Fifth District Knox County Commissioner John Schoonmaker has authored a bill that could return almost $140,000 in tax revenues to Farragut — along with millions of dollars in tax revenues to towns, cities and counties across the state — by eliminating the state Sales Tax Administration Fee.
Schoonmaker, who district includes Town of Farragut and Concord, delivered the bill to state Rep. Jason Zachary [R-District 14, which also includes Farragut, and Concord], who filed HB 1532 last week in General Assembly in Nashville to repeal the fee.
At issue is the Tennessee Department of Revenue’s 1.125 percent across-the-board administration fee required of every municipality, which amounted to over $30 million in fiscal year 2017 alone, Schoonmaker said.
Of that amount, Town of Farragut was charged $139,755, City of Knoxville $1.7 million and Knox County $524,390.
Schoonmaker said all sales tax is transmitted electronically to the Department of Revenue at the end of each month, and is then redistributed back to the municipalities 30 days later — minus the fee.
“The local option sales tax-administration fee that the Department of Revenue assesses the cities and counties of Tennessee for the return of their local option sales tax each month is no longer justified,” Schoonmaker said. “Twenty years ago, there was an extensive staff with adding machines, calculators and reams of paperwork to process these taxes.
“Today, this procedure is now an automated electronic system. You don’t need $30 million to push a button 12 times a year,” he added. “The fees are too high … and this overpayment has been out there, but it seems to be a situation that has gone on for years because ‘we always paid it.’
“Farragut had to spend $24,000 in November just to get their sales tax back.
Smaller and poorer municipalities also concern Schoonmaker.
For example, Schoonmaker provided statistics showing Campbell County was charged $852,463 over a 10-year period, while Roane County paid $183,002 just in FY 2017.
The idea for repealing the fee occurred about a year ago, when Schoonmaker said he met with Chris Caldwell, director of finance for Knox County.
“I asked if there was anything we could do to save funds within our county budget,” Schoonmake said. “Mr. Caldwell explained about the sales tax fee and this began the process for repeal of the fee.
“The hard part is trying to get the state government to relinquish control [of it].”
If approved, the bill would mimic the recently repealed Hall Income Tax: it would be phased out over a three-year period, rather than all at once.
Zachary and state Sen. Richard Briggs [R-District 7 also including Farragut and Concord] had floated a similar bill last year, but it failed to generate support because it would have only affected Knox County’s portion of the fee.
Schoonmaker said the new bill also would have to be introduced in the State Senate for it to move forward. He is pleased with the support it has received from both Zachary and Briggs.
“Obviously this was a team effort with Representative Zachary and Senator Briggs,” Schoonmaker said. “Without their guidance, commitment and support to this legislation, we would have never gotten to this point.
“I am very appreciative of their assistance with this bill.
“And, I am very excited about it,” he added. “It will affect every town, city and county in the state. To phase out this fee would offset some of the financial loss to cities and counties from the phase out of the Hall Income Ta …. but most importantly, it’s the right thing to do.”
Schoonmaker said if the HB 1532 passes both the House and Senate, and is signed into law by Gov. Bill Haslam, it would become effective July 1.