Sales Tax Filing States TN

Some Tennessee Sales Tax Filings Now Require More Detail

by Jennifer Dunn

Tennessee sales tax

Back in late 2017, some out-of-state Tennessee sales tax filers reported receiving this notice from the Tennessee Department of Revenue:

The Department has updated the sales tax return for out-of-state sales tax filers. Beginning January 1, 2018, this tax return will be visible when you login to file sales tax through the Tennessee Taxpayer Access Point (TNTAP) here:

This new return will require that you file your Tennessee sales tax return reporting local option tax on sales on Schedule B by delivery destination locations. You will now report the local tax by the jurisdiction where the product was delivered.

You will need the following information to report the local option tax by delivery destination on Schedule B on the return.

  • Delivery Location
  • State Net Taxable Total
  • Adjustments
  • Adjusted Total
  • Excess of Single Article Tax Base
  • Energy Fuel Sales
  • Other Deductions
  • Local Net Taxable Total
  • Local Tax

What does this mean for sales tax filers in Tennessee?

If you received this notice, this means that starting January 1, 2018 you may sales tax a little differently in Tennessee. This means you may see some changes when filing your monthly Tennessee tax return due February 20th. (Or, if you are a quarterly filer, your first 2018 return will be due April 20th.)

Why? Tennessee is unique in that the state allows out-of-state sellers to choose from two options on how to collect sales tax:

  •      Collect the sales tax rate of the 7% sales tax rate plus the local rate at your buyer’s ship to address
  •      Collect a single uniform rate 7% Tennessee state sales tax rate + a single 2.25% sales tax for every local area (In other words, collect a flat 9.25% sales tax from every buyer in Tennessee)

If you opt to go the simple route of just collecting 9.25% sales tax from every Tennessee buyer, then you were not required to break down how much sales tax you collected from buyers in every local area in Tennessee. Nothing will change for you on January 1, 2018. Note: Starting July 2019 Tennessee will no longer allow this type of sales tax collection.

But, if you currently collect local rates, starting January 1, 2018 you will be required to break down how much sales tax you collected in each Tennessee local area (such as cities and counties.)

I sell on Amazon. How does this affect my sales tax collection and filing?

This depends on how you collect sales tax. In Amazon, you have two options when setting up your Tennessee sales tax collection in Seller Central:

  1. Check the boxes to collect state, city, county and local taxes – This will mean you collect the sales tax rate at your buyer’s ship to location.
  2. Set up a custom rate of 9.25% – This allows you to just collect a single 9.25% sales tax rate from all Tennessee customers. (Tennessee will no longer allow this method of sales tax collection starting July 1, 2019.)

If you choose the first option and collect sales tax at the rate of your buyer’s “ship to” address, then you’ll be required to further break down your Tennessee reports starting January 1, 2018.

If you choose the second option and just collect the 9.25% single sales tax rate from all Tennessee buyers, then nothing will change on your sales tax filing (for now).

What’s next for my Tennessee sales tax filing?

If you opt out of collecting the Tennessee flat rate of 9.25% and instead collect sales tax at your Tennessee buyer’s location, filing sales tax is about to become more time consuming. This will mean more data entry, and it will cause your Tennessee sales tax return to take longer to manually file. If you’d rather avoid the headache, sign up for TaxJar AutoFile and we’ll automatically file your Tennessee sales tax return for you!

Do you have questions or comments about filing sales tax in Tennessee? Start the conversation in the comments!

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