Spotlight on Tennessee: After Wayfair, Sales and Use Tax Compliance for Tennessee E-Commerce

by Baker Donelson

Baker Donelson

The U.S. Supreme Court's decision in South Dakota vs. Wayfair, Inc. et al. represents a significant change in the sales tax collection and remitting responsibilities of all businesses, large and small, selling at retail across state lines by means of e-commerce. Baker Donelson published a first look at this landmark decision on June 26. On July 9, we began providing state-specific compliance analysis in light of the Wayfair decision. This alert continues our state-specific analysis of the Wayfair decision by addressing the current status of sales tax e-commerce compliance in Tennessee.

Revenue Department Considering Options

As explained in greater detail below, the Tennessee Department of Revenue (TN DOR) adopted an administrative rule with the intent beginning in 2017 to require sales tax collection from certain e-commerce dealers who do not have a physical presence in Tennessee. Despite this, the TN DOR has been prevented from enforcing that administrative rule so as to require collection and remittance of tax by e-commerce sellers because of a court order and subsequent legislative action. Based on informal discussions with senior officials in the TN DOR, it is apparent that the TN DOR is considering its options for purposes of enforcing that rule at some point. At present, it also appears that the TN DOR does not intend to impose any retroactive tax obligations on dealers who lack physical presence in Tennessee under the standards in effect prior to the Wayfair decision and will only require collection prospectively once the TN DOR's authority to enforce such rule has been renewed.

Statutory Background

In 1988, Tennessee enacted an amendment to the definition of "dealer" which sought to expand Tennessee's sales or use taxing jurisdiction to include certain remote sellers (that is, sellers with no physical presence in the State) taking advantage of Tennessee's economy. That statutory enactment, currently found at Tennessee Code Annotated, Section 67-6-102 (23) (J), defines "dealer" to include every person who "(e)ngages in the regular or systematic solicitation of a consumer market in this state by the distribution of catalogues, periodicals, advertisements fliers, or other advertising, or by means by print, radio or television media, by telegraphy, telephone, computer data base, cable, optic, microwave, or other communication system." When that statutory enactment became effective January 1, 1989, it was met with resistance from remote sellers. They relied on the 1967 decision by the U.S. Supreme Court in National Bellas Hess, Inc. v. Department of Revenue of Ill. and the Court's subsequent 1992 decision in Quill Corp. v. North Dakota – both of which stood for the proposition that the 'substantial nexus' requirement for validly imposing a tax under the Commerce Clause of U.S. Constitution necessarily required that the remote seller have physical presence within the taxing state.

Fast forward two decades to the Supreme Court's 2015 decision in Direct Marketing Association v. Colorado Department. In that decision, Justice Kennedy concurred with the majority that upheld Colorado's notice requirement, but he also invited a reexamination of both Quill and Bellas Hess. Among the reasons for such invitation, Justice Kennedy cited the dramatic intervening and far-reaching systematic and structural changes in the U.S. economy brought about by the Internet.

Rule 129(2)

Following up on that invitation, and in the wake of enforcement activities by various other states such as South Dakota and Alabama, the TN DOR in October 2016 filed with the Tennessee Secretary of State proposed Sales and Use Tax Rule 1320-05-01-.129. Subparagraph (1) of that Rule sought to address the Tennessee sales or use tax compliance requirements with respect to out-of-state dealers having a physical presence in the state. Subparagraph (2) of the Rule (herein 'Rule 129(2)') sought to address those compliance requirements applicable to remote sellers without a physical presence in the State.

Rule 129(2) provides that remote sellers with no physical presence in Tennessee who engage in regular systematic solicitation of consumers in Tennessee and who make sales exceeding $500,000 to consumers in the State during the previous 12-month period shall be considered as having "substantial nexus" with Tennessee for sales or use tax collection remittance purposes. Rule 129(2) also provided that by March 1, 2017 those remote sellers meeting such threshold shall register with the TN DOR for sales or use tax purposes and thereafter, beginning July 1, 2017, start collecting and remitting such taxes to the TN DOR. For remote sellers who meet the sales volume threshold after March 1, 2017, those remote sellers are required by Rule 129(2) to register with the TN DOR and begin to collect and remit sales and use taxes by the first day of the third calendar month following the month in which the remote seller met such threshold.

