2) it indirectly expanded the types of sellers who are now subject to the informational reporting requirements to include food wholesalers/distributors, automotive product wholesalers/distributors, and others. Under the Commissioner’s June 30 Notice, all persons (i) who make sales for resale of $12,000 or more per year and (ii) who sell items in the categories listed below to retailers that sell beer and tobacco products (iii) are required to file electronically information reports with the Department on a monthly basis detailing sales of the following products:
• Alternative Snacks
• Automotive Products
• Cigarettes & Other Tobacco Products
• Cold Dispensed Beverages
• Commissary & Other Packaged Products
• Edible Grocery
• Fluid Milk
• Foodservice Prepared On-Site
• Frozen Dispensed Beverages
• Frozen Foods
• Health and Beauty Care
• Hot Dispensed Beverages
• Ice Cream/Novelties
• Non-Edible Grocery
• Other Dairy and Deli
• Packaged Beverages
• Packaged Bread
• Packaged Sweet Snacks
• Perishable Grocery
• Salty Snacks
The information reporting requirements for the expanded categories of products, which apply to new wholesalers, distributors, and others, became effective October 1, 2015. Information reports for the month of October are due on November 25, 2015.
Based on the significant expansion of the program, industry groups and wholesalers have contacted the Department to voice concerns over the implementation of the new reporting requirements. Of particular concern is the specified reporting format, as well as the Department’s expanded application of the program to a much broader group of wholesalers, distributors, and manufacturers of the products listed.
Notwithstanding the Department’s specified reporting format as contained in its notices, we note that the statute expressly provides as follows:
[N]o seller shall be required to change its record-keeping system for purposes of this section. If the seller’s records do not include all of the information requested by the commissioner or include the information in a different format than requested by the commissioner, the requirements of this section shall be satisfied if the seller includes in the report all of the requested information that the seller does have, in the format in which the seller ordinarily maintains such information.
Tenn. Code Ann. § 67-6-410(d). Thus, subsection (d) allows for alternative reporting formats consistent with the format ordinarily used by the seller to maintain sales information.
“Notice to Wholesalers and Manufacturers,” October 8, 2015
In response to the concerns received by the Department, it issued a notice to wholesalers and manufacturers dated October 8, 2015 (October 8 Notice). The October 8 Notice provides that if a wholesaler/manufacturer does not use “NACS” (National Association of Convenience Stores) codes, the Department will accept “UPC” (Universal Product Code) codes. The notice further provides that if the wholesaler/manufacturer does not use either NACS or UPC codes, it may contact the Department to discuss alternative reporting.
The notice further acknowledges that although the first report for October 2015 period is due November 25, 2015, new wholesalers, distributors and manufacturers may need additional time to program their systems to create monthly reports, and such additional time may be requested by contacting the Department at firstname.lastname@example.org. Additional information about the program is posted on the Department’s website at http://www.tn.gov/revenue/article/retail-accountability-program.
Wholesalers, distributors, and manufacturers subject to the newly expanded reporting requirements should consider requesting additional time to comply with the program. In addition, wholesalers need not change their record-keeping systems for purposes of complying with the reporting format specified by the Department in its notices.
Bradley Arant’s State and Local Tax Group will continue to monitor this issue for further developments.