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Tennessee Sales Tax Guide

By Cristina Garza

Tennessee, nicknamed the Volunteer State, is a state with strong natural, scientific, and cultural significance! There are more horses per capita in Shelby county than any other in the country, the Tennessee Aquarium is the largest fresh water aquarium in the world, and Tennessee is home to at least 3,800 documented caves! Nashville, the capital, is a city famous for its musical roots and is home to America’s longest running radio show, the Grand Ole Opry. And the famed Oak River National Laboratory continues its grand history of expanding our understanding of atomic energy that began with the Manhattan project. With so much to offer, it’s no wonder many entrepreneurs are so happy to build their small business in Tennessee. If you’re one of the small business owners fortunate to call Tennessee home, you’re going to want to be sure your business stays in line with Tennessee's sales tax laws. Not a problem! That’s exactly why we have assembled this all-in-one guide; so that you can readily meet the sales tax compliance requirements for a small business in Tennessee. 

After reading this guide, you will have learned:

  • How to be prepared for your call with the Tennessee Department of Revenue.
  • How to contact the Tennessee Department of Revenue.
  • When to charge sales tax in Tennessee.
  • What goods, products, and services are taxable in Tennessee.
  • When you establish a sales tax nexus with the state of Tennessee, and the nuances of various thresholds.
  • How to register for a sales tax license in Tennessee.
  • How to collect sales tax in Tennessee.
  • How to file and pay sales tax in Tennessee.

If, after reading, you still have any questions to help you determine your tax sales obligations in Tennessee and how to fulfill them, we are here for your small business bookkeeping needs! 

 

 

 


Tennessee Sales Tax Contacts

Tennessee Sales Tax Contacts

 

✅  Do you need to get in touch with the Tennessee Department of Revenue?

✅  Are you uncertain about whether to visit, call them, or contact them through their website?  

✅ Do you wonder what information you should have ready before you contact them?

 

If you answered “Yes” to any of these questions, please read onward, as we have just the information you need! :)

The Tennessee Department of Revenue is reachable by phone at 615-253-0600. 

You can also visit their one of their office locations. If you are hoping for the fastest response, we always suggest that you call rather than visit in person. 

When you do call the Tennessee Department of Revenue, you will want to have some information on hand. It will save time to have the following information easily accessible before you call: 

  • Taxpayer Name
  • EIN
  • Sales & Use Tax ID Number

If you plan on having a third party contact them on your behalf, you’ll want to be sure to have completed a power of attorney form (F-0103801, PDF). If you don’t have a completed form they won’t be able to assist someone else on your behalf.

If you have any more questions, please feel free to contact us so we can assist you with your sales tax needs.

 

 


Tennessee Sales Tax Registration

Tennessee Sales Tax Registration

 

Are you a new business selling tangible property in Tennessee? If so, you are going to want to register your business with the Tennessee Department of Revenue so that you can pay your sales tax on time. 

You need not fret as this is a relatively simple process and one for which you’re about to be fully prepared. We are going to outline the steps below so you are totally ready to register for your sales tax license.

Here we go! Remember...

Preparation is key. 

Let’s get started!

 

 

How do I register to collect sales tax in Tennessee?

You can apply or register for a Tennessee sales tax permit by visiting the Tennessee Taxpayer Access Point site and following the instructions provided.

Tennessee offers an old school paper based form (PDF) you can print and mail in. This will be slower and more prone to errors, so we always suggest filing online to avoid potential hassle.

 

 

What information do I need to register for a Tennessee sales tax permit?

Excellent question!

Before you sign up for Tennessee sales tax permit you’ll want the following information on hand:

  • Business name
  • Business entity type 
  • Description of business activities
  • Date business activities began or will begin
  • Business address and mailing address
  • Business contact information
  • Associated business entities 
  • NAICS code that best matches the business
  • Federal Employer Identification Number (FEIN)
  • List of business officers, partners, managing members, and/or trustees

Don’t forget! Preparation is key. When you have all this information ready, you can go online and register for your permit at the Tennessee Taxpayer Access Point site

 

 

How much does it cost to register for a Tennessee sales tax permit?

