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Deb is the head of marketing at Numeral. He has worked with the likes of Shopify and Wonderment and has helped countless ecommerce stores scale seamlessly. With a background in finance, he often finds himself advising stores on sales tax and good financial systems.
May 17, 2024 Reviewed by
Kevin is a licensed CPA in the state of California. Prior to Numeral, Kevin operated multiple ecommerce businesses and worked at KPMG as a tax advisor.
Navigate Tennessee's sales tax landscape with our comprehensive guide, covering compliance, rates, and regulations to keep your business on track.
In this articleNavigate Tennessee's sales tax landscape with our comprehensive guide, covering compliance, rates, and regulations to keep your business on track.
| State Taxing Authority | Tennessee Department of Revenue |
|---|---|
| Tennessee Base Sales Tax Rate | 7% |
| Local Tax Rates | Up to 2.75% |
| 2023 Tennessee Sales Tax Rate | 7% state rate plus applicable local rates |
| Tax Threshold | $100,000 in sales revenue |
| Website | https://www.tn.gov/revenue/taxes/sales-and-use-tax.html |
| Tax Line | (615) 253-0600 |
The Tennessee sales tax rate in 2023 is 7% state rate plus applicable local rates. This comprises a base rate of 7% plus a mandatory local rate that varies by jurisdiction. Depending on the local sales tax jurisdiction, the total tax rate can be as high as 9.75%.
You can look up the full table of sales tax rates in each city and county in Tennessee here. Local rates range from 1.5% to 2.75%.
Effective October 1, 2022, the sales tax on groceries was reduced temporarily. The state tax rate on groceries was reduced from 4% to 3%, and local tax rates on groceries may not exceed 1%. This grocery tax holiday is effective from October 1, 2022 through June 30, 2023.
To calculate Tennessee sales tax, you can use the following formula:
Tax = (Purchase Price x (State Rate + Local Rate))
For example, if making a $100 purchase in a jurisdiction with a 2% local rate, the sales tax would be $9:
Tax = ($100 x (0.07 + 0.02)) = $9
Penalties for failing to pay Tennessee sales tax can include fines of up to 25% of the taxes owed as well as additional penalties and interest charges. Criminal charges may also apply in cases of tax evasion.
Destination-based sales tax states collect tax based on where the purchase is delivered. Origin-based sales tax states collect tax based on where the sale originated from the seller.
Yes, Tennessee is a streamlined sales tax state and is an associate member of the Streamlined Sales and Use Tax Agreement (SSUTA).
| Type of nexus | Threshold |
|---|---|
| Physical presence | Any physical presence |
| Economic nexus | $100,000 in sales |
| Nexus with marketplaces | Depends on marketplace collection status |
Yes, you still need a Tennessee seller's permit even if you only make wholesale sales. The sales tax exemption for sales for resale relies on the buyer providing a valid resale certificate.
Yes, if you are making sales within Tennessee, even temporarily, you need a Tennessee seller's permit. There is no exception for temporary sellers.
Some common exemptions include:
The state tax rate on groceries is reduced from 5% to 4%, and local tax rates on groceries may not exceed 1%.
Yes, clothing is generally taxable in Tennessee unless specifically exempted by law. For instance, during the annual sales tax holiday weekend in July or August, clothing under $100 per item and school supplies may be exempt.
Yes, specified digital products like digital audio works, digital audio-visual works, and digital books are taxable in Tennessee. Other digital goods may also be taxable.
Yes, SaaS is considered taxable remotely accessed software in Tennessee. Accessing software from Tennessee is subject to Tennessee sales tax.
Generally no, but some specific services like telecommunications services, video programming services, lodging services, and certain installation/repair services are taxable.
Tennessee levies excise taxes on specific goods like motor fuels, tobacco products, alcoholic beverages, wine, and vapor products. Some key excise taxes include:
Some counties and cities in Tennessee also levy special taxes on beer in addition to the state beer barrelage tax:
So in addition to the regular state and local sales tax due on purchases of these items, the applicable Tennessee excise taxes also apply and are collected at the point of sale. The revenues from these sin taxes go towards various state funds and public programs.
Remote sellers with over $100,000 in Tennessee sales must register and collect Tennessee sales tax. Marketplace facilitators with over $100,000 in Tennessee sales facilitated on behalf of marketplace sellers must also collect tax.
The Tennessee gasoline tax rate is 27.4 cents per gallon. The Tennessee diesel tax rate is 27.4 cents per gallon. These rates are charged on top of the standard sales tax on fuel products.
