Sen. Mike Bell, R-Riceville, and House GOP Caucus Chairman Glen Casada of Franklin have proposed a bill to block the expansion of the Revenue Accountability program, part of the state Department of Revenue’s tax enforcement efforts, reports the Times-Free Press.
The bill (SB1475), backed by much of the business lobby, would also require the department to propose formal rules for the previous program, which applied only to beer and tobacco sales.
Under RAP, wholesalers must provide a report to the department on their sales of covered products to retaliers. The department then compares the retailer’s sales tax collections to product stocking to catch tax cheats — an effort revenue officials say has been highly successful. (Note: Previous post HERE)
Bell now believes the changes passed last year were too broad.
“I know I did not expect the commissioner to implement such a broad program and require so much reporting by our businesses in the state,” he said. “I didn’t get that from the language in the bill nor in the explanation the commissioner [Richard Roberts] gave on more than one occasion before committees.”
He became aware of problems when the owner of a tiny meat wholesale operation in Bradley County, who’d been in business for decades and still does bookkeeping on paper, came to him, worried about having to buy a computer to send information to the state.
Revenue officials strongly defend the existing program and the expansion and say they’re bending over backward to address critics’ concerns. And they stress that the whole point is for retailers to send in the sales taxes they collect in a state where the levy accounts for 55 cents out of every state revenue dollar.
Fifty-seven percent of sales taxes go to K-12 education, Revenue officials like to say, as well as paying for programs from housing felons to the TennCare program for low-income women and their children.
Tennessee cities and counties also rely on them. The state rate is 7 percent (5 percent on food) while local option taxes can tag on up to 2.75 percent more.
As Revenue officials see it, RAP is getting a bad rap.
“It’s worked very well,” Deputy Commissioner David Gerregano said last week. “It’s allowed us to collect at least $60 million in sales tax that is paid by the consumer to retailers but would not have been otherwise paid over to the state.”
It also “makes things fair” for retailers who are turning over all the taxes they collect, Gerregano said.
“We know there’s a population that hasn’t been complying.”
Gerregano pointed out that wholesalers have been required to report on their sales to retailers since Tennessee created the sales tax in 1947. Now new technology lets them upload their data files to the Revenue Department and makes it easier for the state to check compliance.
And, he said, the state has responded to feedback and criticisms by collapsing the proposed 21 categories into just one, to make wholesalers’ reporting easier. And it threw out the category on “non-edible grocery” items like paper towels.