TN Tennessee State sales tax rates

STATEWIDE SALES TAX RATE

ECONOMIC SALES THRESHOLD

$100,000

TRANSACTIONS THRESHOLD

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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

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.

Is what you’re selling even taxable?

Services in Tennessee are generally not taxable. However – if the service you provide includes repairing, creating or installing a product, you may have to deal with the sales tax on products.

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.

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.

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.

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.