CHICAGO — Last October, a carwash operator with over 10 express washes was assessed by the Tennessee Department of Revenue (TDOR) for retroactive tax liability with an impact of more than $3.5 million, which could have potentially put him out of business, according to a press release.

The issue focused around the sudden interpretation of Tennessee Code 67-6-205(c), which, having been written almost 50 years ago, did not address the modern express carwash, the release continued.

In today’s express wash environment, operators ensure safety and quality by providing assistance to vehicles entering a building, such as guiding on to conveyors, protecting wiper arms, hydrating bugs or removing dangerous objects from open bed pickups, the release noted.

These safety and courtesy measures had been interpreted by TDOR as the trigger by which sales tax was applicable, the release added.

Consequently, current or previous operators who were providing one or more of the above complimentary services would be subject to prior sales tax liabilities, penalty and interest, and would be responsible for collecting sales tax in the future, the release reported. 

The operator asked the International Carwash Association (ICA) for assistance, which rallied a group of Tennessee operators on Nov. 1, 2018 to meet and discuss the issue, the release continued.

For the meeting, ICA brought in a lobbyist who had experience in dealing with like issues to help guide their future strategy, the release stated.

Coming out of that initial meeting, there was strong agreement that the operators needed to work together to engage a lobbyist to help clarify the language in the legislation and ensure that they would not face a future tax liability, the release added.

The Tennessee chapter of ICA was formed at the meeting, comprised of nine operators, and the chapter began a fundraising campaign in December for the lobbying effort, the release continued.

ICA committed the first $10,000 to the campaign and provided all administrative support for the fundraising effort, coordination of the chapter and the executive committee, the release noted.

In the end, the chapter exceeded its goal by raising nearly $200,000 and engaged the firm Waller Lansden Dortch & Davis, the release stated.

“We couldn’t have done this without the support of ICA,” said Executive Committee Member David Wild of Ultimate Shine Car Wash. “They were there when we needed them, and they eagerly engaged to make a real difference in the outcome. On behalf of all operators in Tennessee, we want to thank them for their support.”

The effort led to the passing of a new bill that clarifies the language for express carwash models to not collect sales tax, provided that the customer remains in custody, control and care of the vehicle.

However, this would not apply to full-service or flex-service carwash models where the customer exits the vehicle, the release concluded.