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NASHVILLE — As Tennessee grapples with budget cuts and declining revenue, state officials say an incentive plan to collect unpaid business taxes, coupled with a tax crackdown, could bring in several million additional dollars each year.

The state took over collections from local clerks this summer and discovered that as many as 100,000 Tennessee businesses had not been paying taxes on gross receipts, many of them for several years.

“What we found was kind of surprising,” Revenue Commissioner Reagan Farr told lawmakers last month.

The Tennessean reports the state is offering to waive penalties if businesses voluntarily register and pay three years of back taxes with interest before being contacted by the state. Companies that wait to be contacted will have to pay six years to 10 years of back taxes plus interest and penalties.

“We are definitely trying to encourage people to talk to their CPA and see whether they're subject to business tax and, if they are, to get into compliance because this is going to be a major focus,” Farr said.

The program is meant to spare the state the expense of finding and auditing businesses that have not paid their taxes.

“Going and auditing people is not the most efficient way to administer a tax,” Farr said in an interview. “We want to make compliance easy.”

The program applies to the business tax on gross receipts, and the amount collected varies depending on the type of business. The gross receipts tax is separate from both the franchise and excise tax and the sales tax, which have long been administered by the state.

Because the amount paid by individual businesses varies widely, it is difficult to predict how much state revenues will increase once the gross receipts tax is enforced.

A survey by the National Federation of Independent Business found that most of its members pay $200 to $800 annually. That suggests the program could bring in several million dollars. It comes at a time when the state is planning cuts of 6 percent to 9 percent in most departments to deal with declining tax revenue.

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