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Learn the fundamentals of sales tax
Do you need to collect sales tax in Tennessee?
You’ll need to collect sales tax in Tennessee if you have nexus there. There are two ways that sellers can be tied to a state when it comes to nexus: physical or economic. Physical nexus means having enough tangible presence or activity in a state to merit paying sales tax in that state. Economic nexus means passing a states’ economic threshold for total revenue or the number of transactions in that state.
Do you have physical nexus in Tennessee?
Tennessee considers a seller to have physical nexus if you have any of the following in the state:
- “Corporate Presence”
- An employee present in the state
- Lease or rental of tangible personal property
- Ownership of real or personal property
- Independent contractors or other representatives in Tennessee
You can click here to read exactly what the Tennessee Department of Revenue has to say about what constitutes sales tax nexus in Tennessee for out-of-state sellers.
Do you have economic nexus in Tennessee?
As of October 1, 2020, sellers who have sales exceeding $100,000 in the state in the previous 12 months have economic nexus. This means the state considers these vendors obligated to collect sales tax from buyers in the state. You can read Tennessee’s economic nexus guidance for sellers here.
Is what you’re selling even taxable?
Certain services are taxable in Tennessee.
Tangible products are taxable in Tennessee, with a few exceptions. These exceptions include, medical supplies, and packaging. Food is taxed at 4%, instead of the state rate of 7%. In 2021, Tennessee honored a sales tax holiday three different times throughout the year, with more planned for 2022. The sales tax holiday in Tennessee has historically meant that any purchase of computers, clothing and school supplies were not taxed. TaxJar has more information on how our platform handles a sales tax holiday in our Knowledge Base.
Is SaaS taxable in Tennessee?
SaaS is taxable in Tennessee. (Source)
How to get a sales tax permit in Tennessee
Anyone applying for a sales tax (or other tax) permit can do so online at the Tennessee Department of Revenue Online Tax Registration.
You need this information to register for a sales tax permit:
- Reason for applying
- Gross sales – (Remember, you must make at least $4800 in revenue per year in the state of Tennessee or your sales tax license could be revoked)
- Date business began
- Business name & location
- Mailing address
- Type of ownership
- Business activity, including products sold
- EDI/EFT, if applicable
Tennessee does not charge for a sales tax permit. Other business registration fees may apply. Contact each state’s individual department of revenue for more about registering your business.
Collecting Sales Tax
The sales tax rate you collect in Tennessee depends on whether you are based in Tennessee or out-of-state.
How to Collect Sales Tax in Tennessee if You are Based in Tennessee
Tennessee is an origin-based sales tax state. So if you live in Tennessee, collecting sales tax is fairly easy. Collect sales tax at the tax rate where your business is located.
You can look up your local sales tax rate with TaxJar’s Sales Tax Calculator. The Tennessee Department of Revenue states that all local jurisdictions in Tennessee have a local sales and use tax rate, both of which are the same rate.
If you have more than one location in Tennessee, then you would base the sales tax rate you charge on the point of origin of your sale.
How to Collect Sales Tax in Tennessee if you are Not Based in Tennessee
This is where things get trickier for online sellers. Tennessee allows sellers to do one of two things. You can either collect the sales tax rate at the buyer’s ship-to address for all orders shipped to Tennessee (i.e. destination-based sourcing) or you can collect the state sales tax rate of 7% and just add 2.25% to all purchases, meaning you would charge a flat 9.25% rate to all Tennessee buyers.
Should you collect sales tax on shipping charges in Tennessee?
Shipping and handling is generally taxable in Tennessee. If the item you are shipping is taxable, then the shipping is taxable. If the item isn’t taxable, then the shipping isn’t taxable. If you are shipping a taxable and a non-taxable item, then the state requires that you have a percentage of shipping charged for the taxable item. You can charge the percentage either on the price or the weight.
Read a full explanation of sales tax on shipping in Tennessee here.
When are Returns Due?
When you file and pay Tennessee sales tax depends on two things: your assigned filing frequency and your state’s due dates.
How often will you file sales tax returns in Tennessee?
States assign you a filing frequency when you register for your sales tax permit. In most states, how often you file sales tax is based on the amount of sales tax you collect from buyers in the state.
In Tennessee, you will be required to file and remit sales tax either monthly, quarterly, or annually (either fiscal annual or calendar annual).
Tennessee sales tax returns are always due the 20th of the month following the reporting period. If the filing due date falls on a weekend or holiday, sales tax is generally due the next business day.
Filing Sales Tax
When it comes time to file sales tax in Tennessee you must do two things:
- Calculate how much sales tax you owe
- File a sales tax return
- Make a payment
How to Calculate How Much Sales Tax You Owe in Tennessee
Calculating how much sales tax you should remit to the state of Tennessee is easy with TaxJar’s Tennessee sales tax report.
All you do is connect the channels through which you sell – including Amazon, eBay, Shopify, Square and more – and we’ll calculate exactly how much sales tax you collected. All the information you need to file your Tennessee sales tax return will be waiting for you in TaxJar. All you have to do is login.
How to File and Pay Sales Tax in Tennessee
You have three options for filing and paying your Tennessee sales tax:
- File online: File online at the Tennessee Department of Revenue. You can remit your payment through their online system. Check here for our step-by-step guide to filing your Tennessee sales tax return.
- File by mail: Fill out and mail Tennessee form SLS-450
- AutoFile – Let TaxJar file your sales tax for you. We take care of the payments, too. You’ll never have to worry about spreadsheets, calculations or filling out complex sales tax returns.