NASHVILLE, Tenn. - A Tennessee resident purchased 14 all-terrain vehicles (ATVs) within a six-month period from an out-of-state dealer and sold them in Tennessee for a profit. The resident encouraged the purchasers to report a lower price than what was paid, causing Tennessee to lose thousands of tax dollars. This is just one of many examples of such fraud the Tennessee Department of Revenue is working to eliminate through enhanced compliance efforts with other states.

Out-of-state purchases and consumer-to-consumer sales of these vehicles have created a great potential for sales and use tax fraud. In 2004, Tennessee and three other states, Kentucky, Virginia and West Virginia, joined forces to collect some of the thousands of dollars in unreported sales and use tax from sales of ATVs each year. The four states are members of the Southeastern Association of Tax Administrators (SEATA).

"The Department of Revenue takes fraudulent tax activity seriously," said Revenue Commissioner Loren L. Chumley. "This cooperative effort represents just one of the department's many ongoing compliance efforts. We need ATV owners and county clerks' assistance to ensure Tennessee's sales and use tax is administered equally and fairly."

SEATA sponsors a program to exchange tax information among its member states to facilitate tax administration and compliance across state boundaries. Member states are collecting and exchanging audited sales and purchase information on behalf of other member states so that use tax can be properly collected from the customer.

When a Tennessee consumer purchases an ATV in another state or from another individual in Tennessee, the consumer must title the vehicle and pay use tax on the sales price of the ATV to the local county clerk. If an out-of-state consumer purchases an ATV in Tennessee, a three-day removal affidavit applies to allow the consumer time to title the vehicle and pay tax in his/her state of residence. This is also an area of potential fraud. Misuse of a three-day affidavit or intentional underreporting of a purchase price will result in the imposition of a 100 percent fraud penalty, interest and may result in criminal prosecution.

To report tax fraud on ATVs or any other type of tax fraud, call the toll-free tax fraud hot line at (800) FRAUDTX (372-8389).

Revenue receives information from various sources, including the Uniform Commercial Code through the Secretary of State's office and information about boats, all-terrain vehicles and motorcycles from other states through exchange programs.

The Department of Revenue collects approximately 92 percent of total state tax revenue. During the 2003-2004 fiscal year, the department collected $9.1 billion in state taxes and fees. In addition to collecting state taxes, $1.6 billion of local sales tax was collected by the department for local governments during the 2003-2004 fiscal year. Besides collecting taxes, the department enforces the revenue laws fairly and impartially in an effort to encourage voluntary taxpayer compliance. The department also apportions revenue collections for distribution to the various state funds and local units of government. To learn more about the department, log on to www.Tennessee.gov/revenue.

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