Zip! Tennessee doesn’t charge anything to register a new business sales tax permit!  

 

 

Do I need a Federal Tax ID Number or EIN to register for a Tennessee sales tax permit?

Yes! You will most assuredly need one, but if you don’t already have one and need to get a new EIN, it’s a painless process. You can register for a Federal EIN right here :). 

 

 

Which agencies in Tennessee do I need to additionally register with?

You may need to check with some of the following agencies or resources: 

You’ll want to give this some thought and do a little research or investigating; since every business is unique, and there are such different rules, regulations, and laws that may apply. 

We suggest contacting the Tennessee Department of Revenue to verify which additional government agencies you may be required to register with. 

 

*****

 

Huzzah!!!

You are now prepared to register for your Tennessee sales tax permit in Tennessee. 

Let’s summarize what we have covered:  

  • Have all the required information easily accessible before registering online.
  • Acquire a tax ID or EIN before registering for a Tennessee sales tax permit.
  • Register online at the Tennessee Taxpayer Access Point site.
  • Look into what other agencies you may have to additionally register with.

Registering for your Tennessee sales tax permit will be stress free as long as you are prepared. We recommend organizing all the essential information in a folder, preferably using a system like Box.com or Dropbox (something we’re happy to handle for our customers). 

 

 


Tennessee Sales Tax FAQ

Tennessee Sales Tax FAQ 

 

By now, you may have already contacted the Tennessee Department of Revenue and applied for a Tennessee sales tax permit. 

Once you have a license to collect and remit sales taxes in Tennessee, you will probably be asking yourself two questions: 

  • When do I charge a sales tax in Tennessee?
  • What goods and services are subject to sales taxes in Tennessee? 

We are going to go over some common questions that our clients have asked. We believe these questions will help you appreciate the nuances of taxable goods so you can be confident in fulfilling your tax obligations. 

Let’s start with the first question…

 

 

What goods and services are considered taxable in Tennessee?

The following items are all taxable in the state of Tennessee: 

  • Sales of tangible goods at retail.
  • Repairs or alterations of tangible personal property.
  • Property rentals, leases, or licenses [e.g. commercial, mini-warehouse]
  • Selling service warranty contracts.
  • Short-term rentals for living accommodations (e.g. motel/hotel, beach houses, condos, timeshares, vacation homes, or RV homes).
  • Rental/lease of personal goods (e.g.: machinery, vehicles, equipment, or other property).
  • Charges for admission to any place of amusement, sport, or recreation.
  • Manufacturing or producing goods for retail sales.
  • Operating vending machines or amusement rides.
  • Services are mostly exempted

 

 

The bottom line is …

Your business must pay taxes on sales of any non-exempt goods, and some taxable services.

*****

 

 

Let’s now review some of our clients’ frequently asked questions:

  • Is Tennessee an Origin or Destination sales tax State?
  • What creates a sales tax nexus in Tennessee?
  • What is the economic threshold in Tennessee?
  • Does Amazon have fulfillment centers in Tennessee?
  • Does Tennessee have a Click-Through Nexus?

To best understand your tax obligations, new businesses need to consider how they are doing business and the type of relationships they have with buyers and any third parties to their transactions. 

 Let’s discuss some questions that will help you understand the nature of your small business and the subsequent tax implications.   

 

 

Is Tennessee an origin or destination-based sales tax state?

Tennessee is an Origin-based sales tax state. This simply means you’ll need to have a Point-of-Sales system configured to track tax based off your business location vs the buyer’s location.

 

 

 Protip: Charge sales tax based on your location rather than your customer’s location

 

 

What creates sales tax nexus with the state of Tennessee?  

Having nexus, also known as "sufficient business presence,” with Tennessee means your business has established a taxing connection with a state. When this happens, you are required to collect and remit sales tax in Tennessee because you created a sales tax Nexus.

Even if your business maintains its main headquarters in another state, you may still have to charge and pay sales tax to the Tennessee Department of Revenue even if you never step foot in Tennessee.   

So, how do you create a sales tax Nexus in Tennessee?

