Tennessee Sales Tax
Tennessee Sales Tax At a Glance
State rate: 7%
Maximum combined rate: 9.75%
Tax Holidays: Back to School, Second Amendment
Governing Body: Tennessee Department of Revenue
If you’re a retailer in Tennessee, or if you make online sales to customers who live there, then you’ll want to make yourself familiar with Tennessee sales tax law. All in-state retailers and many out-of-state sellers are now required to collect sales tax from their Tennessee customers, then file a sales tax return and remit that money to the Tennessee Department of Revenue. Read on to find out if you have Tennessee sales tax nexus, and how that affects your responsibilities as a retailer.
Tennessee Sales Tax Rates
What is the sales tax rate in Tennessee?
Tennessee sales tax varies by location. There is a state sales tax of 7% and local tax imposed by city, county, or school districts, no higher than 2.75%. Groceries are taxed at 5% (some locations charge more), and some services have a different tax rate. The lowest total tax rate in Tennessee is 8.5%. The average sales tax rate across all counties and municipalities is 9.614%.
Tennessee also has a state single article rate of 2.75% on any single item sold in excess of $1,600 but not more than $3,200.
Is Tennessee Destination-Based or Origin-Based?
Tennessee is an origin-based state. This means that the tax rate you use to calculate sales tax on orders is the rate where your business is located. If your local tax rate is 9.25%, then you’ll charge 9.25% sales tax on all orders shipping to Tennessee addresses, regardless of what the sales tax rate is at the location you’re shipping to.
Does Tennessee Have a Sales Tax Holiday?
Like certain other states, Tennessee also has a sales tax holiday that exempts the tax for clothing and school supplies that cost $100 or less and for computers and tablets that cost $1500 or less. The tax holiday fell on the last weekend of July 2021 (July 30-August 1). Additional sales tax holidays were implemented in 2021 for food and ingredients and gun safety equipment. Neither has been renewed yet for 2022.
Tennessee Sales Tax Nexus
A sales tax nexus is a legal way of stating that a small business has a significant enough presence within a state that the state can require them to collect and remit sales tax on behalf of their customers. Traditionally this has been only a physical presence, but it now consists of any “corporate presence.” Within Tennessee, this “corporate presence” means:
- Having an office, warehouse, or another place of business in Tennessee
- Having an employee, contractor, salesperson, or other solicitors who operate physically within the state
- Furnishing property, or providing services that are subject to sales or use tax while in the state
Establishment of Economic Sales Tax Nexus in Tennessee
In Tennessee, economic nexus can be established for remote sellers in one of three ways, depending on if you are a:
- Marketplace Seller – Remote sellers who operate through a marketplace facilitator’s website and have made more than $100,000 in sales in the state during the previous 12 months or if they have a physical presence in the state may be required to register to collect sales tax.
- Marketplace Facilitator – Businesses that own or operate websites that facilitate marketplace sellers and make more than $100,000 in sales within Tennessee over 12 months are required to collect and remit sales tax to the state.
- Out-of-State Dealer – Regardless of physical presence in Tennessee, out-of-state dealers must collect and remit sales tax if they have $100,000 or more in sales within the state. There are specific details based on the type of sales made to check on the Tennessee Department of Revenue website.
A sales tax nexus is a legal way of stating that a business has a significant enough presence within a state, that the state can require them to collect and remit sales tax on behalf of their customers. Traditionally this has been only a physical presence, but as of 2017 that changed. The types of physical presence that constitute nexus include:
- Having an office, warehouse, or other place of business in Tennessee
- Having a salesperson or other solicitor who operates physically within the state
- Furnish property or provide services that are subject to sales or use tax while in the state
The state will also determine that out of state sellers have economic nexus if they make more than $500,000 in sales to customers located in Tennessee, even if they have no physical presence as defined by the state. This rule was new for 2017, and more information can be found here.
Amazon sellers who use Fulfillment by Amazon (FBA) will particularly want to note the first element in the list above, because FBA does have several warehouses in Tennessee. Your use of FBA may create a sales tax nexus for your business regardless of the amount of sales you make within the state.
What is Taxable in Tennessee?
Tennessee sales tax applies to the sale of most goods, commonly known as tangible personal property (TPP). This includes property that can be seen, weighed, measured, felt, or touched. It also includes gas, steam, electric, water, and pre-written computer software. Custom-written software is taxable in certain situations as well.
