Sales Tax Guide for Tennessee

What Is Taxable in Tennessee?

In Tennessee, most tangible personal property is subject to sales tax. Items that may be exempt include prescription drugs, certain groceries, and medical supplies under specific conditions.

If your business sells taxable goods or services, it is crucial to collect and remit sales tax appropriately. Additionally, businesses should determine if additional use taxes apply when purchasing out-of-state products for use in Tennessee.

Who Needs to Collect Sales Tax?

Businesses required to collect sales tax in Tennessee include:

• Retailers with a physical presence in Tennessee
• Online sellers that meet the state’s economic nexus threshold
• Service providers of taxable services

Tennessee enforces an economic nexus threshold of $100,000 in sales. Businesses exceeding this limit, even without a physical presence in Tennessee, must register and collect sales tax. Failure to comply can result in penalties and back taxes. That’s where doola’s Bookkeeping service becomes essential for managing compliance and avoiding potential legal issues. 

How to Register for a Sales Tax Permit in Tennessee

Registering for a sales tax permit in Tennessee is straightforward:

1. Gather necessary documentation: EIN, business license, and business details.
2. Access the Tennessee Department of Revenue’s website.
3. Complete the online tax application form.
4. Receive your Sales Tax Certificate and begin collecting taxes.

It is illegal to collect sales tax without a permit, so make sure to register before making sales.

doola’s bookkeeping experts can guide you through the process, helping you to focus on growing your business while ensuring compliance. 

How to Calculate Sales Tax in Tennessee

To calculate sales tax correctly in Tennessee, follow these steps:

Step 1:
Determine the combined state and local sales tax rate based on the sales location.

Step 2:
Apply this rate to the total sales price at the point of sale.

Step 3:
Ensure precise and accurate transaction records are maintained.

Tennessee businesses may need to file sales tax returns monthly, quarterly, or annually, depending on the volume of sales. Always check the filing due dates to avoid late fees and penalties.

Common Sales Tax Exemptions in Tennessee

Some purchases are exempt from sales tax in Tennessee, including:

• Purchases for resale (with a valid resale certificate)
• Sales to certain nonprofit organizations
• Specifically designated agricultural and manufacturing equipment

It is essential that businesses use correct exemption certificates and maintain precise records to avoid audits and fines due to misuse of exemptions.

Remote Seller and Marketplace Sales Tax Rules in Tennessee

For remote sellers and marketplace platforms like Amazon, eBay, Shopify, and Etsy, compliance with Tennessee’s sales tax rules is mandatory if thresholds are exceeded. 

The economic nexus threshold in Tennessee is set at $100,000 in sales, and businesses meeting or exceeding this amount must comply with state sales tax regulations.

What Triggers a Sales Tax Audit

The Tennessee Department of Revenue may conduct audits for various reasons, such as missing or inaccurate sales tax filings, frequent late payments, discrepancies in reported sales versus actual revenue, and misuse of exemption certificates.

Keeping detailed records of sales, exemptions, and tax payments is crucial. Performing periodic internal reviews can help maintain accuracy in sales tax filings and reduce audit risks.

FAQs About Sales Tax in Tennessee

Addressing common questions about Tennessee sales tax:

Does Tennessee tax digital goods? 

Some digital goods are taxable; it’s important to confirm state regulations for specific digital products.

Do out-of-state businesses need to collect Tennessee sales tax? 

If they exceed the $100,000 threshold in sales, yes.

What happens if I overcharge or undercharge sales tax? 

You may need to adjust transactions accordingly. Timely and accurate documentation will minimize issues.

Are any services taxable in Tennessee? 

Some services are taxable. Check state guidelines for a detailed list of taxable services.

Stay Compliant With doola

Maintaining sales tax compliance can be simplified with proper information and tools, avoiding penalties and ensuring smooth business operations.

doola offers guidance and solutions to ensure compliance, supporting businesses with comprehensive financial services, tax guidance, and streamlined bookkeeping.