Tennessee has no income tax but relies heavily on sales tax — the 7% state rate is one of the highest base rates in the US, and combined rates in Memphis (9.75%) and Nashville (9.25%) are substantial. Tennessee taxes groceries at a reduced 4% state rate. The state offers a generous annual back-to-school holiday including computers up to $1,500.
Tennessee sales tax overview
| Component | 2026 Rate |
|---|---|
| State sales tax | 7.00% |
| Avg local add-on | 2.55% |
| Avg combined | 9.55% |
| Maximum combined | 9.75% |
Note: Tennessee taxes groceries at reduced state rate of 4% (vs 7% general). Local groceries still at full local rate.
Tennessee sales tax by city
Combined state + local sales tax rates for major cities in Tennessee:
| City | Combined Rate |
|---|---|
| Nashville | 9.25% |
| Memphis | 9.75% |
| Knoxville | 9.25% |
What's exempt in Tennessee
Groceries
Reduced state rate: 4.00% (vs. 7.00% general). Local rates may still apply.
Clothing & footwear
Taxed at standard rate.
Prescription drugs
Exempt from sales tax (typical across most states).
Tennessee sales tax holidays
During a sales tax holiday, qualifying items are exempt from Tennessee sales tax. Some local jurisdictions may opt out — check with retailers near you.
Back-to-School
Last Friday-Sunday of July
Clothing & shoes ≤$100, computers ≤$1500, school supplies ≤$100
How Tennessee sales tax is calculated
Sales tax in Tennessee is calculated by multiplying the pre-tax purchase price by the applicable combined rate. The formula is simple:
Sales Tax = Purchase Price × 9.55% (avg combined)
Total = Purchase Price + Sales Tax
The exact rate depends on where the purchase occurs — the state base rate (7.00%) plus any local city or county add-ons. Tennessee allows local jurisdictions to add their own taxes, so the rate varies by location.
Quick calculation examples at average rate 9.55%:
$100 item
$9.55 tax
$109.55 total
$250 item
$23.88 tax
$273.88 total
$500 item
$47.75 tax
$547.75 total
$1,000 item
$95.50 tax
$1095.50 total
Additional tax-free items in Tennessee
Beyond the standard exemptions, Tennessee also provides sales tax relief on these categories:
Exemptions may have conditions. Always verify with the Tennessee Department of Revenue for complete rules.
Tennessee sales tax in context: rates, history, and neighbors
Tennessee's 7% state sales tax is one of the highest base rates in the US, and combined with local taxes (2.25-2.75%) gives an average combined rate of 9.55% — among the top 5 highest combined rates nationally. Memphis 9.75%, Nashville 9.25%, Knoxville 9.25%, Chattanooga 9.25%, Clarksville 9.5%. TN taxes groceries at a reduced 4% state rate (vs 7% general) — but local taxes still apply at full local rate, so Memphis grocery tax is about 6.75% combined. TN has no state income tax; sales tax is the dominant state revenue source. Compared to neighbors: Mississippi (~7.07% combined), Alabama (~9.31%), Georgia (~7.81%), Kentucky (6%), North Carolina (~6.99%) — TN's combined rate is highest among Southern peers. The reduced grocery rate provides meaningful relief.
Online shopping & Tennessee sales tax
Tennessee requires economic nexus — remote sellers with $100,000+ in Tennessee sales must collect Tennessee sales tax. Tennessee is a member of the Streamlined Sales Tax (SST) Agreement. Tennessee taxes most digital goods including streaming subscriptions, digital downloads, and remote software access at the standard 7% rate.
Use Tax reminder: If you purchase taxable goods online from a seller who does NOT collect Tennessee sales tax, you technically owe Use Tax — the same rate as sales tax, reportable on your Tennessee state tax return. Use Tax enforcement on consumers is rare but the obligation exists for significant purchases.
How much Tennessee sales tax on common purchases?
