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Tennessee enacts major legislation expanding nexus, adopting market-based sourcing

On May 20, Tennessee Gov. Bill Haslam approved legislation, termed the Revenue Modernization Act, that enacts major amendments concerning excise and franchise taxes, business tax, and sales and use taxes. The Tennessee excise and franchise taxes are amended by adopting a new substantial nexus standard that includes bright-line nexus, a triple-weighted sales factor, market-based sourcing, special sourcing provisions for security dealers and telecommunication companies, and an apportionment election for taxpayers with large distribution sales. Also, the related-party intangible expense provisions are amended. The business tax similarly is amended to adopt a new bright-line nexus standard. Sales and use tax provisions are amended to adopt click-through nexus and impose tax on cloud computing and video game digital products. Unless otherwise noted, the legislation is effective for tax years beginning on or after Jan. 1, 2016.

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