Tennessee: Sales Tax Handbook
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.
Contents1.) Taxability of Goods and Services
- General Tennessee taxability guidelines
- Are services subject to sales tax?
- Is shipping & handling subject to sales tax?
- Are drop shipped items taxable?
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.Top
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.
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"")
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.
|Products on Amazon.com||TAXABLE *|
|General Clothing||TAXABLE *|
|Food and Meals|
|Grocery Food||TAXABLE *|
|Leases and Rentals|
|Motor Vehicles||TAXABLE *|
|Tangible Media Property||TAXABLE|
|Manufacturing and Machinery|
|Utilities & Fuel||TAXABLE *|
|Medical Goods and Services|
|Newspapers and Magazines|
|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 *|
|Janitorial 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 *|
|Vending Machine Sales|
* See notes in category taxability page for details
Back to Tennessee Sales Tax Handbook Top