Navigating Tennessee’s sales tax guidelines
Understanding the sales tax guidelines in Tennessee ensures that your business remains compliant in the state. Are you required to apply for a sales tax permit and collect and remit sales tax if you are considered a remote seller? Each state’s economic nexus guidelines differ, according to economic thresholds and/or the number of sales within the state. Use TaxJar’s sales tax guide to learn more about tax laws in Tennessee, and estimate your potential sales tax liabilities with the online sales tax calculator.
Do you need to collect sales tax in Tennessee?
Businesses and remote sellers must collect sales tax and remit payments to the state if they have either physical or economic nexus. Businesses with physical nexus have a tangible presence or activity in Tennessee, and remote sellers or businesses with economic nexus have met Tennessee’s economic threshold for total revenue or the total number of sales transactions.
Do you have physical nexus in Tennessee?
Tennessee considers all in-state businesses to have a physical nexus. In addition, the state outlines additional criteria that require even out-of-state businesses to collect and remit sales tax. These criteria include:
- Use of employees, agents, or independent contractors to solicit sales in Tennessee
- Use of third parties in Tennessee to conduct substantial business activities in the state
- Maintaining inventory in Tennessee and using in-state independent contractors to fulfill Tennessee retail sales of that inventory
- In-state promotional activity by company personnel, including participation in trade shows
- Physical Tennessee business presence of a subsidiary that is acting as an agent of the out-of-state dealer or that is conducting activities in Tennessee on behalf of such a dealer (e.g., a retail store that takes returns of purchases made online from parent)
- Use of company-owned trucks or use of contract-carriers acting as an agent for the seller
- Maintaining a store, office, warehouse, showroom, or other place of business in Tennessee
- Leasing or renting tangible personal property in Tennessee
- Repairing, installing, or assembling tangible personal property in Tennessee or the use of an agent or independent contractor to perform those services in Tennessee
- Providing telecommunication services to subscribers located in Tennessee
- Providing any taxable service in Tennessee
- Use of an in-state party to route customers to the out-of-state dealer (commonly known as “click-through nexus”)
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. These vendors must collect sales tax from buyers in the state. The Tennessee Department of Revenue published a Sales and Use Tax Manual that provides additional context about economic nexus for sellers
Is what you’re selling 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.
Is SaaS taxable in Tennessee?
SaaS is taxable in Tennessee.
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 Tennessee Taxpayer Access Point (TNTAP). . Or visit our registration page to request for TaxJar to manage your Tennessee registration.
Businesses need the following 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.
Use the Streamlined Sales Tax™ Registration System (SSTRS)
Tennessee is a Streamlined Sales Tax™ Associate Member state. The Streamlined Sales Tax™ Registration System provides a centralized site for businesses to register for sales tax permits in member states. The system offers a streamlined solution for navigating the sales tax permit process for businesses and online sellers that have economic nexus in different states.
Use the system to apply for a license in any member state; the system also allows businesses to contract with a Certified Service Provider™ (CSP™ ) for sales tax assistance in all the states where their business is registered through the SSTRS.
Collecting sales tax in Tennessee
The sales tax rate you collect in Tennessee depends on whether you are based in the state or operate out-of-state.
How to collect sales tax in Tennessee if you are based in Tennessee
Tennessee is an origin-based sales tax state. 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
Tennessee allows out-of-state sellers to 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 collect the state sales tax rate of 7% and just add 2.25% to all purchases. The latter option means 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.
When are Tennessee sales tax returns due?
When you file and pay Tennessee sales tax depends on 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 in Tennessee
When it’s time for your business to file sales tax in Tennessee, follow these steps:
- 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.
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.
How to file and pay sales Tax in Tennessee
You have three options for filing and paying your Tennessee sales tax:
- File online at the Tennessee Department of Revenue. You can remit your payment through their online system.
- 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.
