Sales Tax Guide in Tennessee
In the process of opening a small business, it is important to know how much money it means to be up to date with taxes. In Hispanic Entrepreneurs We offer you a guide to sales taxes in Tennessee to clarify your doubts.
What is sales tax?
Sales tax is not established in the United States, so there is no standard rate for charging it. It is for this reason that it varies in each state, ranging from 4 to 7%, 32 is above 5,09% and 18 below this average, only California exceeds 7%. While Colorado imposes 2,9%, in Oregon, New Hampshire, Montana, Delaware, Alaska it is 0%.
In addition, local governments in 35 entities collect an additional sales and use tax of between 1 and 5%. The average of this is 1,45%.
In some they have reduced rates or do not charge any percentage in various items such as food for domestic consumption, machinery for manufacturing and residential services. Persons or businesses that sell tangible personal property at retail are required to register with the state revenue department. Also those that offer taxable services.
Similarly, several states have resolved to require payment according to the annual volume of sales or the number of transactions carried out.
Sales Tax Guide in Tennessee
This tax is the main source of tax revenue in Tennessee, representing 60% of all revenue. It is made up of two parts, the state and the local, the rate of the first is 7% and that of the second varies according to the city or county.
Let's remember that sales tax is only one part of the overall tax structure. Although Tennessee is one of the high-rate states, it does not charge income tax. Usually applies to the retail sale of tangible personal property (physical) and accommodation services, telecommunications, installation and repair of tangible personal property.
As well as food trucks, the sale of some digital products, computer software, warranty and software maintenance contracts, etc. Prescription drugs and gasoline are exempt. But equally, it applies to digital goods and services, such as a movie purchased on Amazon. The company or seller can collect the tax through its customers by including it in the sale price.
The due date for sales tax in Tennessee depends on how often the return is filed. If it is monthly, it will be the 20th of the following month at the end of the reporting period. If it is quarterly, it is due on the 20th of the month following the end of the quarter, that is, January 20, April 20, July 20 or October 20. Meanwhile, if the declaration is annual, it will be on January 20.
It should be noted that the tax rate on food sales is 4%. Other products and services have special rates, aviation fuel is 4,25%, industrial water for manufacturers is 1,0%.
The industrial energy fuel for manufacturers of 1,5%, prefabricated houses of 3,5%, satellite television service for homes of 8,25%, as well as for the video programming service (cable TV) and satellite television.
The rate on individual items is 2,75% if sold for more than $1600 but not more than $3200. You can check all the rates at: https://www.tn.gov/content/dam/tn/revenue/documents/taxes/sales/singlearticle.pdf.
Any county or city in the state may by ordinance levy local sales and use tax to the same actors as the State. The rate cannot be higher than 2,75%, and it has to be in multiples of 0,25. To locate the county or city in which your company is based, visit the website of Local sales tax rates.
Tennessee Sales Tax Registration
To declare taxes, companies must register with the Tennessee Taxpayer Access Point (TNTAP) of the Department of Revenue as well as the local. Submit the application, enter the link and select “register a new business”.
Marketplaces have to register when they exceed $100.000 in revenue in a year. You will begin collecting the tax on the first day of the third month following the month in which you reached this threshold. Some dealers they should too.
At the time of registration you will need the address and telephone number of the business, the owners and the person making the request. Each other's Social Security number and Federal Employer Identification Number (FEIN) issued by the IRS. The description of the company and what it does, type of property, date of incorporation, signature and the estimated amount of gross sales.
At the end of the process, the department will send a registration certificate to place it in sight in the business. Wholesalers, retailers and manufacturers will receive a resale certificate.
Types of sale
The business must be very clear about what type of sale it is making in order to correctly collect the tax and avoid fines. There is the sale in the store, which is the one that takes place on the site and is calculated at the rate that the location of the establishment has.
In-state sales, meaning long-distance sales within Tennessee, are subject to the seller's location rate. Out-of-state sales refer to sales made in another state where the business has a physical presence.
This includes an office, store or warehouse, a remote working employee or a traveling sales representative. Similarly, an affiliate marketing or dropshipping from a third-party seller, to temporary booths at festivals and fairs.
use tax
This type of tax is the opposite of sales tax. It must be paid by everyone when sales on products brought or shipped to Tennessee that are subject to it were not collected, except for services and entertainment.
It is calculated on the sale price applying the same basis as the sales price. The percentage is the same as the local sales tax. The average local tax is 2,47% and the combined rate is 9,47%
Keep in mind that if you file the return late you will have to pay a penalty of 5% per month up to a maximum of 30% of the tax that is in the report. The rate is 7,50% per year.
If you still have questions about this, you can contact the Taxpayer Services Division at 615-253-0600 or send an email to Revenue.support@tn.gov. You also have the option of checking the manual provided by the Tennessee Department of Revenue.
We hope this information has been useful. Likewise, we invite you to read the entrepreneurship articles that we have on our website.
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