Starting a business venture in Tennessee or just wondering how much sales tax you’ll pay on your next purchase? This guide breaks down Tennessee’s sales tax rates, filing rules, and key requirements into digestible, easy-to-follow steps so you can stay compliant without the headache.
Key takeaways:
- The Tennessee 2025 sales tax rate is 7% plus a mandatory local rate of up to 2.75%.
- All businesses with a physical presence in Tennessee are required to collect and remit sales tax to the Department of Revenue if monthly gross sales exceed $400 or yearly gross sales exceed $4,800.
- All remote (out-of-state) businesses with more than $100,000 in sales revenue from Tennessee customers in the previous tax year are required to collect and remit sales tax.
- The penalty for late filings or payments can reach 25% of the unpaid tax (with a minimum penalty of $15), as well as incur additional interest charges.
- Most goods are subject to Tennessee state tax, but the tax rate varies depending on the type of good and the jurisdiction.
The Tennessee state sales tax rate in 2025 is 7% plus applicable local rates. This comprises a base rate of 7% plus a mandatory local rate that varies by jurisdiction. Depending on the local jurisdiction, the total sales tax rate can be as high as 9.75%.
Look up sales tax rates in each city and county in Tennessee's Local Sales Tax Rates Map.
Sales tax 101
Let's talk sales tax. It's not the most pleasant of topics, but that's why we're here!
Whether you're purchasing a new automobile or selling custom software to out-of-state clients, staying compliant requires understanding and interpreting complex sales tax laws.
The local companies you purchase from apply a sales tax at the point of sale, so as a consumer, you do not have to submit sales tax to the government. However, if you pay a company online and they do not collect sales tax at the point of sale, you are responsible for paying use tax to the state of Tennessee.
Running a business in Tennessee or selling to Tennessee customers? If you sell taxable goods or services, staying compliant is a bit more challenging. You must collect sales tax from your customers, file returns, and submit the taxes to the Tennessee government. If you are out of state but sell to Tennessee customers, you may also be required to collect and remit sales tax.
If you have more questions about your sales tax obligations, you are in the right place. In this article, we will take a deep dive into sales tax requirements, current laws, and how to stay compliant.
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Recent tax rate changes in Tennessee
As of February 1, 2025, Davidson County approved a .5% local tax rate hike to support Nashville's transit upgrades. This tax rate increase raises the county's total tax rate to 9.75% (the combined state and local rates).
The tax rate increase applies to all taxable goods and services, with a few exceptions, including video programming services, telecommunication services, certain digital products, and others. See the Tennessee Department of Revenue's website for more information on this update.
How do you stay informed about Tennessee sales tax updates?
Tennessee does not operate on a fixed timetable for updating tax laws, as updates can occur at any time. Unfortunately, this approach makes it difficult to stay compliant.
Thankfully, the state offers multiple resources to help you keep up with Tennessee tax news and updates:
- Visit the Hot Topics page for announcements
- Visit Important Notices for information on recent tax law changes and more complicated tax topics
- Check the Newsroom page, which publishes tax news, including major changes
- Sign up for email alerts concerning sales tax updates
Do I need to collect Tennessee sales tax?
Do you sell goods or services in Tennessee? If so, you may have sales tax obligations.
Even if you live out of state, once you ship products to Tennessee customers, you could owe sales tax. Your tax obligation depends on your revenue (from Tennessee customers) and whether you have a physical presence in the state.
Nexus: What it means and how it affects your business
Good to know: Note that the term "economic nexus" is commonly used in sales tax discussions. However, Tennessee uses the term "substantial nexus" in its tax communications when referring to economic thresholds. Tennessee also uses the term "nexus" to refer to both economic thresholds and the establishment of physical presence in the state.
Physical nexus
Do you have nexus in Tennessee? If so, the state of Tennessee requires you to collect state and local taxes from your customers, file a return, and remit those taxes to the state on a specific schedule.
How do you know if you have nexus in Tennessee?
Any of the following activities establishes physical nexus in the state:
- You reside in the state of Tennessee
- You hire people to work for you who live in Tennessee
- You maintain inventory in Tennessee
- You maintain a store, office, or warehouse (any business) in the state
- You lease or rent tangible personal property in the state
- You provide a taxable service in Tennessee
Note that even if you live out of state, if any of the above nexus criteria apply, you have nexus in Tennessee. Refer to Tennessee's Sales and Use Tax Guide for additional scenarios that establish nexus in the state.