In testimony before the Tennessee Joint Government Operations Committee in December 2016, and as part of the Legislative review of proposed Rule 129(2), the TN DOR advised the Committee that the authority to require remote sellers to collect and remit such tax stems from the 1988 enactment found at Tennessee Code Annotated, Section 67-6-102(23)(J).

Intervening Litigation/ Legislation

The promulgation of Rule 129(2) was almost immediately met with litigation. Suit was filed in March 2017 in the Davidson County (Nashville) Chancery Court challenging the constitutionality of Rule 129(2), such suit being styled American Catalogue Mailers Association v. Tennessee Department of Revenue. That challenge ultimately led to an agreed order being entered in April 2017 by the Chancery Court that delayed the enforcement of Rule 129(2) while the challenge was pending.

Perhaps more importantly, however, the 2017 Legislature also weighed in on Rule 129(2). In that regard, 2017 Public Chapter No. 452 was enacted in May 2017. That Public Chapter states in part that the TN DOR "shall be prohibited from collecting any internet sales or use taxes authorized under [Rule 129(2)] and permitted under a ruling of any court, until such court's ruling has been fully reviewed and [Rule 129(2)] has been approved by the general assembly pursuant to" the Legislature's various oversight and related powers pertaining to rules promulgated under Tennessee Law.

Later in May 2017, the TN DOR issued its Notice #17-12 in which the TN DOR referenced its earlier Notice #17-01 (issued in January 2017) but then reviewed the then-current status of the above-referenced litigation as well as 2017 Public Chapter No. 452. The TN DOR did state at that time that if an out-of-state dealer meeting the requirements of Notice #17-01 does begin to collect or remit tax on or before July 1, 2017, the TN DOR would certify that it would not audit or access the business for periods prior to the date the dealer began to collect or remit such tax.

Outlook Following Wayfair

On June 21, 2018, the Court's decision in Wayfair overruled the Quill and Bellas Hess precedents and held that substantial nexus with a taxing state will no longer require physical presence. In its ruling, the Court was addressing South Dakota's statute which required remote sellers to comply with that State's sales tax collection and remittance obligations if the remote seller had more than $100,000 in annual sales in goods or services into South Dakota, or engaged in 200 or more separate transactions for delivery to residents of that State during a year.

The Wayfair decision certainly bolsters the TN DOR's outlook for enforceability of Rule 129(2) from a constitutional standpoint. However, various procedural issues still remain such as whether Rule 129(2) must first be approved by the General Assembly in 2019 as arguably indicated by 2017 Public Chapter No. 452. Significantly, Rule 129(2) does not include the alternative transactional threshold as was present in the South Dakota statute approved by the Court in Wayfair, which (if left as is) potentially provides room for further constitutional challenges.

Based on the earlier referenced informal discussions with the TN DOR, it appears that the TN DOR is considering various alternative procedures for moving forward with the ultimate objective of enforcing some form of economic presence either through the existing or an amended Rule 129(2), or perhaps through a new statutory enactment. In that regard, it is possible that the $500,000 threshold currently in Rule 129(2) would be reduced to a lower figure. It is not yet clear when any newly expanded collection responsibility will take effect. Fortunately, at present it appears that the TN DOR does not intend to enforce the existing Rule 129(2) or any new e-commerce tax collection standards on a retroactive basis.


On July 9, we began providing state-specific compliance analysis in light of the Wayfair decision. This alert continues our state-specific analysis by addressing the current status of sales tax e-commerce compliance in Tennessee. Please view our Alabama analysis in our Spotlight on Alabama alert, and our Georgia analysis in our Spotlight on Georgia alert.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Baker Donelson | Attorney Advertising

Written by:

Baker Donelson

Baker Donelson on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide

JD Supra Privacy Policy

Updated: May 25, 2018:

JD Supra is a legal publishing service that connects experts and their content with broader audiences of professionals, journalists and associations.

This Privacy Policy describes how JD Supra, LLC ("JD Supra" or "we," "us," or "our") collects, uses and shares personal data collected from visitors to our website (located at (our "Website") who view only publicly-available content as well as subscribers to our services (such as our email digests or author tools)(our "Services"). By using our Website and registering for one of our Services, you are agreeing to the terms of this Privacy Policy.

