2010 Tennessee Code
Title 6 - Cities And Towns
Chapter 51 - Change of Municipal Boundaries
Part 1 - Annexation
6-51-115 - Receipt and distribution of tax revenues. [Amended effective July 1, 2011. See the Compiler's Notes.]

6-51-115. Receipt and distribution of tax revenues. [Amended effective July 1, 2011. See the Compiler's Notes.]

[Amended effective July 1, 2011. See the Compiler's Notes.]

(a)  Notwithstanding any provisions of law to the contrary, whenever a municipality extends its boundaries by annexation, the county or counties in which the municipality is located shall continue to receive the revenue from all state and local taxes distributed on the basis of situs of collection, generated within the annexed area, until July 1 following the annexation, unless the annexation takes effect on July 1.

     (1)  If the annexation takes effect on July 1, then the municipality shall begin receiving revenue from such taxes generated within the annexed area for the period beginning July 1.

     (2)  Whenever a municipality extends its boundaries by annexation, the municipality shall notify the department of revenue of such annexation prior to the annexation becoming effective, for the purpose of tax administration.

     (3)  Such taxes shall include the local sales tax authorized in § 67-6-702, the wholesale beer tax authorized in § 57-6-103, the income tax on dividends authorized in § 67-2-102, and all other such taxes distributed to counties and municipalities based on the situs of their collection.

(b)  In addition to the provisions of subsection (a), when a municipality annexes territory in which there is retail or wholesale activity at the time the annexation takes effect or within three (3) months after the annexation date, the following shall apply:

     (1)  Notwithstanding the provisions of § 57-6-103 or any other law to the contrary, for wholesale activity involving the sale of beer, the county shall continue to receive annually an amount equal to the amount received by the county in the twelve (12) months immediately preceding the effective date of the annexation for beer establishments in the annexed area that produced wholesale beer tax revenues during that entire twelve (12) months. For establishments that produced wholesale beer tax revenues for at least one (1) month but less than the entire twelve-month period, the county shall continue to receive an amount annually determined by averaging the amount of wholesale beer tax revenue produced during each full month the establishment was in business during that time and multiplying this average by twelve (12). For establishments that did not produce revenue before the annexation date but produced revenue within three (3) months after the annexation date, and for establishments that produced revenue for less than a full month prior to annexation, the county shall continue to receive annually an amount determined by averaging the amount of wholesale beer tax revenue produced during the first three (3) months the establishment was in operation and multiplying this average by twelve (12). The provisions of this subdivision (b)(1) are subject to the exceptions in subsection (c). A municipality shall only pay the county the amount required by this subdivision (b)(1), for a period of fifteen (15) years.

     (2)  Notwithstanding the provisions of § 67-6-712 or any other law to the contrary, for retail activity subject to the Local Option Revenue Act, compiled in title 67, chapter 6, part 7, the county shall continue to receive annually an amount equal to the amount of revenue the county received pursuant to § 67-6-712(a)(2)(A) in the twelve (12) months immediately preceding the effective date of the annexation for business establishments in the annexed area that produced Local Option Revenue Act revenue during that entire twelve (12) months. For business establishments that produced such revenues for more than a month but less than the full twelve (12) month period, the county shall continue to receive an amount annually determined by averaging the amount of local option revenue produced by the establishment and allocated to the county under § 67-6-712(a)(2)(A) during each full month the establishment was in business during that time and multiplying this average by twelve (12). For business establishments that did not produce revenue before the annexation date and produced revenue within three (3) months after the annexation date, and for establishments that produced revenue for less than a full month prior to annexation, the county shall continue to receive annually an amount determined by averaging the amount of Local Option Revenue, compiled in title 67, chapter 6, part 7, produced and allocated to the county under § 67-6-712(a)(2)(A) during the first three (3) months the establishment was in operation and multiplying this average by twelve (12). The provisions of this subdivision (b)(2) are subject to the exceptions in subsection (c). A municipality shall only pay the county the amount required by this subdivision (b)(2), for a period of fifteen (15) years. [Effective July 1, 2011. See the Compiler's Notes.]

     (3)  When the amount of local option sales tax produced by businesses in the annexed area cannot be determined from sales tax returns filed by the businesses, the commissioner may determine the amount to be distributed to the county over the fifteen-year period based on the best information available. For this purpose, the commissioner may use information obtained from business tax returns or obtain additional information from the businesses involved.

(c)  Subsection (b) is subject to these exceptions:

     (1)  Subdivision (b)(1) ceases to apply as of the effective date of the repeal of the wholesale beer tax, should this occur;

     (2)  Subdivision (b)(2) ceases to apply as of the effective date of the repeal of the Local Option Revenue Act, compiled in title 67, chapter 6, part 7, should this occur;

     (3)  Should the general assembly reduce the amount of revenue from the Wholesale Beer Tax or the Local Option Revenue Act, accruing to municipalities by changing the distribution formula, the amount of revenue accruing to the county under subsection (b) will be reduced proportionally as of the effective date of the reduction;

     (4)  A county, by resolution of its legislative body, may waive its rights to receive all or part of the revenues provided by subsection (b). In these cases, the revenue shall be distributed as provided in §§ 57-6-103 and 67-6-712 of the respective tax laws unless otherwise provided by agreement between the county and municipality; and

     (5)  Annual revenues paid to a county by or on behalf of the annexing municipality are limited to the annual revenue amounts provided in subsection (b) and known as “annexation date revenue” as defined in subdivision (d)(2). Annual situs-based revenues in excess of the “annexation date revenue” allocated to one (1) or more counties shall accrue to the annexing municipality. Any decrease in the revenues from the situs-based taxes identified in subsection (b) shall not affect the amount remitted to the county or counties pursuant to subsection (b), except as otherwise provided in this subsection (c); provided, that a municipality may petition the department of revenue no more often than annually to adjust annexation date revenue as a result of the closure or relocation of a tax producing entity.

(d)  (1)  It is the responsibility of the county within which the annexed territory lies to certify and to provide to the department a list of all tax revenue producing entities within the proposed annexation area.

     (2)  The department shall determine the local share of revenue from each tax listed in this section generated within the annexed territory for the year before the annexation becomes effective, subject to the requirements of subsection (b). This revenue shall be known as the “annexation date revenue.”

     (3)  The department, with respect to the revenues described in subdivision (b)(2), and the municipality, with respect to the revenues described in subdivision (b)(1), shall annually distribute an amount equal to the annexation date revenue to the county of the annexed territory.

[Acts 1988, ch. 1016, § 1; 1998, ch. 1101, § 24; 2004, ch. 959, §§ 52, 53; 2005, ch. 311, § 2; 2007, ch. 602, §§ 127, 128; 2009, ch. 530, § 35.]