 

 

A business establishes a nexus in Tennessee by:

  • having a business location in Tennessee;
  • having property stored in Tennessee;
  • employing any person in Tennessee;
  • contracting with a salesperson or other agent in Tennessee;
  • leasing equipment used in Tennessee;
  • performing services in Tennessee;
  • licensing the use of intangible property in Tennessee, or transporting property in Tennessee using the taxpayer’s vehicles.

Let’s talk a bit more specifically about where your goods are stored, such as in the instance of an Amazon warehouse. 

 

 

Does Amazon have fulfillment centers in Tennessee?

Yes, there are five Amazon fulfillment centers in Tennessee:

  • 14840 Central Pike // Lebanon, TN // 37090
  • 500 Duke Dr // Lebanon, TN // 37090
  • 2020 Joe B Jackson Pkwy // Murfreesboro, TN // 37127
  • 7200 Discovery Dr // Chattanooga, TN // 37421
  • 225 Infinity Dr NW // Charleston, TN // 37310

Why does this matter?

This is relevant if you sell your products on Amazon or are recognized as an Amazon FBA (Fulfillment by Amazon) seller. When Amazon stores your products in one of its fulfillment centers in any state, including Minnesota, this triggers a sales tax requirement. If Amazon is storing your products in a warehouse in Minnesota, you have created a taxing connection with the state of Minnesota.

We can help guide your small business through this! We use tools like A2X and Wherestock to identify where our clients' inventory is currently being held and shipped from so that we can keep them in compliance. We are super passionate about providing our clients with solutions that turn complexity into ease, so this is well within our wheelhouse :) 

 

 

Does Tennessee have economic nexus?

Yes, Tennessee does now have an economic nexus law, though with one of the highest thresholds of any state. As of July 31st, 2019, remote sellers are liable to pay sales tax beyond a certain threshold. This means that even businesses without a physical presence or traditional nexus can be required to register for, collect, and pay sales taxes.

The threshold for registering is having a cumulative gross revenue of over $500,000 in a year to Tennessee purchasers.

For  more information see the Tennessee DOR’s remote sellers page here.

 

 

Does Tennessee have click-through nexus?

Yes! As of July 1st, 2015, Tennessee has what is known as click-through nexus. This means if you cross a certain amount of revenue as an affiliate marketer or “marketplace facilitator” you have a sales tax liability in Tennessee. Those sellers who earn more than $10,000 in a year may have to register and pay sales tax in Tennessee. For more information, Tennessee has published notice 15 12 which has information on click-through nexus (PDF).

 

 

Is Tennessee a streamlined sales tax state?

Yes! Since October, 2005 Tennessee has been an associate member of Streamlined Sales Tax.

If you are planning on taking advantage of the Streamlined Sales Tax as a business, it is recommended that you use a Certified Service Provider though businesses may opt to register themselves without a CSP. Ultimately the aim of streamlined sales tax is to simplify payment to multiple different states of sales and use tax. It isn’t required that you utilize them, but it can significantly reduce complexity to do so, especially if your business sells in multiple states.

 

 

More effectively manage your tax needs by keeping this guide handy. 

You and your business can be better equipped to avoid situations like paying fines, paying back taxes that you did know you had to pay in the first place, or facing an audit by the tax authorities in Tennessee.

 

 


Collecting Sales Tax in Tennessee

Collecting Sales Tax in Tennessee

 

By now you know if you are a business that has established a nexus with Tennessee. So you have an understanding about whether, or when, you are required to collect sales tax. Knowing this is just half the battle! Now, we are going to help you with the next half of the battle: how to navigate the process of collecting taxes.

Let’s review some common questions our clients have asked regarding their Tennessee Sales Tax obligations. 

  • How do I collect Tennessee Sales Tax?
  • Who is eligible for Tennessee Sales Tax exemptions?
  • What should I do if my customer is exempt from sales tax in Tennessee?
  • What happens if I lose a Tennessee nontaxable transaction certificate? 

After reading this, you will be better equipped to determine when --and when not-- to collect sales tax in Tennessee.

 

 

How do I collect Tennessee Sales Tax?

