Tennessee's statewide sales tax is 9.55 percent

Tennessee has a combined state and local sales tax rate of 9.55 percent. This is made up of a 4 percent state tax plus local taxes that vary by county and city. The local portion ranges from 1.5 percent to 2.75 percent depending on where you live, which is why the total you pay at checkout differs across the state.

The 9.55 percent figure is the statewide average, but your actual rate depends on your location. If you buy something in Nashville, you pay a different rate than someone buying the same item in Memphis or Knoxville. When you see a price tag, the sales tax shown at checkout reflects your specific county and city combination.

Key Takeaways

  • Tennessee's state sales tax is 4 percent, but your total rate is higher because counties and cities add their own local taxes on top.
  • The combined rate ranges from 5.5 percent in some rural areas to 9.75 percent in certain cities, depending on where you make the purchase.
  • Groceries and prescription medications are not subject to sales tax in Tennessee, even though most other items are.
  • Online purchases from out-of-state sellers are subject to the same sales tax as in-store purchases if the seller has a physical presence in Tennessee.

How local taxes are added to the state rate

Tennessee's 4 percent state sales tax is the baseline. On top of that, your county adds a local tax (ranging from 1.5 percent to 2.25 percent), and your city may add an additional local tax (ranging from 0 percent to 2.75 percent). These stack on top of each other, which is why the total varies so much across the state.

For example, Davidson County (Nashville) has a combined rate of 9.55 percent. Shelby County (Memphis) has a combined rate of 9.55 percent. But Rutherford County (Murfreesboro) has a combined rate of 9.55 percent as well. However, smaller cities and rural areas may have lower combined rates because they have lower local tax rates.

The local portion of the tax is split between the county and city. When you pay sales tax, part of it goes to the state, part goes to the county, and part goes to the city where the purchase happens. This is why the rate you pay at a store in one part of town may differ slightly from a store in another part of town if they are in different cities.

What items are taxed and what are not

Most items you buy in Tennessee are subject to sales tax, but there are important exceptions. Groceries and food items for home consumption are not taxed. This includes bread, milk, vegetables, meat, and other items you buy at the grocery store to prepare at home. However, prepared food, restaurant meals, and food bought ready-to-eat are taxed.

Prescription medications are also exempt from sales tax in Tennessee. If you fill a prescription at a pharmacy, you do not pay sales tax on the medication itself. Over-the-counter medications like pain relievers and cold medicine are taxed, but prescription drugs are not.

Clothing and shoes are taxed in Tennessee. Utilities like electricity and gas are taxed. Gasoline is taxed. Services like haircuts and car repairs are taxed. Digital products like e-books and streaming subscriptions are taxed. If you are unsure whether a specific item is taxed, the retailer can tell you at the register or before you buy.

Sales tax on online and mail orders

Online purchases are subject to Tennessee sales tax if the seller has a physical presence in the state, such as a warehouse, office, or store location. Many large online retailers have distribution centers in Tennessee, which means they collect sales tax on orders shipped to Tennessee addresses. The tax rate applied is based on the delivery address, not where the seller is located.

If you order from an out-of-state seller with no physical presence in Tennessee, the seller may not collect sales tax at checkout. However, Tennessee law requires you to report and pay this tax yourself on your state tax return. This is called "use tax," and it applies at the same rate as sales tax. Most individual shoppers do not report use tax, but it is technically owed.

How sales tax is used in Tennessee

The sales tax revenue collected in Tennessee is split between the state and local governments. The state keeps its 4 percent portion and uses it for general state operations, education, and infrastructure. Counties and cities keep their local portions and use the money for schools, roads, public safety, and other local services.

Because Tennessee has no state income tax, sales tax is one of the main ways the state funds government operations. This is why Tennessee's sales tax rate is higher than many other states — it makes up for the lack of income tax revenue.

Finding the exact rate for your location

To find your exact sales tax rate, you need to know your county and city. The Tennessee Department of Revenue publishes a complete list of sales tax rates by county and city on its website. You can search by your zip code or city name to find the combined rate that applies to your purchases.

If you are buying something in a different city or county than where you live, use the rate for the location where you are making the purchase, not your home address. The tax is based on where the transaction happens, not where you live.

Frequently Asked Questions

Do I pay sales tax on groceries in Tennessee?

No. Groceries and food items for home consumption are not taxed in Tennessee. This includes produce, meat, dairy, bread, and pantry staples. However, prepared foods, restaurant meals, and items bought ready-to-eat are taxed at the full rate.

Is sales tax the same everywhere in Tennessee?

No. The combined rate ranges from about 5.5 percent in some rural areas to 9.75 percent in certain cities. The rate depends on your county and city. Check the Tennessee Department of Revenue website to find your exact rate by location.

Do I have to pay sales tax on clothes?

Yes. Clothing and shoes are taxed in Tennessee at the full combined rate for your location. There is no clothing exemption, unlike some other states.

What is use tax and do I have to pay it?

Use tax is a tax on items you buy from out-of-state sellers who do not collect Tennessee sales tax. You are technically required to report and pay it on your state tax return at the same rate as sales tax. Most individual shoppers do not report it, but it is owed by law.

Are prescription medications taxed in Tennessee?

No. Prescription medications are exempt from sales tax. Over-the-counter medications like pain relievers and cold medicine are taxed, but prescription drugs filled at a pharmacy are not.