SB 925 - HB 1181
FISCAL NOTE
Fiscal Review Committee
Tennessee General Assembly
February 20, 2025
Fiscal Analyst: Elizabeth Bransford | Email: elizabeth.bransford@capitol.tn.gov | Phone: 615-741-2564
SB 925 - HB 1181
SUMMARY OF BILL: Extends indefinitely the sales and use tax exemption for purchases
and leases of equipment and infrastructure used to produce broadband communications services or
provide internet access.
FISCAL IMPACT:
STATE GOVERNMENT
REVENUE General Fund
FY25-26 & Subsequent Years ($35,000,000)
Assumptions:
• Pursuant to Tenn. Code Ann. § 67-6-391:
o Beginning July 1, 2022 through June 30, 2025, there is exempt from the sales and
use tax purchases and leases of all equipment, machinery, software, ancillary
components, appurtenances, accessories, or other infrastructure that is used to:
▪ Produce broadband communications services, including broadcasting,
distributing, sending, receiving, storing, transmitting, retransmitting,
amplifying, switching, providing connectivity for, or routing
communications services; or
▪ Provide internet access.
o Such exemption does not apply to the retail sale of personal consumer electronics;
and
o Beginning July 1, 2022, the Commissioner of the Department of Revenue (DOR)
shall reimburse counties and municipalities for loss of revenue resulting from the
sales tax exemption.
• The proposed legislation removes the current end date of June 30, 2025.
• According to DOR, taxpayers are required to apply for this exemption and report the
amount of exempt sales they estimate to make. Taxpayers are further required to report
their actual exempt sales on the sales tax return in the month in which those sales occur.
• The current sales tax rate is 7.0 percent; the average local option sales tax rate is estimated
to be 2.5 percent; the effective rate of apportionment to local government pursuant to the
state-shared allocation is estimated to be 3.617 percent.
• Based on the exempt sales reported to DOR, the decrease in state and local revenue since
implementation of the exemption is as follows:
SB 925 - HB 1181 2
FY22-23 FY23-24 FY24-25 YTD FY24-25*
Reported Exempt Sales $146,256,333 $376,625,605 $180,763,709 $361,527,418
State Tax ($10,237,943) ($26,363,792) ($12,653,460) ($25,306,919)
Local Tax ($3,656,408) ($9,415,640) ($4,519,093) ($9,038,185)
TOTAL ($13,894,352) ($35,779,432) ($17,172,552) ($34,345,104)
*Adjusted for a full year
• Based on information previously provided by DOR, the hold harmless provision is
assumed to apply to both the local option sales tax revenue and the state-shared sales tax
allocation and is reflected as a decrease in state revenue. Therefore, the state will realize 100
percent of the decrease in sales tax collections.
• Due to the current expiration date being June 30, 2025, the first year of the proposed
legislation’s indefinite extension is FY25-26.
• For the purpose of this analysis, the estimated recurring decrease in state revenue will be
$35,000,000.
• Therefore, the recurring decrease in state sales tax revenue as a result of the proposed
legislation is estimated to be $35,000,000 in FY25-26 and subsequent years.
CERTIFICATION:
The information contained herein is true and correct to the best of my knowledge.
Bojan Savic, Executive Director