Tax on Food in Tennessee

Tennessee sales tax is 7%, and local sales taxes can make the total more than 9.5%. This can be a burden for families, especially when prices are high. The grocery tax holiday helps ease the burden for families by removing the sales tax on groceries for three months. The average family saves about $100 during the tax break, but that doesn’t include the money they could have saved had the tax remained in place for a year.

All sellers in Tennessee must register to collect sales tax, and there are different rates depending on how much you sell and whether your goods are taxable or non-taxable. Retailers with more than $100,000 in sales in the state must file a sales tax return. Online sellers can choose to either charge sales tax based on the ship-to address (destination-based sourcing) or use a formula based on the price of the item and weight to calculate their tax liability. Read more about registering to collect sales tax in Tennessee here.

How to File Sales Tax in Tennessee?

If you are required to collect sales tax in Tennessee, you must register with the Department of Revenue and keep up-to-date with the state’s changing rules. You also need to apply the correct tax rate at the point of sale and remit the collected funds by a specified date.

The Department of Revenue has a variety of resources to help you get started, including the Tennessee Sales and Use Tax Guide. You should also consult a tax professional to ensure you’re collecting and applying sales tax correctly.

Food and beverage is always a tricky category when it comes to sales tax. In some cases, it’s exempt, and in other cases, it’s taxed at a reduced rate. Through October, families can enjoy a grocery tax holiday, which means they can shop for certain food items at the reduced 4% sales tax rate. However, pet foods, alcoholic beverages, and dietary supplements are not eligible for the tax-free holiday.

The state’s obligation to collect and remit sales tax depends on its relationship with sellers, a concept known as nexus. You may have nexus in Tennessee if you have a physical presence in the state, such as a brick-and-mortar store or warehouse, or if you sell taxable goods to customers in the state. You can determine your nexus status using a free economic nexus tool or consulting a tax professional.