TSCPA’s State Tax Committee met with representatives from the Tennessee Department of Revenue (DOR) and the Tennessee Department of Labor & Workforce Development (DOL) at the State Tax Liaison meeting on May 29. The State Tax Committee meets semi-annually with officials to stay up to date on tax trends and regulatory changes, as well as discuss issues impacting Tennessee CPAs.
Commissioner’s Office Update
The DOR opened the meeting with news from the commissioner’s office and an update on Schedule G refunds. Both deadlines for the program have passed, and the DOR issued refunds to approximately 60,000 companies. Recipient names and amount ranges were published online from May 31 through June 30. Approximately $1.3 billion was refunded of the $1.55 billion allocated to the program.
Legislative Update
Next on the agenda was an update on legislation. Several legislative items that recently became effective were covered, as well as legislation with upcoming effective dates.
Sales Tax:
- Public Chapter 335 – Makes permanent the department’s reporting requirement for certain wholesalers of food, candy and nonalcoholic beverages relative to the Retail Accountability Program (RAP II). Effective May 2, 2025.
- Public Chapter 449 – Extends the broadband infrastructure exemption through June 30, 2027. Effective May 9, 2025.
- Public Chapter 493 – Authorizes bona fine religious institutions to make sales tax-exempt sales during four temporary sales periods per year. Effective May 21, 2025.
- Public Chapter 508 – Allocates the sales and use tax generated from sales of new or used tires to the highway fund on sales occurring on or after July 1, 2025. Effective May 21, 2025.
- Public Chapter 517 – Authorizes nuclear energy production facilities to qualify for the pollution control credit as certified green energy production facilities, deletes the statutory provision stating the enrichment of uranium is a taxable service, and exempts the purchase of industrial machinery primarily used for uranium enrichment. Effective July 1, 2025.
Franchise and Excise Tax:
- Public Chapter 343 – Authorizes a taxpayer to add back to net earnings any amounts taken as deductions from federal taxable income and any amounts subtracted from net earnings, provided such adjustments do not result in a lower excise tax base. Effective May 2, 2025.
- Public Chapter 455 – Exempts subsidiaries of agricultural cooperatives from franchise and excise tax regardless of their entity type. Effective May 9, 2025.
- Public Chapter 496 – Changes the calculation of the community investment tax credit to now be based on the month-end average unpaid principal balance of qualified loans over the course of the year. Effective Jan. 1, 2026.
Other legislative items of note that were discussed related to administration, litigation tax and fees, vapor products, and hemp-derived cannabinoid products.
Operational Goals Update
Deputy Commissioner Christine Lapps next shared several of the DOR’s operational goals:
- Sales tax exemptions will be coming soon to TNTAP for logged-in and non-logon users.
- A new call center is being implemented that will allow for the opportunity to send text messages to taxpayers. These will be more general in nature – not specific taxpayer account information or notifications. Taxpayers will need to opt in.
- In July, the DOR will be working on increasing awareness of sales tax refunds for disaster recovery relief and increased claims for refunds.
TR3 Update
TR3 processes over two million returns each year, with nearly $27 billion flowing through annually.
In fiscal year 2024, the TNTAP Assistant on the TNTAP webpage received 159,192 messages. The assistant responds to both logged-in and non-logon users. Feedback is monitored daily by the division, and the assistant is updated regularly with new information.
The division then walked through the steps to apply for an exemption for logged-in and non-logon users.
Taxpayer Services Update
Taxpayer Services transitioned to a new call center at the end of June. The center includes several self-service options, including account balance inquiries, status checks, and payment verification. It also features a predictive dialer, and the division is doing outreach to educate new taxpayers on that feature. Additionally, the caller’s account will be recognized before they reach a representative.
Taxpayer Services also discussed several franchise and excise tax Schedule G issues. Taxpayers have been calling about penalties and interest, not realizing that the penalties and interest were from the original return/payment being late. The Notice of Proposed Assessment (NOPA) is then reversed, but the taxpayer may owe additional amounts.
Audit Update
As the deadlines for Schedule G refunds have passed, Audit has been working on determining the final numbers. Currently, an estimated 63,494 refund claims have been paid. The total number of cases/work items is estimated to be 34,579.
Regarding the franchise tax, there has been a notable increase in excess estimated payment refunds, and the division is working through the volume. They are also revisiting the criteria for terminations/withdrawals.
The division also noted that there has been an uptick in duplicate refund claims being filed. This is happening not just in franchise and excise tax but sales/use tax as well. The filing of duplicate claims is discouraged. If a refund claim seems to be taking a long time to resolve, the division recommends calling Taxpayer Services or Audit directly.
Regarding disaster relief, the DOR has launched an educational initiative to share details on the sales tax relief available and the application process. The department visited relief expos and Farmer Recovery Centers in Cocke, Carter and Unicoi Counties and also shared educational materials with various organizations assisting with recovery.
Items eligible for the sales tax disaster refund include major appliances purchased for $3,200 or less, residential furniture purchased for $3,200 or less, and residential building supplies purchased for $500 or less. To submit a claim, visit https://tntap.tn.gov/eservices/_/#1. To view a detailed list of eligible items, visit https://bit.ly/eligibleitems.
Audit has recently been seeing issues/questions regarding industrial machinery and reviewed that Tennessee does not have an exemption for building materials for manufacturers. See Revenue Ruling #12-24 for more information.
Legal Office Update
There are approximately 55 cases currently open in various stages. Of pending cases, approximately 50% are related to sales and use tax, 12.5% are related to franchise and excise tax, and 25% are related to business tax. The Legal Office also reviewed several current cases.
Regarding rulings, 14 tax rulings were issued in 2024. Five tax rulings have been issued so far in 2025, and approximately 13 rulings are pending. Of the pending rulings, five were received in 2025.
DOL Update
The DOL presented the final update of the meeting, sharing an overview of the new Jobs4TN online system.
The new system will:
- Deliver seamless UI program integration
- Allow real-time insights and expanded reporting metrics
- Reduce manual efforts and inefficiencies
- Improve and enhance the customer experience
- Improve system security and reduce fraud
- Adapt to changing economic conditions
The Employer e-Services portal is located at https://jobs4tnui.tn.gov/employer.
The next State Tax Liaison meeting will be held in fall 2025. TSCPA members who have questions or issues that they would like the State Tax Committee to address should send a detailed account of the question or issue to tscpa@tscpa.com.
This article was originally published in the July/August 2025 Tennessee CPA Journal.