Because Tennessee is an origin-based sales tax state, your business should charge sales tax at the time of the transaction based on the business location rather than that of the buyer.  

 

 

What are the current Tennessee sales tax rates?   

Tennessee’s state-wide sales tax rate is 6% at the time of this article’s writing, with local surtaxes potentially adding up to 2.75% to that base. Since sales tax rates may change and do vary based on locality, we advise you to check out the Tennessee Department of Revenue Tax Rate lookup page which has the current rate. Any change will be reflected on that page.

It always helps to be accurate and up to date with this type of information! :) 

 

 

What is exempt from Tennessee Sales Tax?

What is exempt from sales tax in Tennessee?

Here is a sample list of exemptions: 

  • purchases for resale
  • Industrial Machinery
  • Medical supplies
  • Certain groceries 

And that’s it! Most items of tangible property are taxable in Tennessee.

 

 

Who are eligible for Tennessee Sales Tax exemptions?

At this point, you should know what products are exempt from sales tax in Tennessee. You also want to know who may be exempt. 

Under Tennessee law, the type of buyer or the way the goods will be used can qualify can buyer for a sales tax exemption. A good example of this is a merchant purchasing goods for resale, aka a wholesaler.

Other common examples of an exempt buyer may include:

  • Government agencies
  • Non-profit organizations
  • Religious groups
  • Out-of-state buyers (should their business not have nexus in their home state).

Note that a non-profit status doesn’t instantly confer tax exemption.

 

 

What should I do if my customer is exempt from sales tax in Tennessee?

Purchasers who are tax exempt must have completed exemption certificate (PDF) and must present their completed exemption certificate at the time of purchase. It is then incumbent upon the seller to hold on to this exemption certificate. Failure to do so may leave you unable to justify tax exempt sales.

Remember, you always want to collect and file a copy of the exempt certificate. Such certificates must be produced upon request in the event of an audit to justify tax-exempt sales.

 

 

What happens if I lose a Tennessee Sales Tax exemption certificate?

Hmm... Obviously this issue is best to be avoided! Imagine finding out you’ll be audited and discovering you cannot produce an exemption certificate for a buyer! That nightmare scenario would mean you could be held liable to pay all taxes on behalf of the buyer. This is a bad scene and can be avoided by taking proper care with your paperwork… which happens to be one of our specialties! :) 

 

 

Does Tennessee have a sales tax holiday?

Yes! A Back to School Tax Holiday starting 12:01 AM on the last Friday in July ending the following Sunday. Tennessee offers tax free status on more than just clothing; they also permit certain art supply items (under $100) and computers (under $1,500) as well to be tax free during the holiday.  

 

***** 

 

We have now covered who you need to collect sales taxes from, how to determine whether goods for sale are deemed taxable, what goods and services fall under tax exemptions, who is eligible for tax exemption certificates, and, finally, the process of collecting sales tax in Tennessee state. 

Now that we’re this far down the rabbit hole there’s only one thing we need to learn about next… how to pay the piper! 

 

 


 

Filing and Paying Sales Tax in Tennessee

Filing and Paying Sales Tax in Tennessee

 

It is time to talk about filing and paying your sales taxes in Tennessee. In this section, We are going to cover the following frequently asked questions from our clients:

  • When is Tennessee Sales Tax due?
  • What are the Tennessee Sales Tax thresholds?
  • What if a Tennessee Sales Tax filing date falls on a weekend or holiday?
  • How do I file a Tennessee Sales Tax Return?
  • How do I correct a Tennessee Sales Tax return?
  • What happens if I don’t collect sales tax?
  • What happens if I file or pay my sales tax return late?
  • Do I need to file a return if I don’t collect any sales tax in Tennessee?
  • If I close my business, do I need to file a final sales tax return?
  • Does the Tennessee Department of Revenue offer a discount for filing on time?

By the time you finish reading this, you will feel confident enough to file and pay your Tennessee Sales Tax.

 

 

When is Tennessee sales tax due?

