§ 57-4-306 — Distribution of collections

(a) All gross receipt taxes collected under § 57-4-301(c) shall be distributed by the commissioner of revenue as follows: (1) Fifty percent (50%) to the general fund to be earmarked for education purposes; and (2) The other fifty percent (50%) to be distributed to local political subdivisions as follows: (A) Collections for privileges exercised in an incorporated municipality shall be distributed by the commissioner to the city recorder; and (B) Collections for privileges exercised in an unincorporated area of the county shall be distributed by the commissioner to the county trustee. (b) The proceeds received by a local political subdivision pursuant to subdivision (a)(2) must be distributed by the local political subdivision in the following manner: (1) One-half (½) of the proceeds must be distributed as follows: (A) If the county school system is the only LEA in the county, then to the county trustee for the county school system from the collection of taxes in the county or any city exercising the privilege authorized under § 57-4-301(c) ; (B) If a city exercises the privilege authorized under § 57-4-301(c) and operates a kindergarten through grade twelve (K-12) school system, then to the city recorder, who shall retain the collections for the city school system; (C) If a city exercises the privilege authorized under § 57-4-301(c) and operates a city school system that is not a kindergarten through grade twelve (K-12) school system, then to the city recorder: (i) In the amount the percentage that the prior year's average daily attendance (ADA) of the students in the city school system is to the prior year's ADA of public school students residing in the city who attend either the city school system or the county school system with the remaining amount distributed to the county trustee for the county school system, if the city lies entirely in a single county; or (ii) In the amount the percentage that the prior year's ADA of the students in the city school system is to the prior year's ADA of public school students residing in the city who attend either the city school system or a county school system with the remaining amount divided between the counties based on where the tax was collected and distributed to the county trustees for the county school systems, if the city lies within two (2) or more counties; (D) Notwithstanding § 49-3-315 , if a city exercises the privilege authorized under § 57-4-301(c) , but does not operate a city school system, then to the county trustee for the county school system; (E) If a special school district lies, in whole or in part, within a city that exercises the privilege authorized under § 57-4-301(c) , then to the appropriate official acting for the special school district in the amount the percentage the ADA of public school students residing in the city and attending the special school district is to the total ADA of city public school students who attend either the special school district or the county school system with any remaining amount distributed to the county trustee for the county school system; (F) Notwithstanding § 49-3-315 , if a county exercises the privilege authorized under § 57-4-301(c) and one (1) or more city school systems operate within the county, then to the county trustee for the county school system any tax revenues collected outside the boundaries of cities exercising the privilege authorized under § 57-4-301(c) that have city school systems; or (G) If a city that lies in two (2) or more counties exercises the privilege authorized under § 57-4-301(c) but does not operate a city school system, then tax revenues collected in the city must be divided between the counties based on where the tax was collected and distributed to the county trustees for the county school systems; (2) The other one-half (½) of the proceeds must be distributed as follows: (A) Collections of gross receipts collected in unincorporated areas, to the county general fund; and (B) Collections of gross receipts in incorporated cities and towns, to the city or town wherein such tax is collected; and (3) As used in subdivision (b)(1), "average daily attendance" or "ADA" means: (A) If the school system was in operation during the prior school year, the aggregate days' attendance of the school system during the prior school year divided by the number of days school was in session during the prior school year; or (B) If the school system was not in operation during the prior school year, then the estimated expected attendance of the school system for the current school year as reported to the department of education. (c) Notwithstanding subdivision (a)(2), the fifty percent (50%) of the gross receipt taxes allocated to local political subdivisions by subdivision (a)(2) and collected in a municipality which is a premier tourist resort shall be distributed to and expended by such municipality for schools in such municipality. (d) By August 1, 2014, every city or county that exercises the privilege authorized under § 57-4-301(c) shall provide written notice to each school system operating within its jurisdiction. This notice shall contain a statement that the local political subdivision exercises the privilege authorized under § 57-4-301(c) , a statement that students within the jurisdiction attend a school or schools operated by the school system, a statement that the school system is authorized to receive a portion of the revenues collected, and a reference to this part. A city or county that, subsequent to July 1, 2014, elects to exercise the privilege authorized under § 57-4-301(c) , shall comply with the notice provisions of this subsection (d) within thirty (30) days of the effective date of the referendum. (e) If the local political subdivision fails to remit the proceeds to the appropriate school fund, system, or systems as required under subsection (b) within sixty (60) days of receipt from the commissioner, then the aggrieved local school board shall notify the comptroller of the treasury who shall deliver by certified mail a written notice of such failure to the local political subdivision within five (5) business days of notice of the failure. (f) In the event the local political subdivision fails to remit the proceeds within thirty (30) days of the receipt of such notice, the comptroller of the treasury shall direct the commissioner to withhold future distributions of proceeds to the local political subdivision authorized under subsection (b) until a final determination is made pursuant to subsection (g). (g) Upon the commissioner withholding distributions of proceeds as authorized under subsection (f), an aggrieved local school board shall have the authority to pursue equitable relief against the local political subdivision in the chancery court; provided, however, that in the event that the state is a party or becomes a party to the suit, then such suit shall be filed or transferred to the chancery court of Davidson County. Upon receipt of a copy of the final judgment of the court, the commissioner shall distribute all withheld proceeds to the local political subdivision, which shall remit such proceeds to the aggrieved party pursuant to the judgment. If the amount of the judgment is not satisfied by the withheld proceeds, then the local political subdivision shall be solely responsible for remitting future proceeds to the aggrieved party pursuant to the judgment. (h) (1) Subsections (a)-(i) shall not apply in counties having a population, according to the 2010 federal census or any subsequent federal census of: not less than nor more than 98,900.................... 99,000 336,400.................... 336,500 In such counties, all gross receipt taxes collected under § 57-4-301(c) shall be distributed by the commissioner of revenue as follows: (A) Fifty percent (50%) to the general fund to be earmarked for education purposes; and (B) The other fifty percent (50%) to be distributed to local political subdivisions as follows: (i) Collections for privileges exercised in an incorporated municipality shall be distributed by the commissioner to the city recorder; and (ii) Collections for privileges exercised in an unincorporated area of the county shall be distributed by the commissioner to the county trustee. (2) The proceeds received in each local political subdivision pursuant to subdivision (h)(1)(B) shall be distributed by the local political subdivision in the following manner: (A) One-half (½) of the proceeds shall be expended and distributed in the same manner as the county property tax for schools is expended and distributed; any proceeds expended and distributed to municipalities which do not operate their own school systems separate from the county are required to remit one-half (½) of their proceeds of the gross receipts liquor-by-the-drink tax to the county school fund; and (B) The other one-half (½) of the proceeds shall be distributed as follows: (i) Collections of gross receipts collected in unincorporated areas, to the county general fund; and (ii) Collections of gross receipts in incorporated cities and towns, to the city or town wherein such tax is collected. (i) [Expired effective July 1, 2023. See the Compiler's Notes.]

