2024 Guide to State Sales Tax in Tennessee

As an e-commerce seller, you will need to collect sales tax in Tennessee if you have:

• $100,000 or more in retail sales in Tennessee in the previous 12-month period (economic nexus), or
• Physical presence in Tennessee (physical nexus).

Below, we will highlight some of the basic provisions of Tennessee sales tax law.

What is the tax rate range for Tennessee?

State: Tennessee’s general sales tax rate is 7%.

Local: Local jurisdictions can range from 0% to 3%.

Do you have physical or economic nexus in Tennessee?

Physical nexus

Certain business activities create physical nexus in Tennessee. If you have physical nexus, you are required to collect and remit sales tax on all taxable sales that are shipped to Tennessee.

Examples of business activities that can create physical nexus in Tennessee include:

• Corporate presence
• An employee present in the state
• Ownership of personal property
• Lease of personal property
• Contractors or other representatives in the state

Economic nexus

Tennessee recognizes economic nexus for any vendor with $100,000 or more in retail sales into the state in the previous twelve months.

• Retail sales include exempt retail sales, but do not include sales for resale
• Your sales through a marketplace must be included in calculating your threshold
• Once you have economic nexus established, you will be obligated to collect sales tax from buyers in the state no later than the first day of the third calendar month following the month in which the threshold was met. For example, if you met the threshold on January 14, 2023, you must collect sales tax beginning on April 1, 2023.

Marketplace Sellers, Marketplace Facilitators & Out-of-State Dealers

What are examples of sales of taxable items?

• Tangible personal property, unless an exemption applies
• Clothing
• Certain services
• Food (taxed at 4% state rate plus the local rate)
• Digital goods are taxed at the state rate of 7.0% plus a uniform local rate of 2.5%
• Software as a Service (SaaS)

What are examples of sales of nontaxable/exempt items?

• Prescription drugs
• Property used primarily by a qualified farmer in agriculture operations
• Certain healthcare products
• Textbooks

Tennessee Sales and Use Tax Manual and Other Exemptions.

Are there any sales tax holidays?

Tennessee recognizes an annual sales tax holiday in July. This holiday supports back-to-school efforts and applies to some clothing, school supplies and computers.

For the month of August 2022, the legislature enacted a one-month holiday for sales tax on food and food ingredients. We do not know at this time if the holiday will be reenacted for 2023.

Tennessee also recognizes a holiday for gun safes and gun safety devices. This holiday is currently scheduled to sunset on June 30, 2023.

Tennessee Tax Free Sales Tax Holiday Page.

Is Tennessee a member of the SST (Streamlined Sales Tax)?

Currently, Tennessee is an associate member of the Streamlined Sales Tax Governing Board (SSTGB).

How to get a sales tax permit / links to register in this state?

You can register online at:

• Streamlined Sales Tax Registration System
• Tennessee Department of Revenue Sales and Use Tax

Rates

For more information on Tennessee rates, see: Tennessee Local Sales Tax Map.