Welcome to our handy guide on Tennessee sales tax. We'll walk you through everything you need to know, from the specific sales tax rates in different counties and cities across Tennessee to answering some of the most common questions. Plus, we'll guide you on how to efficiently collect and file your sales tax in Tennessee.
Sales Tax Rate
Physical NexusThink of physical nexus like having a cozy cabin in the Smoky Mountains. If your business has a store, office, or warehouse in Tennessee, that's a clear sign of physical nexus. It also applies if you have employees or sales reps in the state.
Economic NexusEconomic nexus in Tennessee is like having a hit song on the radio. If your business racks up over $500,000 in sales to Tennessee customers within a year, congratulations! You've hit the economic nexus mark and need to collect and remit sales tax.
Affiliate NexusAffiliate nexus is like joining forces for a musical duo. If your business partners with another entity in Tennessee that helps you drum up or maintain business, that's affiliate nexus for you.
Click-Through NexusClick-through nexus is like getting a shout-out at a digital music festival. If a Tennessee resident sends customers your way through a website link, and you make more than $10,000 in sales from these referrals within a year, you've got click-through nexus.
Marketplace NexusSelling through an online marketplace like Amazon or Etsy? It's like setting up a booth at a Tennessee craft fair. As of 2021, these marketplace providers handle the sales tax collection and remittance for you, creating what's known as marketplace nexus.
Tennessee taxes haircuts and styling services, because looking good comes with an extra cost.
How to Get Your Tennessee Sales Tax Permit
Cost of Registering for a Tennessee Sales Tax LicenseGreat news—it's free! Registering for a sales tax license in Tennessee doesn't cost you anything.
Federal Tax ID for Tennessee Sales Tax LicenseYes, a Federal Tax ID number or EIN is essential when registering for a sales tax license in Tennessee. It's a crucial part of your registration details.
Other Tennessee Registrations to ConsiderYour journey might involve partnering with other agencies. If you have staff in Tennessee, you'll need to register with the Tennessee Department of Labor and Workforce Development. And, if you're setting up a corporation or LLC, a visit to the Tennessee Secretary of State is in order. It's all about making sure you're in step with all the relevant state requirements.
Is Tennessee an Origin or Destination Sales Tax State?Tennessee follows the destination-based approach for sales tax. This means you apply the sales tax rate based on where your customer is located, not where your business is. It's about where your product or service is going, not where it's coming from.
What Sales are Subject to Sales Tax in Tennessee?Mostly everything tangible you sell or certain services you provide in Tennessee will attract sales tax. This includes physical items like electronics or furniture and certain types of services.
Is Software as a Service (SaaS) Taxed in Tennessee?Yes, SaaS falls under the taxable category in Tennessee. If you're providing SaaS to customers in Tennessee, remember to collect sales tax on these transactions.
What is Exempt from Tennesseene Sales Tax?Some items and services enjoy a no-tax status in Tennessee. This includes prescription drugs, newspapers, specific agricultural products, and certain manufacturing machinery and equipment.
Who is Eligible for Tennessee Sales Tax Exemptions?
What To Do If Your Customer is Exempt from Sales Tax in Tennessee?If you're dealing with a customer exempt from sales tax, make sure to obtain and keep a valid sales tax exemption certificate from them. It's your proof for the tax-free sale, crucial for your records, especially during audits.
What if You Lose a Tennessee Sales Tax Exemption Certificate?Misplacing a sales tax exemption certificate? Act quickly and ask your customer for a replacement. It's important to maintain a complete record of these documents to ensure compliance with Tennessee's sales tax laws. Keeping track of these certificates is as vital as maintaining good business records.
The Volunteer State exempts sales tax on newspapers, so staying informed doesn't need to cost extra.
Monthly FilingInitially, businesses are set to file monthly. Due by the 20th of the month following the reporting period.
Quarterly FilingIf your tax liability averages $1,000 or less per month over 12 months, you can file quarterly. Due by the 20th after each quarter ends (April 20, July 20, October 20, and January 20).
Annual FilingFor marketplace sellers without their own Tennessee sales, annual filing might be an option. File by January 20 of the following year, typically reporting $0 in sales.
What If a Filing Date Falls on a Weekend or Holiday?If your due date lands on a weekend or holiday, Tennessee gives you until the next business day. No need to rush back from that weekend getaway!
How to File a Tennessee Sales Tax Return
Penalties for Late Filing in Tennessee
Sales Tax Incentives in TennesseeTennessee does offer incentives, akin to business perks or discounts. These can include tax breaks or exemptions for specific industries or activities. It's worth exploring if your business might qualify for any of these benefits.
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