States TN

Tennessee Sales Tax for Online Sellers

by Mark Faggiano

Tennessee sales tax

This blog post may now be out of date. For our most up-to-date info on Tennessee sales tax, check out our “Tennessee Sales Tax Guide for Businesses.”

Here are the most common scenarios our customers at TaxJar (particularly if you use Amazon’s Fulfillment by Amazon) need to understand when it comes to potentially having to pay sales tax in Tennessee.

You’re an out-of-state seller

If you operate your business in another state and your business has no ties to Tennessee, then you are not required to collect sales tax from customers that want taxable items shipped to Tennessee.

For example, you live in Vermont and run an eBay business out of your basement. You don’t need to collect sales tax when you sell a taxable item to a customer who wants that item shipped to Tennessee.

You live/operate your business in Tennessee

Now let’s say you’re a resident of Tennessee and you operate a business out of your home. The state says if you sell more than $400 gross each month then you’re required to register your business for sales tax (it’s free) and collect sales tax on orders of taxable items that are delivered to customers in Tennessee.

If you live/operate your business in Tennessee, how much you collect in sales tax depends on where your business is located (in sales tax lingo TN is known as an origin-based state). In general, the state sales and use tax rate is 7.00% and the local rate is 2.25%. The local rate, however, can vary from 1.00% to 2.75%.

Example time: let’s say you operate your business out of Adams, TN. You’d charge all of your orders shipped to a Tennessee address 7.00% state tax plus 2.75% for the local tax. But if you operated in Butler, TN then you’d charge 7.00% state tax plus 1.50% local tax. I’ve included a screenshot of TN’s Department of Revenue’s alphabetical list of Tennessee cities indicating applicable local sales tax rates.

tn local sales tax rates

You live out-of-state but sell through FBA

This is a question we get asked all the time. Let’s say you live in Alabama but use FBA. Amazon  has multiple warehouse locations in Tennessee. At the time I’m writing this they have ones in Charleston, Chattanooga, Lebanon, and Murfreesboro. Just like if you lived in-state, you need to get a Tennessee Sales and Use Tax account and collect sales tax on orders delivered to Tennessee. In other words, you have nexus with Tennessee. If you want to see this for yourself, go to Page 16: Third Party Drop Shipments, [Sales or Use Tax Rule 1320-5-1-.96] of Tennessee’s Sales and Use Tax Guide (PDF).

The rate at which you collect sales tax on orders shipped to a Tennessee address is different than if you are an in-state seller. In this case, the state actually allows you to do one of two things:

  • collect the sales tax rate at the buyer’s ship-to address for all orders shipped to Tennessee (i.e. destination-based sourcing)
  • collect the 7% state rate and just add 2.25% to all purchases, meaning you would charge a flat 9.25% rate to all Tennessee buyers

Tennessee destination based sourcing

It doesn’t matter which of the warehouses your items are shipped from. Charge the sales tax rate at the buyer’s ship to address or charge the 9.25% flat rate. It’s up to your discretion. At TaxJar, we recommend you charge the flat 9.25%.

Last point to make for FBA’ers: if you live in-state but also use FBA, use the rate of your home location. Do not use the rate of any of the warehouses.

Filing sales tax in Tennessee

If you need to file a sales tax return in Tennessee,  you can file and pay online at the Tennessee Department of Revenue.

Summing it all up: your location matters

If you’re out-of-state with no ties to Tennessee, you’re life is easy – don’t collect sales tax from orders shipped to Tennessee. If your business is based in Tennessee, collect sales tax on taxable items shipped in-state based on the rate of your business location. If you are located out-of-state and have inventory in a TN warehouse, collect sales tax at the rate where your buyer’s ship to address is located. If you need more info, check out our sales tax guide to Tennessee.

Got questions? Feedback? Tell me about your experience selling in TN in the discussion section below.

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  • Sir Matthew

    The hardest thing for me when filing the TN sales tax was that the online system just asks for a local tax total, and I could not find a place to enter each jurisdiction. I emailed Tennessee’s Department of Revenue about this but never did receive a reply (checked in my junk folders, etc). They never asked, either, after filing two quarters with local tax. I would call their online system rather antiquated compared to the many other states in which I’ve filed. I know the TaxJar Reports will be very helpful from what I have seen so far, but thought that I’d my 2 cents in case anyone else is having the same problem.

  • Confused Online Seller

    My question is as follows: I have 1000 units of a product. For some reason amazon makes me send 1 unit to TN for FBA. Do I collect Sales Tax for TN the entire YEAR because I had one unit stored in the FC for a few days or do I collect only during the time my products are in that warehouse. This also brings forth another question. Example 2, I ship my products to amazons distrobution center in PA. Then then decide to ship units on there own accord to TN, PX, CA, TX etc. Do I collect PA Sales tax because thats where I shipped it to, or do I have to monitor my entire inventory on a daily basis and update and obtain NEW Tax Permits based on when I start having inventory stored in new states.

    • Here’s what TN says:
      The state says if you sell more than $400 gross each month then you’re required to register your business for sales tax (it’s free) and collect sales tax on orders of taxable items that are delivered to customers in Tennessee.

      Each of the states that you store inventory in says that you’re required to comply with their sales tax law because your inventory counts as nexus. A lot of sellers we talk to decide not to check the inventory on a daily basis (who has time for that?) and register for the states with inventory. That’s a decision you’ll have to make on your own.

      Hope that helps.

  • Paul Kremer

    I just called the Tennessee department of revenue, and the representative stated that because I had no physical presence in the state, any sales tax collection would be strictly voluntary. What gives?

