The State of Tennessee imposes numerous taxes, one of which is the sales and use tax. This tax, in part, essentially taxes the sale of tangible personal property "when the tangible personal property is not sold, but is used, consumed, distributed, or stored for use or consumption in this state." T.C.A. 67-6-203. In the case of McCurry Expeditions, LLC, et al. v. Richard Roberts,Tennessee imposed a $100,000 plus tax bill on an out of state limited liability company (LLC), which had its single owner maintaining his personal residence in Tennessee. The LLC previously bought a $900,000 motor home for the purpose of traveling throughout the United States to use it as a "mobile office to research, develop and purchase recreational parks and other real property in states outside the State of Tennessee." The LLC stored the motor home in Tennessee part of the year and all trips originated from its owner's residence in Tennessee.

The LLC challenged the tax bill and penalty in Chancery Court. The LLC and the State of Tennessee both presented their evidence via summary judgment motions. The case turned on the interpretation of the statutory terms "used" in Tennessee or "stored for use" in Tennessee. The LLC, which prevailed at the trial court level, argued, " that it did not “exercise any right or power” over the motor home in Tennessee because the motor home is “used exclusively for out of state purposes, was not maintained in the State of Tennessee for operational purposes and driven any distance on a Tennessee roadway to a state line to begin the out of state use trip."

The Court of Appeals didn't agree and found that the act of driving the motor home in Tennessee constituted use. Thus, the motor home was subject to taxation. The Court of Appeals went on to determine other issues, but ultimately reversed the trial court. Thus, the LLC owed the tax bill.

Taxation is not something to be taken lightly. I often hear from accountants and bookkeepers that the sales and use tax is one of the more vexing state taxes for their clients. Thus, it is crucial that competent accountants and bookkeepers are on each and every company's core team of professionals.

McCurry Expeditions, LLC, et al. v. Richard Roberts, No. M2014-00526-COA-R3-CV, (Tenn. Ct. App. Nov. 14, 2014).