Economic nexus (substantial nexus)
Do you live outside of Tennessee but sell goods or services to customers in Tennessee? If you earned more than $100,000 in sales revenue from Tennessee customers in the previous tax year, you are required to collect and remit sales tax.
Once you hit the economic nexus threshold, the next step is to register for a sales tax account so you can collect and remit sales tax. Once registered, out-of-state sellers must collect sales tax in Tennessee at the full combined state and local rate applicable to the customer's shipping location.
We will provide details on how to register later in this article.
Good to know: You do not have to register and file a return with the Tennessee Department of Revenue if you earn less than $400 gross sales per month or $4,800 gross sales per year (or less than $100 per month in sales of taxable services). If you do not meet those thresholds, pay sales tax to your suppliers in lieu of registering and paying the state.
Is Tennessee sales tax destination-based or origin-based?
Tennessee functions primarily as an origin-based state. However, if you are a remote seller, and you ship to Tennessee customers, your tax rates reflect the customer's location (destination-based).
What's the difference between destination-based and origin-based sales tax states?
In an origin-based state, you charge the tax rate associated with your business's location. In a destination-based state, your buyer’s address determines the rate.
Since Tennessee is an origin-based state, you charge your Tennessee customers the sales tax rate applicable to your business location, regardless of their residence.
Although Tennessee is an origin-based state, it also functions as a destination-based state for remote sellers. Out-of-state sellers that have nexus in Tennessee will charge sales tax based on the customer's location.
For example, if you run a business in Nashville, Tennessee, and you ship to a customer in Memphis, Tennessee, you would collect the sales tax rate for Nashville.
However, if you are an out-of-state seller in Wyoming that established nexus in Tennessee due to having more than $100,000 in sales in the state, collect taxes based on the Tennessee customer's shipping address.
Note that even if you have a location in Tennessee, if the sale originates from an out-of-state location, collect local tax based on the delivery or shipping address.
Do you sell in a marketplace? Online marketplace sellers with over $100,000 in sales to Tennessee customers in the previous year are also required to collect and remit Tennessee sales tax. The good news is that most large marketplace facilitators collect and remit taxes on behalf of sellers (so you don't have to). However, it's your responsibility to verify that the marketplace handles sales tax collection effectively.
If you are an out-of-state marketplace facilitator with over $100,000 in sales (whether your own sales or those facilitated by your marketplace sellers), you must also collect and remit sales tax. Check out this Tennessee sales tax resource for more information.
How do you determine your Tennessee sales tax obligation? If you have a unique situation or you want more information on your sales tax requirements, consult the Sales and Use Tax Guide (Chapter 7 discusses sourcing tax rules) or contact the Tennessee Department of Revenue directly.
What's taxable?
Let’s look at the products and services that are taxable and exempt in Tennessee.
Which ecommerce goods are taxable?
In Tennessee, sales tax applies to the sale, lease, or rental of physical goods and specific services, as well as digital products, software, and amusements listed in state law. In summary, most sales of tangible personal property are taxable unless state law specifically exempts them.
Examples of taxable items include:
- Clothing and footwear
- Furniture and home furnishings
- Groceries
- Appliances
- Cleaning supplies
- Pet supplies
Are groceries and food taxable in Tennessee?
The state tax rate on groceries is 4% plus local tax rates. However, not every item on a grocery store shelf qualifies for the 4% tax rate. Even though you can find the following items in a grocery store, the tax rate is 7%, plus local taxes:
- Prepared food (pre-prepared or served meals that are ready to consume)
- Candy
- Dietary supplements
- Tobacco
- Alcoholic beverages
Is clothing taxable in Tennessee?
Yes, clothing is generally taxable in Tennessee unless specifically exempted by law. For instance, during the annual sales tax holiday weekend, clothing under $100 per item is exempt.
Are digital products taxable in Tennessee?
Yes, specified digital products, such as digital audio works, digital audio-visual works, and digital books, are taxable in Tennessee. Other digital goods may also be subject to sales tax.
Is software-as-a-service (SaaS) taxable in Tennessee?