Using Tennessee's average combined rate of 9.55%:
| Purchase | Price | Sales Tax | Total |
|---|---|---|---|
| Grocery cart | $150 | $9.83 | $159.82 |
| Clothing / shoes | $120 | $11.46 | $131.46 |
| Prescription drug | $80 | Exempt | $80.00 |
| Smartphone | $999 | $95.40 | $1094.40 |
| Laptop / tablet | $1,299 | $124.05 | $1423.05 |
| New car ($35,000) | $35,000 | $3342.50 | $38342.50 |
| Home appliance | $1,500 | $143.25 | $1643.25 |
| Restaurant meal | $60 | $5.73 | $65.73 |
Based on Tennessee's average combined rate of 9.55%. Exact tax depends on city/county. Use our calculator above for specific locations and amounts.
Collecting sales tax in Tennessee: business guide
If you sell goods or taxable services to Tennessee customers, here's what you need to know:
- Registration: Register for a Tennessee sales tax permit/license through the Tennessee Department of Revenue before making your first taxable sale. Most states process registrations online within a few days.
- Economic nexus (online sellers): If you have $100,000+ in Tennessee annual sales or 200+ transactions, you must collect Tennessee sales tax even without a physical presence in the state — per South Dakota v. Wayfair (2018). You must collect both state (7.00%) and applicable local rates.
- Destination vs origin sourcing: Tennessee uses destination-based sourcing for most sales — the tax rate where the buyer receives the goods applies. Always use the customer's delivery address to determine the rate.
- Filing frequency: Frequency depends on your Tennessee sales volume — monthly for high-volume sellers, quarterly or annually for low-volume sellers. Check with the Tennessee Department of Revenue for your specific filing schedule.
- Marketplace sales: If you sell through Amazon, Etsy, eBay, or similar platforms, the marketplace is required to collect and remit Tennessee sales tax on your behalf — you don't need to collect it separately on marketplace transactions.
- Resale certificates: Businesses purchasing goods for resale can provide a Tennessee resale certificate to suppliers to avoid paying sales tax on wholesale purchases. Keep copies of all resale certificates for audits.
Streamlined Sales Tax (SST): Tennessee is an associate member of the Streamlined Sales Tax (SST) Agreement — partial conformity with simplified registration available.
Tennessee-specific business compliance details
Tennessee businesses register with the TN Department of Revenue at tn.gov/revenue for a Tennessee Sales and Use Tax certificate. Filing frequency: monthly for $200+/month tax, quarterly for smaller, annually for very small. Out-of-state sellers with $100,000+ in TN sales must collect TN tax (economic nexus, since October 2019). TN is an associate member of the Streamlined Sales Tax (SST) Agreement (partial conformity). Marketplace facilitators collect TN tax. TN uses destination-based sourcing. The dual rate (7% general / 4% groceries) requires careful POS configuration. TN was one of the last states to phase out its Hall Tax on dividends/interest (fully eliminated 2021), making it now fully income-tax-free. Penalties: 5% per month (capped at 25%) plus interest.
Tennessee sales tax frequently asked questions
How much is sales tax on groceries in Tennessee?
Tennessee charges a reduced 4% state rate on most grocery food items (vs the 7% standard rate). However, county and city taxes still apply to groceries at their full local rates — typically 2.25%–2.75%. In Memphis (Shelby County), groceries face approximately 4% state + 2.75% local = 6.75% total. In Nashville (Davidson County), approximately 4% + 2.25% = 6.25% total. Prepared foods (restaurants, hot bars) are taxed at the full 7%+ rate.
What is the combined sales tax rate in Nashville vs Memphis, Tennessee?
Nashville (Davidson County) has a combined rate of 9.25% — 7% state + 2.25% Davidson County. Memphis (Shelby County) is 9.75% — 7% state + 2.75% Shelby County. These are among the highest combined rates in the Southeast. Knoxville (Knox County) is 9.25%. Tennessee's high combined rates reflect the state's reliance on sales tax to replace income tax revenue.
What qualifies for Tennessee's back-to-school sales tax holiday?
Tennessee's Back-to-School Sales Tax Holiday occurs on the last Friday through Sunday of July. Qualifying items include: clothing and footwear priced $100 or less per item, computers under $1,500, and school supplies under $100 per item. This is a broad holiday compared to most states — the $100 clothing limit and $1,500 computer threshold are generous. Both state and local taxes are waived for qualifying purchases.
Tennessee city paycheck calculators
If you live or work in a Tennessee city, see our city-specific paycheck calculators for take-home pay including any local income tax, plus local employer and cost-of-living context: