Filed for intro on 01/31/2002 HOUSE BILL 3046 By Armstrong SENATE BILL 3110 By Cooper J AN ACT to enact the "Tax Reform Act of 2002" and to amend Tennessee Code Annotated, Title 3; Title 4; Title 5; Title 6; Title 7; Title 8; Title 9; Title 12; Title 16; Title 30; Title 36; Title 39; Title 40; Title 45; Title 47; Title 48; Title 55; Title 56; Title 57; Title 61; Title 62; Title 67; Title 68; Title 69; Title 70 and Title 71, relative to taxation. BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF TENNESSEE: SECTION 1. This act shall be known and may be cited as the "Tax Reform Act of 2002." SECTION 2. (a) Tennessee Code Annotated, Title 67, Chapter 6, Part 3, is amended by deleting in their entirety all sections in such part except for Sections 67-6-322, 67-6-308, 67-6-337 and 67-6-338. (b) Tennessee Code Annotated, Section 67-6-322(c), is amended by designating the existing language of that subsection as subdivision (1) and by adding the following new subdivision: (2) The exemption granted under subsections (a) and (b) shall not apply to any transaction in which both the seller, giver, or donator, and the buyer, recipient, or donee are entities listed under subsection (a) or (b). SB3110 01180430 -1- (c) Tennessee Code Annotated, Title 67, Chapter 6, Part 3, is amended by adding the following new section: Section __. There is exempt from the tax levied by this chapter: (1) Any sale or use of any article, manufactured of the produce of this State exempt from taxation pursuant to Section 30 of Article II of the Constitution of Tennessee; and (2) Any sale or use which would otherwise be taxable pursuant to the provisions of this chapter but which would impose a tax which is invalid either under the commerce clause or the due process clause of the Constitution of the United States. SECTION 3. Tennessee Code Annotated, Section 67-6-102(9), is amended by deleting from the first sentence the language "the retail price of which, for any such single article, exceeds two hundred fifty dollars ($250)," and by deleting from the fourth sentence the language ", the retail price of which exceeds two hundred fifty dollars ($250)". SECTION 4. Tennessee Code Annotated, Section 67-6-102(13)(B), is amended by deleting the language ", the cost of which, for any such single article, exceeds one thousand dollars ($1,000),". SECTION 5. Tennessee Code Annotated, Section 67-6-102(24)(D), is amended by deleting the language "and each sale is in excess of five hundred dollars ($500)" and the language "for sales in excess of five hundred dollars ($500)". SECTION 6. Tennessee Code Annotated, Section 67-6-206, is amended by deleting the section in its entirety. SECTION 7. Tennessee Code Annotated, Section 67-6-207, is amended by deleting the section in its entirety. - 2 - 01180430 SECTION 8. Tennessee Code Annotated, Section 67-6-209(a), is amended by placing a period "." after the words "deductions whatsoever" and by deleting the remainder of the sentence. SECTION 9. Tennessee Code Annotated, Section 67-6-209, is further amended by deleting subsections (d), (e), (f) and (g) in their entirety. SECTION 10. Tennessee Code Annotated, Section 67-6-216, is amended by deleting the section in its entirety. SECTION 11. Tennessee Code Annotated, Section 67-6-217, is amended by deleting the section in its entirety. SECTION 12. Tennessee Code Annotated, Section 67-6-218, is amended by deleting the section in its entirety. SECTION 13. Tennessee Code Annotated, Section 67-6-219, is amended by deleting the section in its entirety. SECTION 14. Tennessee Code Annotated, Section 67-6-224, is amended by deleting the section in its entirety. SECTION 15. Tennessee Code Annotated, Section 67-6-201, is amended by adding a new subdivision, as follows: (__) Provides or engages in one or more of the following services: (11) (A) Accounting and auditing; (B) Amusements; (C) Business services: (i) Advertising, (ii) Building services, (iii) Computer and data processing, (iv) Credit report and collection, (v) Detective and protective services, - 3 - 01180430 (vi) Finance – Securities Brokers, (vii) Insurance agents, (viii) Mail, art reproduction and steno, (ix) Management consulting or public relations, (x) Personnel supply, (xi) Real estate agents, and (xii) Other business services; (D) Construction services; (E) Education, for-profit and nonprofit; (F) Energy: (i) Manufacturing, and (ii) Residential; (G) Engineers, architectural, surveying; (H) Gasoline and diesel fuel; (I) Governmental contracts; (J) Industrial and farm machinery; (K) Legal services; (L) Newspapers and publications; (M) Nonprofit: (i) Health services, (ii) Amusements/member organizations, (iii) Social services, and (iv) Other research, testing, consulting; (N) Nursing