Yes, SaaS is considered taxable in the state of Tennessee. Any software accessed remotely is subject to Tennessee sales tax.
Are services taxable in Tennessee?
Generally, services are exempt from Tennessee sales tax. However, some services are taxable, including the following:
- Telecommunications services
- Lodging services
- Installation of tangible personal property
- Repair of tangible personal property (including computer software)
Exemptions
The state of Tennessee recognizes the following exemption types:
- Resale: If a retailer purchases goods for resale and presents an updated Tennessee resale certificate, the transaction is exempt from sales tax payment.
- Entity-based: Qualified entities (e.g., farmers) can purchase some items tax-free or at a discounted rate. Government entities and nonprofits are also exempt from paying sales tax on their purchases.
- Product-based: Textbooks, school meals, and some medical equipment are exempt from sales tax.
Excise taxes in Tennessee
Tennessee levies excise taxes on specific goods, including motor fuels, tobacco products, alcoholic beverages, wine, and vapor products. Some key excise taxes include:
- Gasoline - $.26 per gallon
- Diesel - $.27 per gallon
- Cigarettes - $.62 per pack of 20 cigarettes
- Other Tobacco Products (OTP) - 6.6% of the wholesale cost
- Beer - $4.29 per 31-gallon barrel
- Alcoholic beverages (ABW 7% or less) - $1.10 per gallon
- Wine and alcoholic beverages (ABW > 7%) - $1.21 per gallon (includes high alcohol content beer)
- Liquor (distilled spirits) - $4.40 per gallon (ABW > 7%)
Tennessee imposes excise taxes at the distributor/wholesale level. The revenues from excise taxes fund various state and public programs.
How to register for a Tennessee sales and use tax account
To register for a sales tax account, visit the Tennessee Taxpayer Access Point (TNTAP) online registration system. You'll need to provide:
- Legal business name, address, and contact information
- Entity type
- Federal EIN (or SSN)
- Owner, partners, officers' information
- Description of business activity (products or services you're selling)
- Previous owner information (if you bought a pre-existing business)
Once registered, you'll receive a Certificate of Registration (and, if applicable, a Certificate of Resale) to collect and file Tennessee sales tax.
Reminder: Even if you do not have a physical presence in Tennessee, you must register with the Tennessee Department of Revenue if you meet the economic nexus threshold. Out-of-state sellers with over $100,000 in Tennessee sales in the previous 12-month period have substantial nexus.
Registration costs for a Tennessee sales and use tax account
Tennessee does not charge any fees for obtaining a standard sales tax account. The registration process is free for businesses via the TNTAP online system.
Tennessee sales tax return filing schedule and due dates
The Tennessee Department of Revenue requires businesses that meet a threshold of $400 in gross sales per month or $4,800 in gross sales per year to file a sales and use tax return. File returns electronically, either through the Tennessee Taxpayer Access Point (TNTAP) filing system or via an approved software vendor.
To learn how to file a sales and use tax return via TNTAP, follow the steps in this video.
When should you file your Tennessee sales tax returns? By default, Tennessee requires you to file your sales tax return monthly. The Commissioner, however, can set different filing schedules if it benefits the state. If your average monthly tax bill is $1,000 or less for a full year, you have the option to continue filing monthly or switch to a quarterly schedule.
Good to know: Some businesses, such as manufacturers, wholesalers, and sellers whose only Tennessee transactions happen through a marketplace facilitator, file sales tax returns annually. The annual return and payment for the prior calendar year are due by January 20.
Below is a table of filing due dates organized by filing frequency.
Monthly:
Quarterly:
Annual:
If any due date falls on a weekend or holiday, the filing deadline moves to the next business day.
Tennessee sales tax filing and payment penalties
Penalties for failing to file and pay Tennessee sales tax can include a late fee of 5% of the outstanding tax for every month (or part of a month) you’re delinquent, up to 25% of the taxes owed (with a minimum penalty of $15). Interest accumulates at the state’s current rate.
Audit & appeals process
The Tennessee Department of Revenue routinely reviews businesses to ensure compliance with sales tax laws. You’re more likely to trigger a sales tax audit if you miss or file late payments, or submit returns with consistent irregularities.
Audit process — what to expect during the audit
The Tennessee sales tax audit process typically involves:
- You will get a notification of the audit via phone.
