AN ACT to amend Tennessee Code Annotated, Title 9; Title 54; Title 55 and Title 67, relative to the allocation of sales tax revenue for the highway fund.
Summary
HB0963 changes how Tennessee allocates state sales tax revenue from the sale, use, consumption, distribution, or storage of new and used motor vehicles and new and used tires. Beginning July 1, 2025, any growth in sales tax collections from those items above a defined “base tax revenues” amount would be deposited into the state highway fund. The bill defines base tax revenues as the amount collected in the prior fiscal year before the new allocation takes effect, and it ties the definitions of “motor vehicle” and “tire” to existing law.
The bill also preserves existing earmarks for certain sales tax revenues that are already dedicated to educational purposes or otherwise allocated under prior public acts. In other words, the new highway-fund diversion applies only to the incremental increase in revenue from these vehicle- and tire-related sales taxes, and not to portions of the tax stream that are already constitutionally or statutorily committed elsewhere.
Impact
The bill would amend Tennessee Code Annotated § 67-6-103 to create a new ongoing revenue allocation mechanism for the highway fund. It would redirect future growth in sales tax revenue from motor vehicles and tires into transportation funding, while leaving existing base revenue and certain preexisting education-related allocations untouched. This would affect state budget distribution formulas and increase dedicated funding for highways without raising the tax rate itself.
Sentiment
No committee transcripts or recorded votes were provided, so there is no direct evidence of debate, support, or opposition in the available record. Based on the bill’s structure, it appears to be a targeted transportation funding measure rather than a broad tax policy change, which often draws pragmatic support from infrastructure advocates and fiscal planners. However, because it diverts future sales tax growth from the general allocation structure, it could also raise concerns among those focused on preserving flexible revenue for other state priorities.
Contention
The main point of potential contention is the redirection of incremental sales tax revenue away from the state’s general allocation framework and into the highway fund. Supporters would likely favor the dedicated, predictable funding stream for transportation infrastructure, while opponents may object to reducing the pool of revenue available for other uses or to the precedent of earmarking tax growth. A secondary issue is the bill’s carve-out for existing education-related sales tax allocations, which suggests lawmakers were careful to avoid disrupting prior funding commitments.
Crossfiled
AN ACT to amend Tennessee Code Annotated, Title 9; Title 54; Title 55 and Title 67, relative to the allocation of sales tax revenue for the highway fund.