and personal care facilities; (O) Other health services; (P) Personal services: - 4 - 01180430 (i) Beauty and barber shops, (ii) Coin-operated laundry, (iii) Funeral, (iv) Veterinary and landscape, and (v) Other; (Q) Physicians, dentists, etc.; (R) Social and other services (day care, etc.); and (S) Transportation services. SECTION 16. Tennessee Code Annotated, Section 67-6-202, is amended by deleting the language "six percent (6%)" in subsection (a) and by substituting instead the language "four and three-fourths percent (4.75%)". SECTION 17. Tennessee Code Annotated, Section 67-6-202, is amended by deleting subsection (b) in its entirety. SECTION 18. Tennessee Code Annotated, Section 67-6-203, is amended by deleting the language "six percent (6%)" in subsection (a) and by substituting instead the language "the tax levied on the sale of tangible personal property at retail by the provisions of §67-6-202". SECTION 19. Tennessee Code Annotated, Section 67-6-203, is amended by deleting subsection (c) in its entirety. SECTION 20. Tennessee Code Annotated, Section 67-6-204, is amended by deleting the language "six percent (6%)" wherever it appears and substituting instead the language "the tax levied on the sale of tangible personal property at retail by the provisions of §67-6-202". SECTION 21. Tennessee Code Annotated, Section 67-6-204, is amended by deleting subsection (d) in its entirety. SECTION 22. Tennessee Code Annotated, Section 67-6-205, is amended by deleting the language "six percent (6%)" in subsection (a) and by substituting instead the language "the tax levied on the sale of tangible personal property at retail by the provisions of §67-6-202". - 5 - 01180430 SECTION 23. Tennessee Code Annotated, Section 67-6-205, is amended by deleting subsection (b) in its entirety. SECTION 24. Tennessee Code Annotated, Section 67-6-205, is amended by adding the following new subsection: (__). Health care service providers shall receive a credit in the amount of fifty percent (50%) of the taxes actually collected by them under this chapter. The remaining fifty percent (50%) of the taxes actually collected by health care service providers shall be deposited in a fund within the general fund for the purpose of making essential access provider payments to hospitals, community mental health centers, and local public health centers in such amounts as may be appropriated in the general appropriations bill. SECTION 25. Tennessee Code Annotated, Section 67-6-221, is amended by deleting the language "six percent (6%)" in subsection (a) and by substituting instead the language "the tax levied on the sale of tangible personal property at retail by the provisions of §67-6-202". SECTION 26. Tennessee Code Annotated, Section 67-6-221, is amended by deleting subsection (b) in its entirety. SECTION 27. Tennessee Code Annotated, Title 67, Chapter 6, Part 2, is amended by adding the following new section: Section __. Notwithstanding any other provision of law to the contrary, a portion of the revenue in an amount equal to one-half percent (0.5%) generated from any sale or use which is taxed at the rate of the tax levied on the sale of tangible personal property at retail by the provisions of §67-6-202 shall continue to be dedicated for education purposes until changed by the general assembly. All revenue generated from such portion of the sales tax rate shall be deposited in the education trust fund and earmarked for education purposes as provided in §49-3-357. - 6 - 01180430 SECTION 28. Tennessee Code Annotated, Title 67, Chapter 6, Part 7, is amended by deleting Section 67-6-701, Section 67-6-702, Section 67-6-703, Section 67-6-704, Section 67-6- 705, Section 67-6-706, Section 67-6-707, Section 67-6-708, Section 67-6-709, Section 67-6- 710, Section 67-6-712, Section 67-6-713, and Section 67-6-714 in their entirety. SECTION 29. Tennessee Code Annotated, Title 67, Chapter 6, Part 7, is amended by adding the following new section: Section _____. (a) Notwithstanding any provision of law to the contrary, subject to the limitations in the formula provided in subsection (b) of this section, a sum shall be earmarked and allocated from the general fund to hold counties and cities harmless from actual or potential loss of revenue resulting from the amendments to Title 67, Chapter 6, Part 7 in the Tax Reform Act of 2002. (b) The sum allocated to each county and city shall be as follows: (1) For the fiscal year ending June 30, 2002, the sum allocated to each such county and city under its local option law, if any, during the fiscal year ending June 30, 2002. (2) For the fiscal year ending June 30, 2003, the sum allocated to each such county and city under subdivision (1) multiplied by a factor of 1.03.