Sales and Use Taxes in Tennessee

April 13, 2006

	Visited: 156
	Not rated
	Rate:

In Tennessee, the retailers' sales and use tax is imposed on the privilege of selling tangible personal property at retail or storing such property for use or consumption in the state. It includes the renting and leasing of property. The sales and use tax is imposed on every person who:

engages in the business of selling tangible personal property at retail in the state
uses or consumes in Tennessee any item or article of tangible personal property, irrespective of ownership
receives property or services subject to the sales or use tax
rents or furnishes any property or services subject to the sales or use tax
stores for use or consumption in Tennessee any item or article of tangible personal property
leases or rents tangible personal property, either as lessor or lessee, within Tennessee
charges taxable admission, dues, or fees
sells space to transient dealers or vendors

Services subject to tax. Tennessee imposes sales and use tax on the following services:

sale, rental, or charges for accommodations furnished to transients
garage and parking lot services
telecommunications
repair services performed with respect to tangible personal property
laundering, dry cleaning; bathing and grooming of animals
installations of tangible personal property
charges for warranty or service contracts

Sales and use tax rate. Beginning July 15, 2002, the Tennessee sales and use tax rate is generally 7 percent. In addition, make sure you contact your local governments in Tennessee because they are allowed to assess a local sales and use tax. The following rates are for the specific item types:

1 percent for water sold to or used by manufacturers
1.5 percent for energy fuels sold to or used by manufacturers
4.5 percent for aviation fuel
1.5 percent for electricity and liquefied gas, sold to or used by farmers and nurserymen, and coal, wood products, or fuel oil used as energy fuel in the production of nursery and greenhouse crops
persons operating vending machines may register at a fee of $2, plus $1 per machine and pay 1.5 percent of gross receipts from the machines instead of privilege and sales taxes, except that the tax on gross receipts from tobacco-dispensing machines is 2.5 percent

Tax-exempt items. Tennessee has many specific items that are exempt from sales tax — for example, certain prescription medications are exempt from Tennessee sales tax. You'll want to check and see if you are exempt from the sales tax.

Responsibility for paying sales tax. In Tennessee the sales tax is imposed on the privilege of engaging in the business of selling at retail or leasing tangible personal property in the state. Although sellers are liable for the tax, they are required, insofar as can be done, to collect the tax from the consumer. Sellers must indicate to their customers whether they are paying any sales tax by posting a sign or by a statement on the receipt.

Use tax. In Tennessee the use tax is imposed on the privilege of using, consuming, distributing, or storing tangible personal property in Tennessee. When applied together, the sales and use taxes provide a uniform tax upon either the sale or use of taxable goods and services in Tennessee, regardless of where they are purchased.

Responsibility for collecting use tax. In Tennessee the use tax is imposed on the privilege of using, consuming, distributing, or storing tangible personal property in Tennessee.

Obtaining tax permits in Tennessee. In Tennessee each place of business must obtain a certificate of registration from the Tennessee Commissioner. No fee is required for the certificate of registration.

Leases. In Tennessee the lease or rental of tangible personal property is subject to a tax on the gross receipts based on the terms of the lease. Thus, the tax is computed on a billing basis, either as a lump sum at the time of contract execution or on a periodic basis as provided in the contract.

The following discussions address additional sales and use tax issues that many small business owners face: