Does Tennessee charge sales tax on services?
by April 25, 2023
The majority of U.S. states require merchants to charge sales tax on tangible personal property (TPP), otherwise known as physical goods. Many states also implement sales and use tax on digital goods and SaaS. Because the economy has shifted over time from a manufacturing economy to a service economy, states are now looking to generate revenue by taxing services.
Here’s what merchants need to know about taxing services in the state of Tennessee, which has a state sales tax rate of 7%.
Does Tennessee charge sales tax on services?
Services are generally not taxable in Tennessee, though there are exceptions:
- Admissions to sporting events, musical and theatrical performances and other amusements; charges for country clubs, tennis clubs, golf courses; charges for entering or engaging in any kind of recreational activity; charges for using tangible personal property for amusements, sports, entertainment or recreational activities, including golf carts, tennis courts or bowling shoes. More information here.
- Repair of tangible personal property (including computer software), including alterations, mending or correcting, work done to preserve or restore tangible personal property, refinishing, cleaning that is a necessary part of any repair work, service calls where any repair work is done or contemplates; changes in the size, shape or content
- Installation of tangible personal property, including charges for installing tangible personal property that remains tangible personal property after installation
- Installation of tangible personal property attached to real property but can be ordinarily removed (like window air conditioning units, curtain and drapery rods, gasoline pumps)
- Installation of software on a computer located in Tennessee regardless of whether the installation is made along with the sale of tangible personal property or computer software
- Lodging services and rooms
- Short-term space rental for making sales
- Cleaning of tangible personal property (including animal bathing)
- Parking and storing of motor vehicles
- Telecommunication services
- Enriching of uranium materials
- Bathing animals (but not grooming)
Please keep in mind that this is a guideline, and you should consult with a sales tax professional to determine if the services your business provides should be subject to state sales tax. For an in-depth look at Tennessee sales tax, TaxJar’s guide to sales tax in Tennessee and the Tennessee Department of Revenue has more details.
How to stay compliant with sales tax when you sell services
Managing all the moving parts of sales tax can be challenging. Are accounting services taxed? What about hair care or car maintenance? They may not be taxed in your state today, but sales tax laws change all the time. TaxJar makes it easier for you to stay current with it all, especially as you scale your business across states.
If you need to charge sales tax on services, TaxJar takes all of these state laws into account and makes your job simple. To learn more about TaxJar and get started automating your sales tax compliance, start a free, 30-day trial today.
