Tennessee Sales Tax Return Instructions
One of Agile's team members sat in on the Tennessee Department of Revenue’s sales and use tax webinar to provide this short summary for your reference. Here are the tips we picked up to help you with your Tennessee sales tax return!
What are your responsibilities for Tennessee Sales Tax Return?
Businesses that qualify for Nexus in Tennessee collect and remit sales and use tax on the sales, lease, or rental of tangible personal property (an item you can touch, smell, or taste), recreational activities, and digital products. Digital products are subject to a special local rate unless the products are also available as tangible product. For example, an eBook version of a book in print. In cases like that, the digital products are taxed at the normal rate.
While most services are exempt from tax in Tennessee, some have specific laws making them taxable. Taxable services include lodging services and rooms, short-term rental space for making sales, cleaning/repairing/installation of tangible personal property including animal bathing or computer software installation, parking or storage of motor vehicles, telecommunication & ancillary telecommunication services, and enriching of uranium materials.
Any business with physical Nexus in Tennessee (brick and mortar locations or employees working in the state) are required to register for sales and use tax if their gross sales exceed $4,800/year or if their taxable services exceed $1,200/year. Out of state businesses with no physical presence in Tennessee must register if they achieve economic Nexus. Companies can assume they meet economic Nexus if they exceed $100,000 of sales in Tennessee. This determination is made by destination delivery of sales, but it does not include sales for resale.
Taxpayers should register, file, and pay their Tennessee sales tax return through Tennessee’s online portal TNTAP. Most businesses will be required to file monthly, which is the default filing frequency. After 1 year of filing, any business that averages more than $1000/month can choose to file quarterly or annually instead.
Two Common Confusions on a TN Sales Tax Return
While filing on TNTAP is generally self-explanatory, we wanted to highlight two common confusions:
- Many businesses find the concept of a “single article” (reported in schedules B and C of your TN sales tax return) to be cryptic. If an item sold is sold as one, assembled entity, that item is considered a single article even if component parts may have been sold for different charges. The best example of this is a car. While you may have paid for the upgraded leather interior and a subwoofer as separate trim options, the final item is sold as a single article. However, a set of separate items sold as one unit do not count as a single article. For instance, if you buy a furniture set consisting of a love seat and a sofa, they would be considered two items for your Tennessee sales tax return because, despite being invoiced as a set, they’re separate items.
- While food sales are taxed at a lower rate of 4%, prepared food is taxed at the full 7% state rate. The easiest way to think about this difference is where the food is purchased. Most prepackaged food or meal ingredients sold at a grocery store will be taxed the lower rate, while food that is sold at something akin to a restaurant is taxed at the full rate.
We hope this advice was helpful, but should you need sales & use tax assistance in TN or any other state. Agile has developed a patented, real-time nexus study program that provides instant results. Now we have two ways we can assist you when it comes to determining whether your business has sales tax nexus in any U.S. states! Choose our traditional, manual study conducted by our team of sales tax compliance specialists, or opt for an instant solution via our real-time nexus study.
