Sales Tax in Tennessee: A Complete Guide for Ecommerce Sellers

Tennessee is an SST member state with one of the highest combined sales tax rates in the country, up to 9.75% in some counties. Tennessee’s 7% state rate is already among the highest state base rates, and county additions bring combined rates well above 9% in the Nashville and Memphis metro areas. Tennessee taxes food at a reduced 4% state rate rather than exempting it outright, and there is no income tax in Tennessee, which means the state relies heavily on sales tax revenue.

Quick reference

Economic nexus

Tennessee’s threshold is $100,000 in gross sales into Tennessee in the prior 12-month period. There is no transaction count threshold, only the dollar amount matters.

Tennessee enacted its economic nexus rules effective October 1, 2019.

Physical nexus

Physical presence in Tennessee creates nexus without any threshold:

• Warehouse, office, or storage facility in Tennessee
• Amazon FBA inventory in Tennessee fulfillment centers
• Employees, agents, or independent contractors in Tennessee
• Sales representatives in Tennessee

Registration

Tennessee is an SST member state. Register through a Certified Service Provider for simultaneous registration in Tennessee and all other SST states at no charge.

Sellers can also register directly with the Tennessee Department of Revenue through the TNTAP portal (tntap.tn.gov). Registration is free.

Tax rates

State rate: 7% for most tangible personal property. 4% for food and food ingredients.

Local additions: Tennessee counties and cities can levy local option sales taxes of up to 2.75%. Combined rates vary by location.

Major combined rates:

• Shelby County (Memphis): 2.25% local = 9.25% combined
• Davidson County (Nashville): 2.25% local = 9.25% combined
• Knox County (Knoxville): 2.25% local = 9.25% combined
• Hamilton County (Chattanooga): 2.25% local = 9.25% combined
• Williamson County: 2.75% local = 9.75% combined (among the highest in state)

What’s taxable

Generally taxable: Electronics, clothing, furniture, sporting goods, toys, most tangible personal property.

Generally exempt:

• Prescription medications
• Agricultural products and equipment
• Industrial machinery

Notable Tennessee rules:

• Food: Tennessee taxes food and food ingredients at a reduced 4% state rate (plus local additions). This is not a full exemption, groceries are taxed in Tennessee, just at a lower rate than general merchandise. Combined rates on food typically range from 6.25% to 6.75% depending on county
• Clothing: Taxable in Tennessee, no clothing exemption
• Digital products: Tennessee taxes specified digital products, including downloaded software and digital audio/audiovisual works
• SaaS: Tennessee has guidance that cloud-accessed software can be taxable as a taxable service in certain circumstances

Shipping taxability

Tennessee taxes delivery charges when the shipped goods are taxable. When all goods in a shipment are exempt, the delivery charge is also exempt.

Marketplace facilitator rules

Tennessee enacted marketplace facilitator legislation effective October 1, 2020. Qualifying marketplace facilitators collect and remit Tennessee sales tax on marketplace-facilitated sales.

Remote sellers with no Tennessee physical nexus whose only Tennessee sales are through marketplace facilitators may not need to separately register. Sellers with Tennessee physical nexus must register regardless.

State-specific notes

High combined rates: Tennessee’s combination of a high 7% state rate with county additions creates some of the highest combined sales tax rates in the country. Williamson County at 9.75% is notable even by Tennessee standards. Sellers pricing products competitively in Tennessee markets should factor in the high effective tax rate.

Food at reduced 4% rate, not exempt: Unlike states that fully exempt groceries, Tennessee taxes food, just at a lower rate. Sellers of food and food ingredients need to apply the 4% state rate (not 7%) plus applicable local rates. Most tax calculation engines handle this automatically, but it’s worth confirming.

No income tax reliance: Tennessee has no broad-based state income tax, making sales tax revenue unusually critical to state funding. Tennessee enforces sales tax compliance actively.

SST membership: Tennessee’s SST membership makes registration straightforward for multi-state sellers.