Tennessee – TN Sales Tax Calculator: User Guide

Tennessee is a landlocked U.S state that shares its borders with eight states; North Carolina to the east, Arkansas to the west, Kentucky to the north, Georgia, Alabama, and Mississippi to the south, Virginia to the northeast, and Missouri to the northwest.

The State of Tennessee is 16th most populous and 36th largest by area among the 50 states and has Nashville as its capital and the largest city. While Greater Nashville is the largest Metropolitan.

Loaded with a rich history, great hospitality, fantastic landscape, including the Great Smoky Mountains and the Mississippi River, the State of Tennessee offers plenty of reasons for people to flock in. It has a simple living, southern charm, captivating nature, and low cost of living, ensuring a high quality of life for the residents.

The state also has a good economy, flourishing job market, and a favorable business environment for businesses and entrepreneurs to prosper. So, if you are one of them and planning to relocate, expand, or move your business to Tennessee, then you should know how to deal with Tennessee Sales Tax.

Our experts have created a comprehensive guide and a handy Tennessee Sales Tax calculator to assist you with sales tax.

Let's Dig In!

Tennessee Sales Tax Facts:

• Tennessee levies the second-highest statewide rate of 7% in the nation. On top of it, several counties and cities also levy local sales tax, ranging between 1.50% and 2.75%.
• 75% is the maximum possible combined sales tax rate charged in cities, including Church Hill, Tennessee.
• 5% is the minimum possible combined sales tax rate charged in cities, including Butler, Tennessee.
• Unlike most other states, items including Prescription Drugs, Non-Prescription Drugs, Clothing, and Groceries are not exempted from sales tax.
• Sales of books, Jewelry, computer software, clothing, and most other items are among the tangible personal property on which sales tax is charged.
• Unlike most other states, Tennessee also charges sales tax on most services, including parking garages, installations, hotel or motel room rentals, repair services (of cars, computers, etc.), and laundry.
• Textbooks, a number of healthcare products, some Agriculture related items, gasoline, and school meals, as well as items intended for reselling, are exempted from TN Sales Tax.
• Most Groceries are taxed at a lower statewide rate of 5% plus local taxes sales tax in Tennessee. However, prepared food and Candy and dietary supplements are taxed at the normal rate.
• Tennessee has a unique law known as "Single Article Tax," according to which Single Items, which are priced over $1600, are charged with combined (State + local) sales tax differently. Here, the first $1600 is charged with a regular combined sales tax rate, while the next $1,600 of the purchase is taxed at 9.75%. However, any remaining portion, the purchase price exceeding $3,200, will be charged with a lower sales tax rate of 7%.
• Although Tennessee has one of the highest sales tax rate, the taxpayers can enjoy tax-free purchases on the sales tax holiday, which begins on the last Friday in July and lasts the entire weekend. The tax-free purchases include items related to computers priced up to $1,500, and school supplies and clothing items with prices less than $100 per item.
• Tennessee Sales Tax Exemption Form can be used by individuals and businesses to buy items for resale, improvement, or as raw materials without paying sales tax in Tennessee.
• Tennessee requires the businesses and individuals to pay TN Use Tax (which is charged at the equivalent rate as TN sales tax) on taxable items brought or shipped into Tennessee without paying TN Sales Tax.

How to calculate Sales Tax in Tennessee?

Businesses and Sellers involved in the sale taxable tangible personal property and some services, and have Nexus in Tennessee are required to register for Sales tax.

They must collect, manage, and remit it to the Tennessee Department of Revenue while staying in compliance with state laws and avoid penalties and interest.

The sales tax determined on four factors:

1. Nexus: It is a connection of business with a state. The business is only liable to pay taxes to the states with Nexus.
2. Out of State Seller's Eligibility: Out of State Seller is only required to register, collect, and remit the sales tax to the authorities in the state if it falls under the criteria provided by the state.
3. Location and Products or Services: The sales tax rate varies from product to product and location to location, so you must check the sales tax rate applicable to your product according to the product category, county, and city in Tennessee.
4. Exemptions: Almost all goods are eligible for sales tax regulation. However, Products including textbooks, a number of healthcare products, some emption Agriculture related items, gasoline, and school meals as well as items intended for reselling are exempted from Tennessee Sales Tax. Still, you should regularly check with the Tennessee state government to which goods and services sold in Tennessee are subject to sales tax.

