Business tax hikes to take effect Sept. 1

By Thomas Wilson


   Tennessee's retail and wholesale businesses will see their business tax on their gross sales receipts rise beginning Sept. 1.
   The Tennessee General Assembly's 2002-2003 budget legislation increased the business tax rates by 50 percent. The increased tax revenues generated by the business tax increase is exclusively state money.
   "Most all retail businesses and wholesale businesses have to purchase a business license, that they buy from a county court clerk or city clerk," said Susan Keebler, audit manager for the state Department of Revenue's Knoxville and Johnson City offices.
   "That business license is a privilege tax. It is first paid to the local government. They have to file a return annually based on the type of business that they are," Keebler added. "The type of business determines when the return will be due."
   The tax increase will affect retail and wholesales grocery stores, service stations, hardware stores, clothing stores, tailors, delicatessens, newsstands, toy stores, pawn shops, construction firms and livestock owners.
   The business tax rates are based on fractions of 1 percent of business' gross sales receipts for one tax year.
   For example, retail grocery stores that currently pay 1/15 of one percent of gross sales will pay 1/10 of 1 percent beginning Sept. 1.
   If a grocery store's gross sales receipts for the tax year are $100,000, the store will pay approximately $100 in business tax under the state's new tax structure.
   "The percentages are based on their gross income for a tax year. It depends on what type of business it is," said Keebler.
   Business owners will have to file one return for gross sales collected through Sept. 1 and a second return for sales transactions reflecting the new rates from Sept. 1 to Dec. 31, 2002, said Keebler.
   Local governments will continue to collect business taxes at the rates they have adopted, according to the law.
   "We take their gross sales or income for that tax period and apply that percentage to it," said Kari Rountree, with the Carter County Court Clerk's office.
   If county clerks offices do not collect the business tax, the state can come in and collect the tax and keep all the money.
   Keebler said the state did allow business owners to count personal property taxes as a tax credit against business tax liability. However, those tax credits only applied to the county's portion of business tax revenues.
   "This first year is going to be tough for county clerks' offices," said Keebler.
   Owners of coin-operated amusement machines are to register with the Department of Revenue for a new tax passed under the Tax Reform Act.
   Individuals or companies must purchase a $10 sticker for each coin-operated amusement machine they own and provide for public use.
   An amusement machine owner may obtain a six-month master license on or after Jan. 1 of each tax year. The six-month license will expire on June 30 of the tax year.
   Owners of amusement games will be licensed under three categories.
   The tax is levied on all coin-operated amusement machines put into use or play by the general public. There is no sales or business tax due on the receipts of these amusement machines, according to the tax legislation.