Legislative History

Amended by 2020 Tenn. Acts, ch. 696, Secs.s 1, s 2, s 3, s 4 eff. 7/1/2020. Amended by 2019 Tenn. Acts, ch. 194, s 2, eff. 7/1/2019. Amended by 2019 Tenn. Acts, ch. 194, s 1, eff. 7/1/2019. Amended by 2018 Tenn. Acts, ch. 687, s 2, eff. 7/1/2018. Amended by 2018 Tenn. Acts, ch. 687, s 1, eff. 7/1/2018. Amended by 2017 Tenn. Acts, ch. 346, s 2, eff. 7/1/2017. Amended by 2017 Tenn. Acts, ch. 346, s 1, eff. 7/1/2017. Amended by 2016 Tenn. Acts, ch. 885, s 2, eff. 7/1/2016. Amended by 2016 Tenn. Acts, ch. 885, s 1, eff. 7/1/2016. Amended by 2015 Tenn. Acts, ch. 220, s 2, eff. 7/1/2015. Amended by 2015 Tenn. Acts, ch. 220, s 1, eff. 7/1/2015. Amended by 2014 Tenn. Acts, ch. 901, s 1, eff. 7/1/2014. Acts 1967, ch. 211, § 3; T.C.A., § 57-162; Acts 1982, ch. 942, §§ 1, 2; 1983, ch. 356, § 1; 2003 , ch. 355, § 19; 2005, ch. 500, § 2; 2006, ch. 989, § 7.