1. Professional Privilege Tax
John Williams, JD

2. What is this tax?
Engaging in the professions listed in T.C.A. § is declared by the Tennessee legislature to be a privilege taxable by the State.
The tax revenue collected by the Department of Revenue is deposited into the state general fund and used to support all the functions of state government.

3. Who must pay this tax?
The professions subject to this tax are listed in T.C.A. § (a): (1) Persons registered as lobbyists pursuant to § ; (2) Persons licensed or registered under title 48, chapter 1 as: (A) Agents; (B) Broker-dealers; and (C) Investment advisers.

4.    (3) Persons licensed or registered under title 62 as:       (A) Accountants;       (B) Architects;       (C) Brokers, as defined in § ;       (D) Engineers; and       (E) Landscape architects.

5. (4) Persons licensed or registered under title 63 as:       (A) Audiologists;       (B) Chiropractors;       (C) Dentists;       (D) Optometrists;       (E) Osteopathic physicians;       (F) Pharmacists;       (G) Physicians;     

6.    (G) Physicians;       (H) Podiatrists;       (I) Psychologists;       (J) Speech pathologists; and       (K) Veterinarians.

7.    (5) Persons licensed as attorneys by the supreme court of Tennessee; and    (6) Persons registered as athlete agents pursuant to title 49, chapter 7, part 21.

8. How long has this tax been in effect?
The professional privilege tax (PPT) was first enacted by the Tennessee General Assembly in 1992.
This tax was enacted instead of an income tax and instead of requiring professionals to collect and pay sales tax on the services they provide.

9. How much is this tax? From 1992 to 2002, the PPT was $200 a year.
In 2002, the General Assembly raised the tax to $400 a year.
The tax must be paid by June 1 of each year.
Penalties and interest are assessed if an individual does not pay the tax on time.
A person’s license may be suspended or revoked if the tax is not paid at all.

10. How much tax revenue does the State receive from the PPT?
The State of Tennessee receives about $77,500,000 from the PPT each year.
Of that amount, Speech Pathologists pay $656,000 each year, and Audiologists pay $126,400. (These figures are for 2012.)

11. ARCHITECT 2,899 $1,159,600.00
ATTORNEY 17,584 $7,033,600.00
AUDIOLOGIS 316 $126,400.00
BR-DEALER 1,419 $567,600.00
BR DLR AGT 99,062 $39,624,800.00
CPA 8,629 $3,451,600.00
CHIROPRCTR 954 $381,600.00
DENTIST 3,314 $1,325,600.00
ENGINEER 9,862 $3,944,800.00
STATE EMPL 2,449 $979,600.00
STATE JUDG 1 $400.00
INV.ADVISR 204 $81,600.00
LANDS ARCH 259 $103,600.00
LOBBYIST 362 $144,800.00
ST COL EMP 953 $381,200.00
OPTOMETRST 1,111 $444,400.00
OSTEOPATH 846 $338,400.00
PHARMACIST 8,992 $3,596,800.00
PHYSICIAN 18,740 $7,496,000.00
PODIATRIST 218 $87,200.00
PSYCHOLGST 1,145 $458,000.00
ACCOUNTANT 18 $7,200.00
PRIN BRK 3,227 $1,290,800.00
SPEECH PTH 1,640 $656,000.00
SPORTS AGT 59 $23,600.00
VETERINARN 1,795 $718,000.00

12. Why are some professions not required to pay the PPT?
No one seems to know the answer to that question.
In general, the professions which earn the most money and practice independently have been included.
But it is not clear why speech pathologists and audiologists were included, when physical therapists and occupational therapists were not included.

13. Doesn’t this violate the Tennessee Constitution?
In 2004 the Tennessee Attorney General said the statute creating the PPT is constitutional.
The Attorney General said the legislature has broad discretion to determine which professions to include within the scope of the tax.
The Attorney General said the disparity in average income of the professions required to pay the PPT does not violate the due process or equal protection provisions of the Constitution.

14. Is the PPT a fair tax?
TAASLP believes that the PPT is not a fair tax for the following reasons:
1. Many health care professionals are not required to pay the tax. Speech pathologists work closely with physical therapists, occupational therapists, and nurses on a daily basis. None of those professionals have to pay the tax. In fact, only 11 of the 30 health care professions listed in Title 63 of the Tennessee Code have to pay this tax.

