Tennessee Sales Tax on Services, Installation, etc Tennessee: Sales Tax Handbook

Tennessee:

What purchases are taxable in Tennessee?

The taxability of various transactions (like services and shipping) can vary from state to state, as do policies on subjects such as whether excise taxes or installation fees included in the purchase price are also subject sales tax. This reference is here to help answer your questions about what is and is not subject to the Tennessee sales tax.

Section 1: Taxability of Goods and Services

What transactions are generally subject to sales tax in Tennessee?

In the state of Tennessee, sales tax is legally required to be collected from all tangible, physical products being sold to a consumer. Several examples of of items that exempt from Tennessee sales tax are medical supplies, certain groceries and food items, and items used in packaging.

This means that an individual in the state of Tennessee who sells school supplies and books would be required to charge sales tax, but an individual who owns a store which sells groceries medication is not required to charge sales tax on all of its products.


Are services subject to sales tax in Tennessee?

The state of Tennessee does not usually collect sales taxes on the vast majority of services performed. An example of services which might be taxed would be a service which includes creating, manufacturing, repairing, or installing a product.

This means that an accountant would not be required to collect sales tax, while a carpenter might be required to collect sales tax.

You can find a table describing the taxability of common types of services later on this page.

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Are shipping & handling subject to sales tax in Tennessee?

In the state of Tennessee, the laws regarding tax on shipping and handling costs are relatively simple. Essentially, if the item being shipped is taxable, and if you charge for the shipping as part of the order, then the shipping charge is considered to be taxable. If the item is not taxable, then the shipping is not seen as being taxable either.

If you are shipping a non taxable item together with a taxable item, you should charge sales tax for the percentage of the shipped items which are taxable. This can be determined by either weight or price.

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Are drop shipments subject to sales tax in Tennessee?

"Drop shipping" refers to the common business practice in which a vendor, often in a different state, makes a sale of a product which is shipped to the end-user by a third party supplier hired by the initial vendor. In Tennessee, drop shipments are generally exempt from sales taxes. If a Tennessee purchaser is in any way exempt, then the purchaser or re seller may provide Tennessee's customer's exemption certificate, or the resale certificate (which must belong with the purchaser's home state resale certificate. However, as of July 1, 2015, any drop shipper has the right to claim a resale exemption (which is included in the definition of ""resale"")

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Section 2: Taxability of Various Items in Tennessee

This table shows the taxability of various goods and services in Tennessee. If you are interested in the sales tax on vehicle sales, see the car sales tax page instead. Scroll to view the full table, and click any category for more details.

Category Exemption Status
Amazon Purchases
Products on Amazon.com TAXABLE *
Clothing
General Clothing TAXABLE *
Food and Meals
Catering TAXABLE *
Grocery Food TAXABLE *
Leases and Rentals
Motor Vehicles TAXABLE *
Tangible Media Property TAXABLE
Manufacturing and Machinery
Machinery EXEMPT
Raw Materials EXEMPT
Utilities & Fuel TAXABLE *
Medical Goods and Services
Medical Devices EXEMPT
Medical Services EXEMPT
Medicines TAXABLE
Newspapers and Magazines
Newspapers EXEMPT *
Periodicals EXEMPT *
Occasional Sales
General Occasional Sales EXEMPT *
Motor Vehicles TAXABLE *
Optional Maintenance Contracts
General Optional Maintenance Contracts TAXABLE
Parts Purchased for Use in Performing Service Under Optional Maintenance Contracts EXEMPT
Pollution Control Equipment
General Pollution Control Equipment EXEMPT *
Services
Janitorial Services EXEMPT *
Transportation Services EXEMPT
Software and Digital Products
Canned Software - Delivered on Tangible Media TAXABLE *
Canned Software - Downloaded TAXABLE
Custom Software - Delivered on Tangible Media TAXABLE *
Custom Software - Downloaded TAXABLE *
Customization of Canned Software TAXABLE *
Digital Products TAXABLE *
Trade-Ins
General Trade-Ins EXEMPT
Vending Machine Sales
Food TAXABLE *
Merchandise TAXABLE *

* See notes in category taxability page for details



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Source: http://www.salestaxhandbook.com/tennessee/sales-tax-taxability