To calculate Sales Tax in Tennessee, follow the steps below:

Step 1 – Determine your Nexus:

As a business owner, you are only required to collect sales tax if you are eligible for collecting sales tax and have Sales Tax Nexus in the Tennessee State. And to determine your Nexus in Tennessee, you must have any of the following:

• Maintaining a physical location in Tennessee, such as office, warehouse, retail store, or other business locations.
• An employee or independent sales representative, other representatives working for you in Tennessee.
• Having inventory in Tennessee
• Rental or lease of tangible personal property
• Ownership of personal or real property in Tennessee
• Having a "Corporate Presence" in the state.
• Having an Economic Nexus, where the remote seller had more than $500,000 sales during the previous 12-month in Tennessee

Step 2 – Determine the Sales Tax Rate:

Once you have determined that your Nexus is with Tennessee, next is to deduce the Sales Tax rate (State+City) applicable to your product, for which you can refer to the table below:

Step 3 – Calculate Sales Tax:

Once you have determined that your Nexus is with Tennessee, next is to deduce the Sales Tax rate (State + County + City) applicable to your product, for which you can refer the points below:

Example # 1:

For instance, you sell a Rocking Chair on your store in Brentwood Estates, Tennessee, having a net cost of $275. The amount of Sales Tax that you have to pay on the Rocking Chair would be:

Manual Method:

Net Price (amount before Tax) of a Rocking Chair: $275

Total Sales Tax rate: 0.00% (Brentwood Estates) + 2.75% (Williamson County) + 7.00% (Tennessee State) = 9.75%

Total Sales Tax amount = $275 x 9.750% = $26.8

Gross Price (Amount after Tax) = 275 + 26.8 = $301.8

The sales tax amount charged on the Rocking Chair would be $26.8, raising the gross cost of it to $301.8.

Using our Sales Tax Calculator:

All of the steps mentioned above can be skipped to get an instant result using our Sales Tax Calculator. All you need is:

1. Input the $275 Net Price of a Rocking Chair as Amount Before Tax
2. Input or select 750% of the combined Sales Tax rate on the Tax Rate menu.

Our calculator will automatically calculate the result and represents it in 3 different forms, as shown in the image below:

Reverse Sales Tax Calculation

In the example above, we have explained to you to calculate the Sales Tax amount payable in a product and the Gross Price of the Product.

But there are also instances when you are required to deduce how much Sales tax you have actually paid on a product in Tennessee.

This is where the Reverse Sales Tax Calculation Kicks in. And luckily, our Tennessee Sales Tax Calculator can perform this calculation like a Pro.

Example:

The gross cost (amount after tax) of a Table is $120, which you sell on your store in Buchanan, Tennessee. Now, if you want to deduce the amount of sales tax you have actually paid on it and the net cost (amount before tax) of a Table, you can follow the steps below:

Gross Price (Amount after Tax) of Table: $120

Total Sales Tax rate: 0.00% (Roslyn) + 2.75% (Henry County) + 7.00% (Tennessee State) = 9.75%

Manual Method:

Gross Price with sales tax = [Net Price × (tax rate in decimal form + 1)]

120 = [Net Price x ((9.75/100) + 1)]

120 = Net Price x 1.10

$109 = Net Price

So the original Price (net price) of the Table would be $109.

Using our Sales Tax Calculator:

You can also use our Sales Tax Calculator for Reverse Sales Tax calculation to skip the aforementioned manual method. All you need is:

1. Input the $120 Gross Price of Table as Amount after Tax
2. Input or select 9.75% of the combined Sales Tax Rate on the Tax Rate

Our calculator will automatically calculate the result and represents it in 3 different forms.

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