What is the sales tax rate in Tennessee?
Tennessee has a statewide sales tax rate of 7%. The local tax rate varies by county and/or city. However, the local tax rate may not be higher than 2.75%, so the total sales tax rate will never exceed 9.25%.
Sales Tax Tennessee: When should you start collecting Sales Tax in Tennessee?
Businesses should collect sales tax in Tennessee if they have a sales tax nexus, which means a substantial connection to the state created through business operations. Factors that establish a nexus include a physical presence and/or exceeding a certain threshold of economic transactions or revenue within Tennessee.
Tennessee Physical Sales Tax Nexus
A Physical Sales Tax Nexus in Tennessee exists when a business has a substantial presence in the state.
Sales Tax Physical Nexus checklist for Tennessee
Here are some circumstances that could establish a physical nexus in Pennsylvania:
- Corporate presence in Tennessee
- An employee present in Tennessee
- Lease or rental of tangible personal property in Tennessee
- Ownership of real or personal property in Tennessee
- Independent contractors or other representatives in Tennessee
- Third party affiliate partnerships with Tennessee businesses
Tennessee Economic Nexus: Revenue, Thresholds and Transactions
The Tennessee economic nexus threshold for sales tax is $100,000 in gross sales, excluding marketplace sales, in the previous fiscal calendar year.
Which services are taxable in Tennessee?
Taxable services in Tennessee include examples such as the following:
- The repair, installation, and cleaning of tangible private property (incl. computer software)
- Lodging services and letting rooms
- Short-term space rental for commercial purposes
- Parking/storage of vehicles
Tennessee Sales Tax on Products: How to Calculate What Your Business Should be Charging
To calculate the sales tax on products in Tennessee, follow these steps:
- Determine the general state tax rate: The general state tax rate in Tennessee is 7%.
- Determine the local tax rate: The local tax rate varies by county and/or city
You can use the Tennessee Sales Tax Calculator or consult the Tennessee Department of Revenue for the specific local tax rate applicable to your location.
- Add the state tax rate and the local tax rate together to get the total sales tax rate.
- Multiply the total sales tax rate by the purchase price of the product to calculate the sales tax amount.
Tennessee Clothing Tax: How much sales tax do you need to collect on clothing sales?
Clothing sales are subject to the collection of sales tax of up to 9.25% in Tennessee, except during the sales tax holiday that typically occurs during the last weekend of July, where general apparel that costs $100 or less is exempt from sales tax.
Tennessee Online Sales Tax: Are SaaS and Digital Services Taxable?
Here is a breakdown of the taxability of SaaS and digital services in Tennessee:
Taxable:
- Telecommunications services
- Remote access to software from a location in Tennessee
- Some computer services
- SaaS, software, and digital goods after a USD $100,000 threshold
Not Taxable:
- Most professional and other personal services
- Specified digital products (e.g. music, movies, e-books)
- Most professional services
SaaS Sales Tax Tennessee: Does my Business Need to Charge Sales Tax for SaaS in Tennessee?
Yes, according to the Tennessee department of Revenue, “Computer software is subject to sales and use tax regardless of the medium of transfer or delivery of the computer software in Tennessee.”
It is important to note that Tennessee SaaS sales tax and the taxation of digital services in Tennessee can be complex and may depend on the specific circumstances. It is advisable to consult with a tax professional or refer to the Tennessee Department of Revenue for specific guidance.
How can a business get a sales tax permit in Tennessee?
Register for a Tennessee Taxpayer Access Point (TNTAP) account: The TNTAP is the online portal for businesses to manage their tax accounts with the Tennessee Department of Revenue
Collecting Sales Tax in Tennessee as a Business
Businesses should apply the correct rate based on the location of the buyer (destination-based sales tax) when collecting sales tax in Tennessee.
Tennessee Tax Return Due Dates Explained
Tax Return Due dates in Tennessee:
Monthly: 20th day of the month following the end of the reporting period
Quarterly: 20th day of the month following the end of the quarter (January 20, April 20, July 20, October 20)
Annually: January 20
What is the required frequency for sales tax returns in Tennessee?
The required frequency for sales tax returns in Tennessee depends on the estimated yearly income of the business.