Most other services are not taxable, including (but not limited to): furniture moving, medical services, beauty services, carpentry, lawn care service, and others. There are no broad exemptions for food or clothing, but there are annual sales tax holidays for clothing, some food and food ingredients, and gun safety equipment.
For more details, please see Tennessee’s Sales and Use Tax Guide.
All in-state retailers and out-of-state retailers who meet the economic nexus requirements must register for Tennessee sales and use tax. If your small business meets this threshold, you are required to register with the state of Tennessee to file and pay sales tax.
How do I register for a Tennessee resale certificate?
Registration for in-state tax filing is done through the department’s Tennessee Taxpayer Access Point (TNTAP). The website uses a wizard-based questionnaire to guide you through the process of registering. For out-of-state retailers who meet the requirements, you must also register to collect and remit Tennessee sales tax. This is also done through TNTAP.
Visit the Department of Revenue for:
- Tax filing instructions.
- Local tax rates are listed on this PDF and updated regularly.
- Sales tax holiday information
Payees may only file and pay online. Payments may be done via:
- Credit cards, or
- ACH payments, either via taxpayer bank account or their 3rd party vendor, Global Payment Systems.
Note that taxpayers with a block or restriction on their account who use ACH must provide the information as required by the state.
Filing Your Tennessee Sales Tax Return
Tennessee requires all sales and use tax returns and payments to be filed and paid electronically. This is done through the Tennessee Taxpayer Access Point (TNTAP). First-time filers must register for an account to file their return and make payments. After that, filers log in with their username and password to file future taxes.
A helpful video about filing your sales and use tax return through TNTAP can be found here.
How do I file Tennessee sales and use tax returns?
The state of Tennessee requires that all business file their sales tax returns electronically. The Department of Revenue provides a sales and use tax online filing application on their website. Returns can also be filed using software by an approved software vendor.
Tennessee Sales Tax Deadlines
How often do I need to file sales tax in Tennessee?
Tennessee requires businesses to file and pay sales tax monthly, quarterly, or annually. Your business’s estimated yearly income determines the frequency with which you must file. This will be determined when you apply for a sales tax account and should be listed on your exemption certificate.
The deadlines for filing sales tax in Tennessee are as follows:
- Monthly: No later than 20 days after filing period (20th of each month, or next available business day).
- Quarterly: No later than 20 days after filing period or next available business day. (January 20th, April 20th, July 20th, October 20th)
- Annual: January 20th or next available business day.
What are Tennessee’s sales tax deadlines?
Monthly Filer Due Dates
Quarterly Filer Due Dates
|January – March (Q1)||April 20|
|April – June (Q2)||July 20|
|July – September (Q3)||October 20|
|October – December (Q4)||January 20|
Annual Filer Due Dates
|January – December||January 20 of the following year|
If any of the above dates fall on holiday or weekend, the deadline is extended until the next business day.
Are there penalties and interest if I file late or fail to file?
If you do not make your sales tax payment on time, it is considered delinquent. If you make a smaller payment than the amount due, then it is called deficient. In both cases, both penalties and interest apply to the unpaid amount. Penalties may also be assessed if you pay by a method other than electronic payment.
The penalty is 8% of the unpaid amount for each month or partial month the tax is unpaid, for a maximum of 25%. Interest is calculated at the current rate, which can be found here. To calculate the interest, use the following formula:
Original liability * Rate * # of days delinquent / 365.25
If you aren’t comfortable calculating it, the Tennessee Department of Revenue will send you a bill for the correct amount.
Can I get my penalty waived?
The TN Department of Revenue does allow the penalty to be waived if there is a “good and reasonable cause” for the delay. One example is that the payer has had no previous payment problems over the last two years. If you think you qualify, sign in to your TNTAP account and follow the link for “Petition for Penalty Waiver”.
Tennessee Sales Tax Software
While calculating sales tax in Tennessee is easier than in many destination-based states, retailers may find that sales tax software helps them streamline the process and avoid the kinds of mistakes that lead to audits. Our TaxTools software is the answer. It pinpoints the right sales tax for every US address, and applies the appropriate sales tax to each order placed on your site. Then when you’re ready to file your return, our reports make the process simple. Configuring sales tax on your ecommerce store has never been easier. Contact us for more information or register for a free trial of AccurateTax’s TaxTools software.
You can also use our free sales tax calculator to look up the rate for any Tennessee address.
Last updated September 2023