Please note that if you subscribe to one of our Services, you can make choices about how we collect, use and share your information through our Privacy Center under the "My Account" dashboard (available if you are logged into your JD Supra account).

Collection of Information

Registration Information. When you register with JD Supra for our Website and Services, either as an author or as a subscriber, you will be asked to provide identifying information to create your JD Supra account ("Registration Data"), such as your:

  • Email
  • First Name
  • Last Name
  • Company Name
  • Company Industry
  • Title
  • Country

Other Information: We also collect other information you may voluntarily provide. This may include content you provide for publication. We may also receive your communications with others through our Website and Services (such as contacting an author through our Website) or communications directly with us (such as through email, feedback or other forms or social media). If you are a subscribed user, we will also collect your user preferences, such as the types of articles you would like to read.

Information from third parties (such as, from your employer or LinkedIn): We may also receive information about you from third party sources. For example, your employer may provide your information to us, such as in connection with an article submitted by your employer for publication. If you choose to use LinkedIn to subscribe to our Website and Services, we also collect information related to your LinkedIn account and profile.

Your interactions with our Website and Services: As is true of most websites, we gather certain information automatically. This information includes IP addresses, browser type, Internet service provider (ISP), referring/exit pages, operating system, date/time stamp and clickstream data. We use this information to analyze trends, to administer the Website and our Services, to improve the content and performance of our Website and Services, and to track users' movements around the site. We may also link this automatically-collected data to personal information, for example, to inform authors about who has read their articles. Some of this data is collected through information sent by your web browser. We also use cookies and other tracking technologies to collect this information. To learn more about cookies and other tracking technologies that JD Supra may use on our Website and Services please see our "Cookies Guide" page.

How do we use this information?

We use the information and data we collect principally in order to provide our Website and Services. More specifically, we may use your personal information to:

  • Operate our Website and Services and publish content;
  • Distribute content to you in accordance with your preferences as well as to provide other notifications to you (for example, updates about our policies and terms);
  • Measure readership and usage of the Website and Services;
  • Communicate with you regarding your questions and requests;
  • Authenticate users and to provide for the safety and security of our Website and Services;
  • Conduct research and similar activities to improve our Website and Services; and
  • Comply with our legal and regulatory responsibilities and to enforce our rights.

How is your information shared?

  • Content and other public information (such as an author profile) is shared on our Website and Services, including via email digests and social media feeds, and is accessible to the general public.
  • If you choose to use our Website and Services to communicate directly with a company or individual, such communication may be shared accordingly.
  • Readership information is provided to publishing law firms and authors of content to give them insight into their readership and to help them to improve their content.
  • Our Website may offer you the opportunity to share information through our Website, such as through Facebook's "Like" or Twitter's "Tweet" button. We offer this functionality to help generate interest in our Website and content and to permit you to recommend content to your contacts. You should be aware that sharing through such functionality may result in information being collected by the applicable social media network and possibly being made publicly available (for example, through a search engine). Any such information collection would be subject to such third party social media network's privacy policy.
  • Your information may also be shared to parties who support our business, such as professional advisors as well as web-hosting providers, analytics providers and other information technology providers.
  • Any court, governmental authority, law enforcement agency or other third party where we believe disclosure is necessary to comply with a legal or regulatory obligation, or otherwise to protect our rights, the rights of any third party or individuals' personal safety, or to detect, prevent, or otherwise address fraud, security or safety issues.
  • To our affiliated entities and in connection with the sale, assignment or other transfer of our company or our business.

How We Protect Your Information

JD Supra takes reasonable and appropriate precautions to insure that user information is protected from loss, misuse and unauthorized access, disclosure, alteration and destruction. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. You should keep in mind that no Internet transmission is ever 100% secure or error-free. Where you use log-in credentials (usernames, passwords) on our Website, please remember that it is your responsibility to safeguard them. If you believe that your log-in credentials have been compromised, please contact us at

Children's Information

Our Website and Services are not directed at children under the age of 16 and we do not knowingly collect personal information from children under the age of 16 through our Website and/or Services. If you have reason to believe that a child under the age of 16 has provided personal information to us, please contact us, and we will endeavor to delete that information from our databases.

Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at:

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit
  • New Relic - For more information on New Relic cookies, please visit
  • Google Analytics - For more information on Google Analytics cookies, visit To opt-out of being tracked by Google Analytics across all websites visit This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at:

- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.