Tennessee Sales Tax Rates

Total Range for 2024

7%–10%

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Why do you need to collect sales tax in Tennessee?

If you’re selling goods and services in Tennessee then sales tax might apply! To determine your obligation, you need to understand “nexus,” which ties businesses to states for tax purposes.

Two types of nexus exist:

  1. Physical Nexus: Having a physical presence, like an office, warehouse, or employees in Tennessee, triggers this type. If you do, you likely need to collect sales tax.
  2. Economic Nexus: This kicks in when your sales within Tennessee exceed a certain economic threshold. Even without a physical presence, surpassing this threshold requires collecting sales tax.

Is what you’re selling taxable in Tennessee?

Now that you understand the basics of Tennessee’s sales tax and nexus thresholds, let’s delve into whether your specific products or services are taxable.

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How to register for sales tax in Tennessee

To register for sales tax in Tennessee, you can do it online through the Tennessee Taxpayer Access Point (TNTAP):

  1. Visit the TNTAP website: https://www.tn.gov/revenue.html.
  2. Click the link titled “Register a New Business” on the homepage. This will take you directly to the online application.
  3. You’ll need to create a TNTAP login if you don’t have one already. Follow the prompts to set up your account.

Alternatively, you can register by mail or in person:

  • Mail: Download the Registration Form (RV-F1300501) and instructions from the Department of Revenue’s website and mail it to any of the listed offices.
  • In Person: Visit one of the Department of Revenue offices. Trained personnel can assist you with the registration process.

How to collect sales tax in Tennessee

  1. Include the Tax in Your Prices:
  • The easiest way is to simply show the total price including tax to your customers. This avoids any last-minute surprises at checkout.
  • You can adjust your point-of-sale system or pricing displays to reflect the total price with tax.
  1. Collect the Tax at the Time of Sale:
  • You’re responsible for collecting the appropriate sales tax from your customers at the time of sale.
  • The collected amount represents what you’ll later remit to the Tennessee Department of Revenue.
  1. Keep Good Records:
  • It’s crucial to maintain accurate records of your sales and the amount of sales tax collected for each transaction.
  • These records will be vital when you file your sales tax returns.
Example:

Let’s say you run a small clothing store in Nashville, Tennessee. The state sales tax rate is 7%, and Nashville has a local rate of 2.75%.

  • You have a shirt priced at $20 before tax.
  • To find the total tax, add the state and local rates: 7% + 2.75% = 9.75%
  • To calculate the total tax amount, multiply the price by the total tax rate: $20 x 9.75% = $1.95 (round to the nearest cent)
  • The final price the customer pays would be $20 (price) + $1.95 (tax) = $21.95

FAQs

Do you have a physical nexus in Tennessee?

A physical nexus in Tennessee, for tax purposes, means you have a connection to the state that’s substantial enough to require you to collect and remit sales tax. Here’s how to know if you might have one:

Common Triggers for Physical Nexus:

  • Having a physical presence: This includes owning or leasing a store, warehouse, or office in Tennessee.
  • Employees in Tennessee: If you have employees who regularly work in Tennessee, even if it’s remotely, that could establish nexus.
  • Inventory in Tennessee: Storing inventory in a Tennessee warehouse, even if fulfilled by a third party like Amazon (FBA), might create nexus.
  • Regularly attending trade shows or events: Having a salesperson or representative attending trade shows or soliciting sales in Tennessee for more than a short period could create nexus.
Do you have an economic nexus in Tennessee?

Currently, Tennessee’s economic nexus threshold is $100,000 of sales in the past 12 months. This means if your out-of-state business makes more than $100,000 in sales to Tennessee customers during a year, you likely have economic nexus and need to register to collect and remit sales tax.

What is use tax in Tennessee?

In Tennessee, use tax acts as the counterpart to the state’s sales tax. It applies to situations where the sales tax wasn’t collected at the time of purchase. Here’s a breakdown:

  • When it applies: Use tax applies to taxable goods you purchase from outside Tennessee and bring or have shipped into the state for your own use.
  • Who is responsible:  The responsibility to pay use tax falls on both individual consumers and businesses operating in the state.
Do you need a seller/reseller permit?

In Tennessee, a seller’s permit isn’t exactly called a permit, but rather a sales tax registration.  However, you might also need a separate resale certificate. Here’s a breakdown to clarify:

  • Sales Tax Registration: This is required for most businesses that sell taxable goods and services in Tennessee.  It essentially allows you to collect sales tax from your customers and then remit it to the state.  There’s no fee to register, and you can do it online through the Tennessee Taxpayer Access Point (TNTAP).
  • Resale Certificate: This is a separate certificate that allows you to purchase goods without paying sales tax upfront if you intend to resell them.  You’ll provide this certificate to your suppliers so they don’t charge you sales tax when you buy items for resale.
How to get a sales tax permit/license in Tennessee?

To register for sales tax in Tennessee, simply get a sales tax account through TNTAP. It’s free online, mail-in, or in person. No permit needed, but register even if you sell tax-exempt goods. You’ll get a certificate to display at your business. Easy!

When are Tennessee's Returns Due?

Tennessee’s sales and use tax return due date depends on your filing frequency:

  • Monthly filers: If your sales tax liability is high (usually exceeding a certain threshold set by the state), you might be required to file and pay sales tax monthly. The deadline for monthly filers is the 20th day of the following month.
  • Quarterly filers: Most businesses file sales tax returns quarterly. The deadlines for quarterly filers are:
    • 1st Quarter (January – March): April 20th (following month)
    • 2nd Quarter (April – June): July 20th (following month)
    • 3rd Quarter (July – September): October 20th (following month)
    • 4th Quarter (October – December): January 20th (of the following year)
How to file sales tax in Tennessee
  1. Register for a Sales Tax Account (if you haven’t already)
  2. Determine Your Filing Frequency
  3. Gather Your Records:
  • You’ll need records of your total sales, taxable sales, sales tax collected, and any other relevant information for the filing period.
  1. Prepare Your Return:
  • You can file your sales tax return electronically through TNTAP. There’s a user guide available to assist you: [invalid URL removed]
  1. Make Your Payment:
  • You can also submit your payment electronically through TNTAP. They accept various payment methods like debit/ACH, credit card, or electronic funds transfer.
Is anyone exempt from sales tax in Tennessee?

Exempt Customers:

  • Government Agencies: State and local government agencies are typically exempt from paying sales tax on purchases for official government business.
  • Certain Non-Profit Organizations: Qualifying non-profit organizations may be exempt for purchases used exclusively for their charitable or educational purposes.
  • Merchants Purchasing for Resale: Businesses with a valid resale certificate can purchase goods without paying sales tax upfront, as long as they intend to resell those items.

Exempt Goods:

  • Groceries: Most groceries are subject to a reduced sales tax rate in Tennessee (currently 5.5%). Certain prepared foods and restaurant meals are generally taxable.
  • Prescription Drugs and Medical Equipment: Prescription drugs and qualifying medical equipment are exempt from sales tax.
  • Farm Equipment and Supplies: Equipment and supplies used directly in farm production are generally exempt.
  • Religious Items: Bibles, hymnals, and other items used exclusively for religious worship are exempt.

Contact Yonda Tax Today

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