Tennessee sales tax is 7% at the state level on most physical goods, with county and city governments adding up to 2.75% on top, which pushes the combined rate past 9% in most of the state.1Justia. Tennessee Code 67-6-702 – Tax Authorized – Rates – Termination of Services Tax Tennessee has no personal income tax, so sales tax does the heavy lifting for state revenue, and the rules reach into nearly every retail transaction.
How the Combined Rate Works
The base state rate of 7% applies to the retail sale of tangible personal property.2FindLaw. Tennessee Code 67-6-202 – Tax Levied on Tangible Personal Property at Retail On top of that, counties and incorporated cities can add a local option tax of up to 2.75%.1Justia. Tennessee Code 67-6-702 – Tax Authorized – Rates – Termination of Services Tax Most jurisdictions set local rates between 2.25% and 2.75%, so combined rates typically run between 9.25% and 9.75%. The statewide average combined rate is about 9.61%.3Tax Foundation. Taxes in Tennessee
The Single Article Cap on Big-Ticket Items
Local tax only applies to the first $1,600 of any single item’s price. Between $1,600 and $3,200, a separate 2.75% state single article tax takes its place. Nothing above $3,200 is subject to either the local tax or the single article tax, though the 7% state rate still applies to the full price.4Tennessee Department of Revenue. Single Article and Special Tax Rates
Here’s how that plays out on a $5,000 purchase: you pay 7% on the full $5,000 in state tax, 2.75% on the first $1,600 in local tax, and 2.75% on the slice from $1,600 to $3,200 as the single article tax. Everything above $3,200 escapes the local and single article portions.5Tennessee Department of Revenue. SUT-6 – Single Article Tax – Overview and Application
What Tennessee Actually Taxes
Most physical goods are taxable. Services are different: Tennessee only taxes a defined list of them. The taxable list includes repair and installation work on tangible property (including computer software installation), lodging, telecommunications, laundry and cleaning services, and parking or motor vehicle storage. Professional services such as legal advice, accounting, and medical care are not subject to sales tax.6Tennessee Department of Revenue. Services Subject to Sales Tax in Tennessee
Specified digital products delivered electronically are also taxable, including digital audio, digital video, and digital books, whether downloaded, streamed, or accessed through a subscription. These are taxed at the 7% state rate plus a flat 2.5% local rate regardless of where the buyer lives, rather than the varying local rate used for physical goods.7Tennessee Department of Revenue. Sales Tax on Specified Digital Products
Reduced Rates and Exemptions
Groceries
Food and food ingredients meant for home preparation are taxed at a reduced state rate of 4% instead of 7%.8Justia. Tennessee Code 67-6-228 – Food Retail Sales Tax Local tax still applies on top. Prepared food, candy, dietary supplements, and alcohol don’t qualify and are taxed at the full 7%.9Tennessee Department of Revenue. SUT-53 – Food and Food Ingredients – Definition and Tax Rate
Resale Inventory
Goods bought for resale aren’t taxed at purchase if the buyer gives the seller a valid Tennessee resale certificate. You get one by registering for a sales tax account through TNTAP and printing the certificate from your account. The certificate is only for inventory you intend to sell, and once you hold one you must file sales tax returns every period, even periods with no sales.10Tennessee Department of Revenue. Resale Certificate
Industrial Machinery
Manufacturers get a full exemption on industrial machinery used directly in production. No sales tax is due on qualifying equipment.11Justia. Tennessee Code 67-6-206 – Industrial Machinery and Raw Materials
The Back-to-School Sales Tax Holiday
Tennessee suspends state and local sales tax on back-to-school purchases every year on the last weekend of July, running from 12:01 a.m. Friday through 11:59 p.m. Sunday.12Justia. Tennessee Code 67-6-393 – Exemption for Sales Tax Holiday Qualifying items are:
- Clothing priced at $100 or less per item
- School supplies and art supplies priced at $100 or less per item
- Computers, laptops, and tablets priced at $1,500 or less per item
The holiday is written into the Tennessee Code, so the dates follow the same statutory formula each year without needing fresh legislation.12Justia. Tennessee Code 67-6-393 – Exemption for Sales Tax Holiday
When You Owe Use Tax Instead
If you buy something from outside Tennessee and the seller doesn’t charge sales tax, you owe use tax at the same combined rate. This covers online purchases, catalog orders, and goods you bring back from another state. As of July 2024, use tax also reaches certain services performed out of state when the repaired or installed property is shipped back to you in Tennessee, including repairs to physical goods, computer software installation, and laundry or dry cleaning.13Tennessee Department of Revenue. Consumer Use Tax Most major marketplaces now collect tax at checkout, but the obligation still catches private sales and smaller out-of-state vendors.
Rules for Businesses and Remote Sellers
Economic Nexus and Marketplaces
Out-of-state businesses with no physical presence in Tennessee must register and collect once they hit $100,000 or more in sales to Tennessee customers during the previous year.14Tennessee Department of Revenue. SUT-4 – Nexus – Overview Marketplace facilitators like Amazon and Etsy have their own obligation: if the platform facilitates $100,000 or more in Tennessee sales in a 12-month period, the platform collects and remits on behalf of its sellers.15Tennessee Department of Revenue. Out of State Dealers Marketplace Facilitators If you sell through one of these platforms, confirm your marketplace is handling collection before assuming you’re clear.
Registration and Filing
Any business selling taxable goods or services in Tennessee must register for a certificate of registration before its first sale, with a separate certificate for each physical location.16Justia. Tennessee Code 67-6-602 – Certificate of Registration – Application – Form – Issuance or Refusal to Issue Certificate Registration runs through TNTAP, the state’s online tax portal.17FindLaw. Tennessee Code 67-6-601 – Certificate of Registration – Application
Returns and payments go through TNTAP as well. The default schedule is monthly, with returns due by the 20th of the month after each reporting period. Lower-volume businesses can file quarterly (due the 20th of the month after each quarter ends) or annually (due January 20).18Tennessee Department of Revenue. SUT-9 – Sales and Use Tax Filing – Filing Due Dates Even in a zero-sales period, you still have to file a zero-dollar return.
What a Late Return Costs
Missing a deadline gets expensive quickly. Tennessee imposes a penalty of 5% of the unpaid tax for every 30 days (or any fraction of a month) the return is late, up to a maximum of 25%.19Justia. Tennessee Code 67-1-804 – Delinquency – Negligence – Fraud – Dishonor of Check – Exceptions Interest accrues on top of that. For July 2025 through June 2026, the interest rate is 11.50%, and businesses on installment payment agreements face 13.25%. Those rates reset annually.20Tennessee Department of Revenue. Tax Rates and Interest Rate Between the capped penalty and double-digit interest, a few months of neglect can nearly double a small tax bill.