15. 2. All the professions listed in T. C. A. §67-4-1702
2. All the professions listed in T.C.A. § pay the same amount of tax -- $400 a year. Yet many of the professionals required to pay the PPT have incomes which exceed $100,000 a year, while the average speech pathologist or audiologist earns $60,000 or less. This tax creates a greater hardship for SLPs and audiologists than it does for most of the other professionals who pay it.

16. 3. Audiologists and speech pathologists are not able to raise their fees to recover the tax from their clients and patients. Most of them are either salaried employees of hospitals and other institutions or receive fixed reimbursement from insurance companies and government agencies. Most audiologists and speech pathologists pay the tax out of their own pockets, unless they are lucky enough to have an employer who agrees to pay it for them.

17. What about audiologists and speech pathologists who work in the schools?
There are more than 1000 SLPs and about 15 audiologists who hold a license from the Tennessee Department of Education to provide services in the primary and secondary schools.
They are not required to hold a professional license from the Board of Communications Disorders and Sciences, and thus they are not required to pay the PPT.

18. However, many of the SLPs and audiologists who work in schools would like to supplement their income by working in the private sector part-time or in the summer.
To do so, they must hold a license from the Board of Communications Disorders and Sciences.
By obtaining this license, they become subject to the PPT.
This is a strong disincentive to those who might otherwise provide these services in the private sector and deprives Tennesseans of the services of many SLPs and audiologists.
This is a strong argument in favor of removing SLPs and audiologists from the list of professions required to pay the PPT.

19. What can we do about the PPT?
For many years, TAASLP has been trying to get the statute changed to remove SLPs and audiologists from the list of professionals required to pay the PPT.
Audiologists have been divided about whether they want to be removed from the list because of the fact that (like many of the other professions which pay the tax) they must hold a doctorate degree.
The current position of the TAA is to seek to remove audiologists from having to pay the tax.

20. What are the chances of success?
From 2008 to 2011, Tennessee’s economy was not in good shape. As a result, sales tax collections were down. The State needed every penny of taxes it could get.
In the last three years, the economy (and sales tax collections) have improved dramatically.
The State is not as strapped for tax revenue.

21. Have any other taxes been repealed?
In 2012, the Tennessee legislature voted to repeal the gift tax in its entirety.
In 2012, the Tennessee legislature voted to phase out the inheritance tax over a 5-year period, raising the monetary level of estates to which the tax applies in each year from 2012 through After 2016, there will be no tax on any estate.

22. In 2012 and 2013, the Tennessee legislature reduced the sales tax on food sold at grocery stores and other retail locations from 5.5% to 5%.
In 2013, the Tennessee legislature changed the law which exempts persons 65 or older from having to pay the Hall tax on income from stocks and bonds if their total annual income is below a certain amount.
The exemption level was increased from $26,200 to $37,000 for single persons and from $37,000 to $59,000 for couples.

23. What about repealing the PPT?
Senate Bill 1238/House Bill 1080 deletes SLPs from the list of professionals required to pay the PPT.
This bill can be amended to include audiologists.
Senate Bill 1238 is sponsored by Sen. Janice Bowling of Tullahoma.
House Bill 1080 is sponsored by Rep. Darren Jernigan of Nashville.

24. How can you help the effort?
Talk with your state senator and your state representative in person.
It is not enough to simply send a letter or .
During the fall, you can usually set up a meeting with your legislators in your home town.
Don’t be afraid to call them to set up a meeting. They like to meet with constituents.

25. What if you don’t know who your legislators are?
Go to the following website:
On the right-hand side of the home page, look under “Find Your Legislator.”
Type in your home address.
Your legislators will be displayed, with all their contact information.
The rest is up to you!

26. Won’t it take time to meet with my legislators?
Yes, it will.
But the question is, how badly do I want to get rid of the PPT?
If you’re really tired of paying the PPT or if it is a real financial burden to you, then you won’t mind spending a little time explaining that to your legislators.

27. What should you say to your legislators?
Just “tell it like it is”.
Explain in your own words why you think it is unfair for SLPs and audiologists to have to pay the PPT.
The TAASLP lobbyist can provide handouts for you to use:
John P. Williams
(615)