How to Pay Sales Tax in Tennessee for Your Business

Sales tax in Tennessee is a consumption tax applied to the sale of certain goods and services. Businesses collect sales tax on behalf of the state, gathering funds from customers at the point of sale. Businesses selling tangible personal property or providing specific services are responsible for collecting and remitting this tax. This system helps fund various state programs and services.

Registering for a Sales Tax Account

Businesses need to register with the Tennessee Department of Revenue (TDOR) to obtain a sales tax account number. This registration process is completed online through the Tennessee Taxpayer Access Point (TNTAP). There is no fee to register for a sales tax account.

To register online, businesses navigate to the TNTAP website and select “Register a New Business.” The system will prompt for specific business information. This includes the business’s legal name, any “doing business as” (DBA) names, and its physical and mailing addresses.

Businesses will also need to provide their Federal Employer Identification Number (FEIN), contact details such as a phone number and email address, and the specific type of business entity (e.g., sole proprietorship, partnership, corporation, LLC). The start date of sales activities in Tennessee is also a required piece of information. After submitting the registration, the TDOR will send a Certificate of Registration to be displayed at the business location, and retailers, wholesalers, and manufacturers will also receive a Tennessee Certificate of Resale.

Understanding What to Report

Businesses must understand which sales are taxable and non-taxable to accurately report sales tax in Tennessee. The statewide sales tax rate is 7% on most goods and some services. Local sales tax rates vary by city and county, ranging from 1.5% to 2.75%, leading to combined rates up to 9.75% or higher.

Certain types of tangible personal property and services are subject to sales tax, including the repair, installation, and cleaning of tangible personal property, lodging services, and short-term space rental for commercial purposes. Groceries are taxed at a reduced state rate of 4%, with local taxes potentially adding up to 2.75%, resulting in a combined rate between 6.25% and 6.75%. Digital goods such as e-books, downloadable music, and streaming subscriptions are taxable.

Numerous exemptions exist that businesses might encounter. Sales for resale are exempt when a valid resale certificate is provided by the buyer. Other common exemptions include prescription drugs, certain medical devices, and farm equipment and agricultural supplies. Manufacturers may also be eligible for reduced rates or exemptions on certain purchases, such as a 1.5% state sales tax rate on energy fuel used on the manufacturing site.

Before filing, businesses must accurately calculate total gross sales, identify taxable sales, and apply the correct combined state and local tax rates for each transaction.

Filing and Paying Sales Tax

After gathering all sales data and completing the necessary calculations, businesses must file their sales tax returns and remit payments. All sales and use tax returns and associated payments must be submitted electronically through the Tennessee Taxpayer Access Point (TNTAP). Once logged into TNTAP, businesses can navigate to the “Sales and Use Tax” section to begin the electronic filing process.

The online system guides users through entering sales details, calculating the tax liability, and submitting the return. Businesses are assigned a filing frequency (monthly, quarterly, or annually) based on their sales volume or average monthly tax liability. For instance, businesses with an average monthly tax liability of $2,500 or more file monthly, while those between $100 and $2,499 may file quarterly.

The standard due date for sales tax returns and payments is the 20th day of the month following the end of the reporting period. If a due date falls on a weekend or holiday, it is extended to the next business day. Payment methods available through TNTAP include Electronic Funds Transfer (EFT) via ACH debit directly from a bank account, or credit card. After submission, businesses should receive a confirmation of their filing and payment. Even if no sales tax was collected during a period, a “zero return” must still be filed to avoid penalties.