Tennessee No Closer to Streamlined Sales Tax, and Here's One Reason Why

In its October 11, 2017 meeting in Oklahoma City, the Streamlined Sales Tax Governing Board met at its regular meeting to conduct the business of the SSTP. Among the various agenda topics, the Governing Board addressed whether Georgia and Indiana were in substantial compliance with the Streamlined Sales Tax Agreement - the multistate agreement to streamline the collection and remittance of sales tax across the United States. The Agreement vests authority with the Governing Board to make sure that all the states are playing by the rules and authorizes the Governing Board to take administrative action against participating states that are not in substantial compliance with the requirements of the Agreement.

During this most recent meeting, the Governing Board voted to continue sanctions on Georgia for noncompliance with the Agreement. This was not a new issue for Georgia as they have previously been in noncompliance on a few sections of the Agreement, but the Governing Board voted to remove Georgia's vote until the issues were remedied.  One of the issues revolved around the Georgia Legislature's vote to include a good faith acceptance requirement for sales tax exemption certificates.

Tennessee is not a full member in Streamlined, but this action by the Governing Board highlights one of the concerns that was expressed back around 2005 when Tennessee first entered the world of Streamlined and adopted many of the Streamlined definitions. Tennessee was not all-in at the time based, in part, on concerns around sourcing of sales and control of Tennessee's tax laws going forward. Opponents of streamlined trumpeted that Tennessee should not give up control over what sales tax statutes that it would enact.

Despite what were fundamental differences with some of the basic tenants of Streamlined, Tennessee became an associate member of Streamlined and has continued to keep one toe in the Streamlined Sales Tax world with its almost annual delay of the effective date of the controversial Streamlined provisions. Tennessee delayed the effective date during the 2017 legislative sessionuntil 2019, and everyone expects that 2019 will usher in a further extension absent some Federal legislation.  

The actions of the Governing Board during its most recent meeting are noteworthy in Tennessee only because those actions are creating a track record that will only embolden and give ammunition to Streamlined opponents in Tennessee. The Legislature is not one to give up control, and the idea that a multistate governing board can tell Tennessee what sales tax laws it has to enact will likely not sit well with a Legislative leadership team that is known to be extremely conservative. Indeed, much will have to change before Tennessee ever alters its stance on Streamlined, and the most recent action of the Governing Board only provide proof of what concerns Tennessee had back when the original Streamlined votes were cast.

Don't Have the Columbus Day Blues ... A Lesson in Calculating Deadlines!

Several years ago I was asked to assist a taxpayer with a Massachusetts tax appeal. I know the @TNTaxLawyer goes north (sorry David Nagle and Joe Donovan) ... Regardless, they called me on Tuesday, April 17th and sent me the paperwork to review. I quickly realized that the deadline to file the appeal was on April 14th (a Saturday) - three days earlier. Yikes! Had they missed the deadline? It was now Tuesday, and it appeared that I was about to ruin my client's day with news that they had missed it and could not appeal ... but that is when Chris Wilson and I started getting creative...

We quickly confirmed that Saturdays and Sundays did not count in when the deadline fell on one of those days, which extended the filing date to April 16, but that was still one day earlier. Holiday??? We knew that holidays were often not counted in calculating deadlines and confirmed that holidays were, in fact, excluded in Massachusetts if the deadline fell on a holiday (NOTE: This is not true in all states), so now we just needed a holiday (sounds familiar, as I could always use a good holiday!). Problem ... there are no Federal holidays in April ... all the Federal government expects from you in April is a tax return and a tax payment... 

Despite this slight obstacle, we continued to dig and found that there is, in fact, a state/commonwealth holiday observance in Massachusetts in April - Patriots Day (Note: Mel Gibson was much better in Braveheart) AND Patriots Day is observed on the third Monday of April but only in Suffolk County. Two important facts to this story - the third Monday in April that year ... was April 16th ... and Suffolk County is Boston, WHICH IS WHERE THE MASSACHUSETTS DEPARTMENT OF REVENUE IS LOCATED. BOOYAH!!! Problem solved, crisis averted, all good on the home front, and we filed the appeal by close of business with no problem with the deadline.

Which brings me to Tennessee and our boy Christopher Columbus and another lesson on calculating deadlines. This year, Columbus Day falls on Monday, October 9th. It is a Federal holiday, and it is also a state holiday in Tennessee. See Tenn. Code Ann. 15-1-101. 

Let's say you have a deadline on Saturday, October 7th. When is the actual deadline? Based on my experience from Massachusetts, I would have thought ... Tuesday, October 10th as Saturday, Sunday and Columbus Day do not count. 

Tennessee Code section 1-3-102 actually confirms this thinking as it provides:

The time within which any act provided by law is to be done shall be computed by excluding the first day and including the last, unless the last day is a Saturday, a Sunday, or a legal holiday, and then it shall also be excluded.

Case closed ... But Wait! There is also another aspect of this issue to consider because in Tennessee, the state statutes allow the Governor to authorize the observance of Columbus Day on the day after Thanksgiving.

(a)  (1) Each department shall be opened for the transaction of public business from eight o'clock in the morning (8:00 a.m.) until four thirty in the afternoon (4:30 p.m.) of each day except Saturdays, Sundays and legal holidays.

...

 (3) The governor may, at the governor's discretion, substitute the Friday after the fourth Thursday in November, which is Thanksgiving Day, for the legal holiday that occurs on the second Monday in October, which is Columbus Day, for purposes of closing state offices only.

Tenn. Code Ann. 4-4-105(a)(1). AND GUESS WHAT ... Governor Haslam has exercised this authority, and state workers will show up for work on Monday, October 9th but not on Friday, November 24th.

So where does this leave us? Well, Tenn. Code Ann 4-4-105(a)(1) says that the observance of Columbus Day in November is "for purposes of closing state offices only," so it does not change the fact that Monday, October 9th is a "legal holiday" as that term is defined by the Tennessee Code, which according to Tenn. Code Ann. 1-3-102 is not counted in calculating deadlines.

For filings in Court, the Tennessee Rules of Civil Procedure in the Advisory Comments have addressed this issue:

Rule 6.01 is amended to define "legal holiday" by reference to statute, Tenn. Code Ann. § 15-1-101. The status of a day as a legal holiday is statutory; thus, for the purpose of filing papers in court, it does not depend on whether the clerk's office is open for business. For example, state offices might be open on Columbus Day, pursuant to the governor's authority under Tenn. Code Ann. § 4-4-105(a)(3) to substitute the day after Thanksgiving for the Columbus Day holiday; in such circumstances, however, Columbus Day is still a "legal holiday" for purposes of computing time periods under the rule.

2011 Comment. So, under Tennessee law, the Governor's proclamation regarding the observance of Columbus Day does not change the deadline calculation - the deadline is October 10 and not the 9th. That likely holds true for the Tennessee Department of Revenue as well as there is no other state statute that we could find that would change this result. So a roundabout way of getting to October 10th.

There is also the question of how to handle the day after Thanksgiving now that Columbus Day is observed then. It is not a legal holiday, so that day is a viable deadline and is not excluded in calculating deadlines with the Department of Revenue as far as we have been able to determine. For Court filings, Rule 6.01 in the Rules of Civil Procedure indicates that days when the courts are closed are not included in calculating deadlines, so that issue has been addressed by the Courts. But man, the winding road that it takes to get to that answer.

Two morals to this story: (1) Pay close attention to state statutes when calculating deadlines involving weekends and holidays, and (2) don't wait until the deadline - File the Friday before Columbus Day and enjoy your weekend!