State Takes Control of Local Gross Receipts Business Tax
More Control by State – Higher Taxes for Taxpayers
During this Legislative session, some State agencies were busy pushing for laws to takeover more local city and county taxing functions. These new laws will eventually, and in many cases immediately, mean higher taxes for all State taxpayers.
Takeover – Gross Receipts Business Tax
The Tennessee Department of Revenue was successful in including a major tax law change in the Governor’s Technical Corrections Bill.
Governor Phil
Omnibus Public Chapter 530 consists of 52 pages and 132 sections of tax law changes.
A review by our attorneys indicate that Section 92 of the Public Chapter 530 requires changes with respect to the filing of returns, computing tax amounts, and the method for payment of the gross receipts business taxes.
Following is how our attorneys see the effects of the new taxing procedures.
1. All business tax returns must be filed with, and all taxes must be paid to, the Department of Revenue.
Previously all business tax returns were filed with, and all taxes were paid to, the local governments. Then the local governments sent the State its portion of the taxes.
True, the State receives a share of the taxes and will return the local governments’ portion. However, the local governments receive the major portion of the taxes and have always retained control of the process.
We feel it is wrong to take away local taxpayers’ contact with the local officials they elected to administer the taxes.
In addition, these local government officials (usually County Court Clerks) are being paid to administer and collect these taxes.
We don’t see any evidence of a planned tax reduction due to the lower costs of local government.
2. The deduction allowance against the business tax for the amount of personal property taxes paid is now reduced to no more than 50% of the total taxes paid to the local government and the State.
Prior to the change, the taxpayer could deduct the amount of paid personal property taxes up to 100% of the business taxes.
This decrease in allowance is an obvious hidden tax increase for the taxpayers. For some taxpayers, the increase will be substantial.
The new law goes on by making clear some unfair practices that the State claims are existing practices.
3. It provides that the local governments receive the first 5% of the revenues and then the remainder is split 57% to the local governments and 43% to the State.
Not much change here. The percentages work out close to the previous percentages.
4. The Department of Revenue also has the right to audit business taxpayer returns and the State gets to keep 100% of any funds recovered from the taxpayers.
This provision is clearly unjust to the local governments and the taxpayers who support them.
The local governments and taxpayers are completely denied receiving their proper share of these recovered tax funds.
5. The law further requires that businesses which are also located within a municipality, must pay the gross receipts business tax not only to the county but also must pay the same amount again to the municipality.
In addition, the State is to receive 43% of the extra tax paid to the municipality.
Wait a minute!
Did we just notice that the business taxpayer pays the taxes once to the county and then if located within a municipality, must pay the same tax amount again to the municipality?
That’s right.
However, what is not right is for the State to receive another 43% per cent of the tax paid to the municipality.
Although not a new practice, it is made clear from the new law that if a business is located inside a city, the business must pay the State its 43% twice for the privilege of doing business in the State.
Isn’t that double taxation?
Our attorneys think it is.
The State Attorney General thinks it is too, but also thinks that it is legal double taxation.
Nevertheless, the business tax is a privilege tax for doing business in the State.
Regardless of the legalities of the issue, we feel it is unfair for the State to be paid twice by one business in one location.
There you have it:
One more example of growing government control and taxes.
It is amazing that State and local governmental agencies are still able to write new tax laws and have many of them approved by the Legislature without opposition.
Help TTA oppose these expansions of government and hidden tax increases. Join and support!
copyright – Tennessee Taxpayers Association – October 15, 2009
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