Tax rate by region Tennessee

Select region

SaaS Sales Tax in Tennessee: Your Comprehensive Guide

In Tennessee, businesses are subject to sales tax, including digital services like SaaS. Understanding the rules and regulations can be crucial for SaaS providers operating in the state. This guide provides a comprehensive overview of SaaS sales tax in Tennessee, covering essential details to help you navigate compliance requirements.

Tennessee has a sales tax rate of 7%, applicable to most goods and services, including SaaS. Food items are taxed at a reduced rate of 5%. While currently, there are no specific exemptions for SaaS under Tennessee’s sales tax law, understanding your customer’s location and the type of SaaS service you provide is crucial. B2B transactions may be exempt from sales tax if the customer provides a valid resale certificate.

Tennessee

Tennessee has no state income tax, which continues to attract new residents and businesses seeking a favorable tax environment.

Official government link: Revenue

7.00%

E-products and services VAT/Sales tax rate

Food 5%

Reduced tax rate

Reverse charge mechanism for B2B sales

Not applicable in the US

Tax ID validation required

Yes

When do you have to register

If you exceed $100,000 in sales.

Online registration possible

Yes

Local representative needed

Yes

Registration procedure

Register with the Tennessee Department of Revenue to obtain a sales and use tax certificate.
File Form FAE 174 (Tennessee Franchise and Excise Tax Return) if earning Tennessee-source income.
Appoint a Tennessee registered agent if necessary

List of digital and electronic services liable for tax

SaaS, video games, digital products

Penalties

5% of unpaid tax for each month, max 25% (Late Filing); 10% of unpaid tax after 30 days (Late Payment)

Registration threshold

$100,000.00

Filing interval

Monthly, Quarterly, or Annually

Filing deadline

20th of the month

E-invoicing requirements

No state-wide e-invoicing mandate

Record keeping

No state income tax: N/A

Effortless Subscription Management and Billing

Regarding compliance, businesses are required to file sales tax returns monthly, quarterly, or annually, depending on their sales volume. The payment deadline is the 20th of the month following the reporting period. Maintaining accurate records, including invoices and receipts, is essential for compliance. While Tennessee doesn’t currently mandate e-invoicing, implementing it can streamline your invoicing process and improve efficiency.

Optimizing your sales tax management in Tennessee involves staying informed about any updates to the law, considering e-invoicing for enhanced efficiency, and seeking guidance from a tax professional for complex situations. By adhering to these recommendations and staying up-to-date with the latest regulations, you can ensure your business complies with SaaS sales tax requirements in Tennessee.

What is the current sales tax rate for SaaS in Tennessee?

The current sales tax rate for SaaS in Tennessee is 7%. Food items are subject to a reduced rate of 5%. It’s crucial to stay informed about any potential changes to the tax rates or exemptions.
How frequently do I need to file sales tax returns in Tennessee?

The frequency of sales tax return filing in Tennessee depends on your business’s sales volume. You may need to file monthly, quarterly, or annually. Consult the Tennessee Department of Revenue for specific requirements based on your sales volume.
Is e-invoicing mandatory for SaaS companies in Tennessee?

Currently, e-invoicing is not mandatory for SaaS companies in Tennessee. However, implementing e-invoicing can improve your efficiency and streamline your invoicing process.

Ready to get started?

We’ve been where you are. Let’s share our 18 years of experience and make your global dreams a reality.

Talk to an Expert