- The auditor will schedule a meeting to discuss your business accounting procedures and records.
- You will receive a confirmation letter detailing the audit start date and requested records (e.g., sales journals, invoices, bank statements, Federal Income Tax returns).
- The completed audit assessment will be delivered to you (preferably in person).
- The audit may result in additional tax liability, credit for tax overpayment, or no adjustments if no more tax is due.
During a Tennessee sales tax audit, businesses can expect auditors to thoroughly review financial statements, tax returns, invoices, inventory records, exemption certificates, and other relevant documents. The auditor's goal is to verify that you collected and submitted the correct amount of tax. Key focus areas often include taxability determinations, sourcing rules, exemption certificate validity, and proper tax calculations.
After the audit — appealing the results
Disagree with the tax audit findings? You can appeal.
Appealing can include one or more of the following:
- Asking for a meeting with the audit supervisor or manager
- Requesting an informal conference with the department's hearing office
- Filing suit
Contesting audit findings early helps identify and resolve erroneous interpretations of tax laws before assessments become overly inflated or finalized. Filing appeals promptly is crucial for preserving a business's rights.
Read more about tax compliance and how to prepare for an audit on the Tennessee Department of Revenue's website.
Sales tax FAQs
How do you calculate Tennessee sales tax?
To calculate Tennessee sales tax, use the following formula:
Tax = (Purchase Price x (State Rate + Local Rate))
For example, if you make a $100 purchase in a jurisdiction with a 2% local rate, the total sales tax would be $9.
Tax = ($100 x (.07 + .02)) = $9
Is Tennessee a streamlined sales tax state?
Tennessee is an associate member of the Streamlined Sales and Use Tax Agreement (SSUTA). An associate member state has met most of the agreement’s requirements but hasn’t fully implemented every single SSUTA provision.
Do I need to register for a Tennessee sales tax account if I’m only a wholesaler?
Yes, you still need to register even if you only sell wholesale. The exemption relies on the buyer providing a valid resale certificate.
Do I need a Tennessee sales tax account if I only sell temporarily in the state?
Yes, if you are making sales within Tennessee, even temporarily, the Department of Revenue requires you to open a Tennessee sales tax account. There is no exception for temporary sellers. Transient vendors may also be required to pay additional fees.
Should you collect sales tax on shipping charges?
Yes, if the items sold are subject to Tennessee sales tax, the associated shipping charges are also generally taxable. Calculate the sales tax due based on the combined cost of the item and shipping.
If taxable and non-taxable items are shipped together, sellers can allocate the shipping charges based on the cost or weight of the taxable portion compared to the whole shipment.
There are, however, some exceptions and nuances to this rule. Visit Tennessee's Sales and Use Tax guide and navigate to "Delivery charges" to find out how Tennessee handles taxes on shipping and delivery charges.
Can I amend a Tennessee sales tax return?
Yes, you can file an amended sales tax return in Tennessee to correct underpayments or overpayments from a previously filed return. You may owe additional tax, interest, or limited penalties when amending a return.
What are the Tennessee sales tax filing due dates?
Tennessee sales tax returns are due on the 20th day of the month following the end of the reporting period. Due dates vary based on the assigned monthly, quarterly, or annual filing status.
Does Tennessee have an annual sales tax holiday?
Yes, Tennessee observes an annual "Back to School" sales tax holiday. The holiday runs from the last Friday in July to the following Sunday. Consumers can purchase clothing, computers, and school supplies tax-free. However, some items are exempt, such as clothing and school supplies priced over $100, computers priced over $1,500, and other items.
Information & contacts
For sales tax questions, contact:
- Tennessee Department of Revenue
- Phone number: (615) 253-0600
- Website: tn.gov/revenue
- Tennessee state website
There you have it — a comprehensive guide on Tennessee's sales tax laws. It's a lot to keep up with, we get it. Staying compliant with ever-changing sales tax law is both time-consuming and stressful.
Thankfully, you don't have to be a sales tax expert to stay compliant. If you have 5 minutes a month, we can help. Numeral can simplify and manage your sales tax logistics, from calculating your sales tax to identifying nexus thresholds and filing and remitting tax payments on your behalf.
Let us remove the sales tax burden so you can focus on growing your company (and reducing your stress).
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