Tennessee imposes a 7% statewide sales tax on the retail sale, lease, or rental of most goods and some services. With local sales taxes added on, Tennesseans can pay a combined rate as high as 9.75% depending on their location. Understanding Tennessee sales tax calculator and Tennessee’s tax laws allows taxpayers to optimize major purchases while ensuring businesses comply with registration, collection, filing, and remittance requirements.
Tennessee Sales Tax Calculator
The Tennessee sales tax calculator is an online tool that automatically calculates the total sales tax due for purchases made in Tennessee. To use the calculator, you simply select the county and city where the purchase is being made, enter the total purchase price, and the calculator will determine the applicable state and local tax rates and calculate the total tax owed.
Tennessee Sales Tax Calculator
Tennessee Sales Tax Calculator
The advantage of using the Tennessee sales tax calculator is that it simplifies the process of figuring out how much sales tax needs to be collected on transactions in different parts of the state. Since sales tax rates vary widely across Tennessee counties and cities, the calculator ensures you are charging the correct rate and not under-collecting sales tax. The automated feature removes the need to manually lookup tax rates and perform calculations, saving time and preventing errors.
Overview of Sales Tax in Tennessee
Tennessee first instituted a sales tax in 1947 at an initial rate of 2%. Increases over the decades brought the current state rate to 7% as of 2017. This applies to sales of most physical goods plus specifically enumerated services. Restaurants also face a separate local tax.
On top of the state rate, counties and cities in Tennessee can levy their own local option sales taxes ranging from 1.5% to 2.75%. Memphis currently has the highest combined state and local rate in Tennessee at 9.75%.
In addition to general sales tax, Tennessee imposes separate taxes on liquor, cigarettes, gasoline, and other specific items. The state also taxes vehicle purchases based on the total sales price rather than trade-in value.
What Transactions are Taxable in Tennessee?
Tennessee broadly levies its 7% state sales tax plus any local rates on retail sales of tangible personal property. This includes common purchases like:
- Clothing, footwear, and accessories
- Furniture, home furnishings, and appliances
- Electronics like TVs, computers, and tablets
- Toys, games, arts and crafts materials
- Food and groceries from convenience stores or vending machines
- Digital products including apps, downloads, and streaming services
- Automobile purchases and leases
- Jewelry, cosmetics, and toiletries
The sales tax also applies to some taxable services in Tennessee, primarily repair and installation services along with accommodations.
Exemptions to Sales Tax in Tennessee
While extensive, Tennessee sales tax does exempt select goods and services, including:
- Groceries – Food purchased at grocery stores, bakeries, and dairies is exempt from state sales tax in Tennessee but may face local tax. Prepared deli foods are taxable.
- Prescription drugs – Prescription medication is exempt along with other medical products like crutches, hearing aids, and eyeglasses.
- Professional services – Legal, accounting, engineering, real estate services, and more are not subject to sales tax.
- Manufacturing machinery and tools
- Water – Residential, commercial, and industrial water service is exempt.
- Nonprofits – Valid nonprofits can make select purchases tax exempt with an exemption certificate.
Understanding Tennessee’s exemptions allows consumers and businesses to avoid overpaying sales tax.
Who Collects and Remits Sales Tax in Tennessee?
In Tennessee, sellers making taxable sales are responsible for collecting and remitting sales tax. Consumers then pay the tax at the point of sale.
Both in-state and remote sellers shipping into Tennessee must register for sales tax permits once they exceed $100,000 in annual sales or make 200 or more separate sales transactions into the state. This economic nexus threshold took effect in 2019 following the South Dakota v. Wayfair Supreme Court decision.
Marketplaces like Amazon must collect taxes on behalf third-party vendors when they exceed Tennessee’s sales thresholds. Sellers may also have physical or affiliate nexus triggering tax obligations.
How Tennessee Uses Sales Tax Revenue
In fiscal year 2021, Tennessee collected over $7.4 billion in state sales tax revenue. Billions more came in from local option taxes. Sales tax accounts for Tennessee’s largest source of state tax revenue.
These collections fund essential public services like:
- Education – K-12 schools, colleges, financial aid programs.
- Healthcare – Medicaid, mental health services, local health departments.
- Transportation – Highway infrastructure, public transit.
- Public safety – State police, forensics, corrections.
- Local governments – Tax revenue sharing to fund municipal services.
Maintaining strong sales tax compliance allows Tennessee to adequately fund these programs for its residents.
Recent and Possible Future Changes to Sales Tax in Tennessee
Like most states, Tennessee frequently updates its sales tax policies and rates. Recent changes include:
- Economic nexus – Tennessee enacted sales tax thresholds for out-of-state sellers in 2019 following the Wayfair decision.
- Tax holiday – Tennessee holds an annual sales tax holiday in July for clothing, school supplies, and computers.
- Digital media tax – In 2020 Tennessee began taxing digital products like music and ebooks consistently with physical formats.
- Grocery tax reduction – The state reduced its 4% tax on groceries down to 3% in 2022. Local taxes still apply.
Ongoing legislation may continue reducing the grocery tax rate incrementally. Further base expansion to services and rate hikes are also periodically considered to raise revenue.
Sales Tax Compliance Tips for Tennessee Businesses
Businesses making taxable sales into Tennessee must obtain sales tax permits and adhere to all compliance regulations including:
- Register for a tax permit – Apply for a Certificate of Registration after exceeding Tennessee’s economic nexus thresholds. You can register online through the TN Taxpayer Access Point.
- Integrate sales tax software – Using solutions like AvaTax can automate rate calculations, timely filing, and remittance.
- Charge all tax rates accurately – Ensure your POS system charges the combined state rate of 7% plus all applicable local rates based on delivery jurisdictions. Zip code-based lookups help get this right.
- Collect tax on online and mail order sales – Charge Tennessee tax on any orders shipped to addresses within the state.
- File returns on time – Sales tax returns for Tennessee are due the 20th of the following month. Late payments incur penalties.
- Keep transaction records – Retain thorough purchase orders, invoices, and exemption certificates to back up your tax payments and exemptions.
Proper compliance helps Tennessee businesses avoid headaches from audits and penalties down the road. Consider outsourcing sales tax management if struggling to keep up internally.
Conclusion
With a 7% statewide rate plus local add-ons reaching nearly 10%, Tennessee imposes above average sales tax burdens on its residents. While exemptions provide some savings, consumers must budget major outlays carefully. Tennessee also requires in-state and remote sellers to closely follow its economic nexus provisions and manage software integrations to collect and remit taxes appropriately. With the rise of e-commerce and evolving tax policies, sales tax in Tennessee will likely continue increasing in complexity for both taxpayers and businesses in 2023.
