The Rutherford County sales tax rate is 9.75% on most retail purchases. That’s Tennessee’s 7% state tax plus the county’s 2.75% local option tax, which is the highest local rate state law allows.1Justia Law. Tennessee Code 67-6-702 – Tax Authorized – Rates – Termination of Services Tax Groceries, expensive single items, and digital products each follow different rules, so the rate you actually pay depends on what you’re buying.
How the 9.75% Is Built
Tennessee charges a flat 7% state sales tax on most taxable goods and services statewide.2Tennessee Department of Revenue. SUT-13 – Sales and Use Tax Rates – Overview Rutherford County adds a 2.75% local option tax under T.C.A. § 67-6-702, which is the ceiling the statute allows any county to impose.1Justia Law. Tennessee Code 67-6-702 – Tax Authorized – Rates – Termination of Services Tax Together, that’s 9.75% on an ordinary taxable sale.
Big-Ticket Items: The Single Article Cap
The 9.75% figure overstates what you pay on anything expensive. Rutherford County’s 2.75% local tax applies only to the first $1,600 of any single item’s price.1Justia Law. Tennessee Code 67-6-702 – Tax Authorized – Rates – Termination of Services Tax The local tax on any one item therefore caps at $44 (2.75% × $1,600), no matter how pricey the item is.
Tennessee then charges a separate state single article tax of 2.75% on the portion of the price between $1,600.01 and $3,200.3Tennessee Department of Revenue. SUT-6 – Single Article Tax – Overview and Application That additional state tax also caps at $44. Any dollar above $3,200 is taxed only at the base 7% state rate.
On a $20,000 vehicle bought in Rutherford County, the tax works out like this:
- State tax at 7% on the full $20,000: $1,400
- Local tax at 2.75% on the first $1,600: $44
- State single article tax at 2.75% on the next $1,600: $44
- Total: $1,488
Without the caps, the local and additional state portions would be $550 each. The cap is evaluated per item, not per transaction, so two separate $1,000 items in the same purchase are each measured against the cap on their own.
Groceries vs. Prepared Food
Unprepared groceries and food ingredients get a reduced state rate of 4% instead of 7%.4Tennessee Department of Revenue. Due Dates and Tax Rates The local 2.75% still applies, so a typical grocery run in Rutherford County is taxed at 6.75%.
Prepared food, candy, dietary supplements, and alcoholic beverages don’t qualify for the reduced rate and are taxed at the full 9.75%.2Tennessee Department of Revenue. SUT-13 – Sales and Use Tax Rates – Overview A rotisserie chicken from the deli counter is taxed at 9.75%; raw chicken from the meat case is taxed at 6.75%. The gap adds up on a large receipt.
Digital Products
Digital audio, video, and e-books sold by electronic transfer are taxable in Tennessee, whether they’re downloaded, streamed, or accessed online.5Tennessee Department of Revenue. SUT-65 – Specified Digital Products The state rate is 7%, but the local rate on digital products is 2.5% rather than the 2.75% used for physical goods. The combined rate on a streaming subscription or an e-book download in Rutherford County is 9.5%.
Software-as-a-service and other cloud tools can land in a gray area depending on how the product is delivered and whether it meets Tennessee’s definition of a specified digital product.
What’s Taxed, What Isn’t
Tennessee only taxes services when the statute specifically lists them. The taxable list includes short-term lodging, parking and vehicle storage, repair of personal property, laundry and dry cleaning, telecommunications, cable and satellite television, and installation of tangible property.6Tennessee Department of Revenue. SUT-115 – Services – Services Subject to Sales and Use Tax Services that aren’t listed generally aren’t taxed, so legal fees, medical bills, accounting, and most professional consulting stay off the sales tax rolls.
Several categories of goods are also exempt:
- Prescription medications and certain medical equipment
- Agricultural supplies such as seed, feed, and fertilizer used in farming
- Manufacturing machinery used directly in production
- Purchases by federal, state, or local government agencies
Businesses buying inventory for resale can skip the tax at purchase by presenting a valid Tennessee Certificate of Resale to the seller. The certificate is issued when you register for a sales and use tax account with the Tennessee Department of Revenue.7Tennessee Department of Revenue. Tennessee Sales and Use Tax Certificate of Resale Using a resale certificate for items you actually consume is a fast route to an audit.
If you bought something from an out-of-state seller that didn’t collect Tennessee tax, you owe use tax on the purchase and can report it through the Tennessee Taxpayer Access Point.8Tennessee Department of Revenue. Sales and Use Tax