"Welcome" to CMA Fest in Nashville??? Tennessee Tax Department Targets Tour Companies for Amusement Tax

It's CMA Fest time in Nashville, Tennessee. People are crowding into the city to get a glimpse of Nashville - its country stars, it hockey, its TV stars ... maybe they want to see the @TNTaxLawyer ... ya know? - BIG FUN! With all the excitement, the bars, restaurants, and tourist venues are busting at the seams.

In sitting back and thinking about all the tax dollars that are being generated by these events for the city and the State of Tennessee, it reminded me that Tennessee's tourist industry may have overlooked a little-publicized notice of the Tennessee Department of Revenue in late 2016 - Notice 16-09 which was targeted at extending the Tennessee amusement tax (sales tax) to tour companies, so tours like Nashville Ghost Tours, Nash Trash Tours, Hick Chick Tours, Honky Tonk Party Express, Music City Brew Tours, Nashville Pedal Tavern and many others are now in a position of being subject to the amusement tax on gross receipts generated from ticket sales to these tours.

In particular, the Notice provided as follows:

Tours conducted for amusement within the state for a fee, whether the tour is on foot or in a vehicle, are subject to the Tennessee sales tax as an amusement.  Examples of amusement tours include ghost tours, celebrity bus tours, cave tours, facility tours, city tours, sight-seeing tours, boat tours, etc.

What this notice failed to point out is that the "amusement tax" only applies by statute to "places of amusement," and the last time that I checked, buses and pedal taverns were not "places." It reminds me of that old School House Rock cartoon about people, places and things. Thus, I'm not sure the amusement tax applies to these businesses, but the only thing that matters is that the Department of Revenue is of the opinion that the tax should be collected by these tour companies.

Based on this, tour companies should either begin collecting the sales tax on their ticket charges and start remitting the tax to the state or buckle down and be prepared to tend with the Department of Revenue at some point down the road. The decision to start collecting the tax is an easier approach as you can pass tax onto customers.

Practice Point: If you do decide to come online and start paying the tax, you will note that the Department's notice did not provide amnesty for prior period, and there is no statutory change, so taxpayers should consider whether they should address past liabilities and limit the look-back period with a VDA before they go online. There may be an opportunity to limit that exposure, so that would be something to consider before hauling off and registering with the state.

Practice Point 2: Don't forget the business tax. No real good reason you shouldn't have a business license and pay the business tax on gross receipts.

While we take pride in being a welcoming city with nice people, it has become clear with the boom in Nashville that we are not afraid to take advantage of our visitors and help them add to the state coffers. Don't let this one sneak up on you if you are one of our great tour options in Nashville.

Go Preds, Beat the Pens!