Legislation that would explicitly require marketplace facilitators, such as Grubhub, Doordash or Uber Eats, to collect and remit sales tax on all transactions is working its way through the Tennessee General Assembly.
A marketplace facilitator is defined as a company that facilitates a transaction between a marketplace seller and a buyer, such as Grubhub or Doordash, which makes money by picking up food from a restaurant and delivering it to the buyer.
Senate Bill 2182 would require transactions between the seller and the facilitator be taxed. The change is estimated to generate about $84 million in additional revenue for the state.
The bill’s sponsor, Sen. Jack Johnson, R-Franklin, told the Senate Finance, Ways, and Means Revenue Subcommittee on Tuesday that current law requires these transactions be taxed, but some transactions are going untaxed because the law is too vague. He said 45 states have sales tax, and 40 of them have explicit language to account for marketplace facilitators. He hopes to make Tennessee the 41st.
“It’s been vague, let’s just say, and we know that there are some folks out there that are selling, buying items on websites and various places where sales tax is not being collected or remitted,” Johnson said.
If the seller has more than $1 billion in annual sales, then it is that business’ obligation to collect and remit the sales tax on the transactions; otherwise, it is the obligation of the marketplace facilitator. The legislation will not apply to any marketplace facilitators that have sales that total less than $500,000 annually in the state.
Johnson emphasized that this is not a tax increase, but rather a means to ensure taxes are equitable and fair.
The bill was advanced out of the Senate Finance, Ways, and Means Revenue Subcommittee on Tuesday and was referred to the full committee. It was placed on the committee’s docket for March 3.
Similar legislation has been introduced in the House – House Bill 2249 – by Majority Leader William Lamberth, R-Portland.