All Tennessee jurisdictions levy a local option sales tax at the county and/or city level. Local sales tax rates range from 1.5% to 2.75% of the purchase price.
Even if you do not have a physical presence in Tennessee, you must register with the Tennessee Department of Revenue if you meet the economic nexus threshold. Out-of-state sellers with over $100,000 in Tennessee sales in the prior 12-month period have economic nexus.
Once registered, out-of-state sellers have two options for charging Tennessee sales tax:
When registering for a Tennessee sales tax permit, out-of-state sellers will need to provide information such as:
Register online through the Tennessee Taxpayer Access Point (TNTAP). There are no fees charged by the Tennessee Department of Revenue for obtaining a sales tax permit.
Yes, if the items sold are subject to Tennessee sales tax then the associated shipping charges are also generally taxable. The sales tax due would be calculated based on the combined item cost plus shipping.
There is an exception if multiple items are shipped together - some taxable and some not taxable. In that case, sellers can allocate the shipping charges based on the cost or weight of the taxable portion compared to the full shipment.
The Tennessee Department of Revenue requires all sales and use tax returns to be filed and paid electronically, either through the Tennessee Taxpayer Access Point (TNTAP) online filing system or via an approved software vendor.
The filing frequency assigned to businesses by Tennessee depends on expected taxable sales:
Monthly:
| Period | Due Date |
|---|---|
| January | February 20 |
| February | March 20 |
| March | April 20 |
| April | May 20 |
| May | June 20 |
| June | July 20 |
| July | August 20 |
| August | September 20 |
| September | October 20 |
| October | November 20 |
| November | December 20 |
| December | January 20 |
Quarterly:
| Period | Due Date |
|---|---|
| Jan - Mar (Q1) | April 20 |
| Apr - Jun (Q2) | July 20 |
| Jul - Sep (Q3) | October 20 |
| Oct - Dec (Q4) | January 20 |
Annual:
| Period | Due Date |
|---|---|
| Jan - Dec | January 20 |
If any due date falls on a weekend or holiday, the filing deadline moves to the next business day.
Tennessee charges a 5% per month penalty with a maximum of 25% on late filed returns or late payments. An additional penalty of 5% is charged for returns filed more than 30 days late.
Tennessee sales tax due dates are the 20th day of the month following the end of the reporting period. Due dates vary based on assigned monthly, quarterly, or annual filing status.
Yes, you must still file a $0 sales tax return even if you did not have any sales or collect any sales tax for the period.
Yes, you can file an amended sales tax return in Tennessee to correct underpayments or overpayments from a previously filed return. You may owe additional tax, interest, or limited penalties when amending a return.
Tennessee charges a penalty of 5% per month up to a maximum of 25% on late filed returns or payments. An additional 5% penalty applies to returns filed >30 days late. Interest also accrues on unpaid tax.
The Tennessee sales tax audit process typically involves:
During a Tennessee sales tax audit, businesses can expect auditors to thoroughly review financial statements, tax returns, invoices, inventory records, exemption certificates, and more. Auditors aim to verify proper tax was collected and remitted. Key focus areas often include taxability determinations, sourcing rules, exemption certificate validity, and proper tax calculations.
It's advisable for businesses to have an experienced representative available to manage requests, ensure auditor adherence to department rules, and push back when needed. Unjustified proposed assessments are common without adequate representation.
Businesses have 30 days after receiving a Proposed Assessment to file an appeal with the Department of Revenue. Contesting audit findings early helps identify and resolve erroneous interpretations of tax laws before assessments become overly inflated or finalized. Filing appeals promptly is critical for preserving businesses' rights.
To register for a Tennessee sales tax permit, visit the Tennessee Taxpayer Access Point (TNTAP) online registration system. You'll need to provide:
There is no fee charged by Tennessee to obtain a sales tax permit. Once registered, you must collect and remit sales tax on taxable Tennessee sales.
Online sellers with over $100,000 in Tennessee sales or 200 or more separate sales transactions in the prior 12-month period have economic nexus and must register to collect Tennessee sales tax.
Additionally, online sellers on marketplaces have nexus in Tennessee if the marketplace itself has nexus. Most large online marketplaces have nexus in every state.
Tennessee does not charge any fees for obtaining a standard sales tax permit. The registration process is free through the TNTAP online system.
There you have it—a comprehensive guide on Tennessee's sales tax laws. Need help filing taxes for your ecommerce store? Get a demo with Numeral now.
Deb is the head of marketing at Numeral. He has worked with the likes of Shopify and Wonderment and has helped countless ecommerce stores scale seamlessly. With a background in finance, he often finds himself advising stores on sales tax and good financial systems.
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