    • Hi Paul-

      Call back again and you’ll probably get a different answer. 🙂

      Per the link above the state says that there are other ways of gaining nexus other than “physical presence”.

      • Paul Kremer

        I called back, and the person I got had absolutely no idea what I was talking about, much less the answer. I e-mailed the sales tax department. The biggest headache of all of this isn’t even having to collect or remit, it’s trying to figure out what my obligations are.

  • ShellysPlace2Buy

    Hi Paul: I have a different situation than the people who write you. I have a bunch of old things in my house that I have had for more than 20 years. I want to sell them to make room in my house and to get some money. Normally a person would simply have a garage sale. However, I do not want to have to display things on tables outside or have to cancel because of bad whether, or have to deal with people who want to give me nothing for my items or who might try to steal from me. I found a website, Etsy, where I can sell my items from inside my house over my computer. It has been my understanding that no sales tax is paid at garage sales. At least that is what I had heard when I lived in New York. Now I live in Tennessee. My situation is that I will be selling over the internet instead of selling outside my house at a garage sale. I do not see why I would have to collect sales tax. I am basically having a garage sale over the internet. The items I have to sell were already taxed years ago. I feel I should not have to have anything to do with sales taxes. Could you please explain what sales tax laws would pertain to my situation? Thank you.

    • I think that in TN you only collect when selling to others in TN and only if you have a business that makes more than $400.00 a month. You don’t have to collect for another state selling out of your house. If you started selling with Amazon and their fulfillment service, then you would have to collect based on where you were shipping. That is my understanding of it, but I’m no expert.

  • Jerry

    Hi Mark, I’m an out state seller with nexus in TN. I also use TaxJar.
    Should I use the custom rate of 9.25% or select the Amazon settings for state, local, and district?

    • We suggest using the flat rate.

      • Jerry

        Thanks for answering Mark. And sorry for the confusion but by flat rate, do you mean the flat rate of 9.25% or use the check boxes that Amazon has for State, Country, Local, and District?

        • If you look at the section for TN, you see we suggest 9.25% as the custom rate.

          • Jerry

            Great! Thanks… 🙂

  • Jason

    Mark, Thanks very much for all your informative blogs. I don’t live in Tennessee but will be shipping inventory through Amazon’s FBA program to a warehouse there. I have a
    question about the $400/monthly limit mentioned. Is this $400/mo in
    gross sales to Tennessee residents or $400/mo in gross sales for all
    sales, period? I would think that the state of Tennessee would care
    about the former rather than the latter, but it’s not clear on their FAQ located at http://tn.gov/revenue/faqs/salesandusefaq.shtml.

  • SBIRD

    Hello! I just started a confection business in December of 2014. Right now, I am the only employee, and do not have intentions of hiring any employees anytime soon. I did not charge tax on my transactions (most of which were via Square). Are there any special tax rates based on what you sell, or is it just the flat 7% + the local tax based on your location?

  • Hi Sbird,

    It all depends on what state you live in. If you live in Tennessee, then you need to check with your state’s department of revenue on the tax rate on food. If there are no exemptions, then yes, it’s just the state + any local tax rates.

  • Daree Johnson

    Just want to make sure that I have this right. I live in TN, and will be shipping orders out of state often. I do not need to charges sales tax for those items. Only charge sales tax to customers in the same state as me?
    Thank you in advance for your answers.

  • Hi Daree,

    That’s correct. You only need to charge sales tax to customers in states where you have “sales tax nexus.” If you have sales tax nexus in Tennessee only, then you only need to charge sales tax nexus to customers in Tennessee.

  • I am a resident of TN selling out of my house online. TN is such a pain in the butt state for sales tax laws and restrictions. You can never get a straight answer or two of the same answer. It’s always a different story each time you call back. You would think there would be an easier way! ugh. I just started my business, so if you were me, would you wait until you had $400.00 in TN sales before you bother with it? I just know my expected income not what I will actually sell.

    • Hi Lezlie,

      While when to register for a sales tax permit is a business decision and up to you, we usually recommend caution, especially when it comes to your home state. We’ve published a whitepaper on “When to Register for a Sales Tax” permit for more guidance: http://offers.taxjar.com/sales-tax-permit

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  • AmyTYB

    We have a business that is based in Ohio and we ship to Tennessee (well any state). We provide a service tracking boats at marinas. We pay a cellular service provider and we pay tax on the data plan. We buy the devices for boats, cars, fleet or company vehicles, or personal..etc. we sell them at cost unless we need to buy more licensing. We are unsure if we need to pay taxes solely in Ohio, or other states as well. We do not have an office in TN, but do have an unpaid partner that had been trying to sell and install for us to get the business started. We make about $10-14 per device. Can you give any clarification where or how much tax to collect IF we actually have to collect on the devices?
    Thank you

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  • Hey, I provide monthly SEO & marketing consulting for clients. If part of that service includes writing blog posts for them, that’s still a service right? (because it’s not a pre-existing defined product)

  • Hi Jeremy,

    Yes, that’s not “tangible personal property.” Some states do consider some services taxable, so it’s always a good idea to double check with your department of revenue!

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  • Luane

    My company is in TN. All of my sales are wholesale. I have a S&U tax registration for any thing bought and sold in Tennessee. However, what if my supplier’s warehouse is in another state, say Mississippi. I purchase from my supplier and he drop ships from his MS warehouse to my customer in TN. Do I need a separate registration so I can charge sales tax at my customer’s rate? I can’t find a different registration on the TDR website. Someone told me to use the same online registration form I used before but mark that I am an out of state seller. I don’t see a place to make that distinction on the form.
    Confused!

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