Tennessee sales tax payments are due based on the filing interval. Filing intervals are based on the company’s tax liability [detailed ahead, be patient! :p] 

The state of Tennessee requires payment by no later than the 20th day of the month following the reporting period

 

 

What are the Tennessee Sales Tax filing interval thresholds?

The thresholds for filing intervals are generally determined by the state and default to annual unless they give notice of a change:

 

Average Tax Liability Owed Monthly*

Filing interval

From $0 to $200

Annual

TN DOR discretion

Quarterly

TN DOR discretion

Monthly

 

 

*anticipated if new business, actual if existing company

 

Not sure how to determine your tax filing frequency?

You can review your eCommerce or Point-of-Sale Software to see the volume of sales you have generated. 

Don't worry though! The state will let you know when your due dates change. :) 

Keep an eye out for notices in your mail from the State of Tennessee so that you don't miss any shift in deadlines.

 

 

What if a Tennessee sales tax filing date falls on a weekend or holiday?

The deadline is moved to the next business day, typically the Monday following the weekend or the day after the holiday. Where possible, we always suggest filing well before the holiday, of course ;). 

 

 

How do I file a Tennessee sales tax return?

Paper (Note!: Paper filing Only available with a hardship exception [religious belief, no computer access]): Fill out form SLS-450 (PDF) and mail to the address on the form. 

Electronic: File online via Tennessee Taxpayer Access Point site and submit payment via EFT.

  

 

How do I correct a Tennessee sales tax return?

Paper (see note above): Use the same form but check “Amended” box at the top left

Electronic: Amend the return within the Tennessee Taxpayer Access Point site.

 

 

What happens if I don’t collect sales tax?

If you were required to collect sales taxes and failed to do so for whatever reason, that’s a big no-no! Ultimately the business will be held liable for the due tax. Always be sure to collect sales tax at the point of sale. Attempting to collect after the fact will be time consuming and most likely unsuccessful. 

 

 

Protip: You are still responsible for remitting sales taxes even if you failed to collect them. 

 

 

What happens if I file or pay my sales tax return late?

Tennessee's Department of Revenue charges a penalty for late filing or late payment:

 

Either results in a penalty of 5% per month of the tax due, up to a maximum of 25%, with a minimum of $15 . 

 

They also reserve the right to charge daily interest of 7.25% on any outstanding amount due. So if you do pay late, we suggest you make it right as quickly as possible!

 

 

Do I need to file a return if I don’t collect any sales tax in Tennessee?

Yep indeedy! Tennessee does require businesses to file a “Zero-Tax” return even when they have no sales during a taxing period.

 

 

If I close my business, do I need to file a final sales tax return?

Absolutely, Tennessee requires businesses to file a “Final sales tax” return when closing their doors.

 

 

Does the Tennessee Department of Revenue offer a discount for filing on time?

Negative! The reward for paying on time is not being penalized for paying late? It is a bit “All stick 🏒, no carrot. 🥕”  

 

*****

 

Now that we have covered all our bases for filing and paying sales taxes in the state of Tennessee, you should feel more at ease about the process.

 

Some things to remember:

  • Due dates are important. If anything, file and pay your taxes early.
  • There are three payment plans for filing and paying your sales taxes depending on how much you collect in sales tax on average in a month.
  • You can file and pay your taxes electronically or by mail
  • If you need to amend a return, you may do so electronically or by paper.
  • If you don’t collect sales tax and you were supposed to, you (not the buyer) is liable to pay the sales tax to the state of Tennessee.
  • You will have to pay late fees if you fail to file your tax return on time and/or if you fail to make your tax payment on time.
  • Even if you collect no sales tax, you still need to file a return.
  • You need to file a “Final sales tax report” when you close your business.

 

Now, you are ready to file and pay your sales tax in Tennessee. If you have any more questions, feel free to contact us.

 

  

Click here if you think sales tax is boring. Book a meeting.

 


Please note: This blog is for informational purposes only and the information is accurate as of 10/14/2019. If you want legal advice on sales tax law for your business, please contact a Sales Tax professional. Keep in mind that sales tax regulations and laws are subject to change at any time. While we strive to keep our blog current, this blog possibly may be out of date by the time you review it.