Navigating through the state of Tennessee's existing rules on imposing sales taxes can generate a sense of confusion among taxpayers. Besides charging sales and use tax on the sale of goods, the state also outlines a list of taxable services. For any seller in Tennessee, it's the best move to have the right information about the taxability of services as provided by the Tennessee Department of Revenue.
While not all services are subject to sales tax, the department of revenue highlights some services that are taxable under the law.
- The use of rooms, lodgings, or accommodation for less than 90 days by hotels, inns, or other businesses providing lodging services
- Parking or vehicle storage services provided in a parking lot or parking garage
- Installation services for computer software
- Installation of tangible personal property that remains tangible personal property after the installation
- Repair services for tangible personal property such as appliances and automobiles and computer software
- Laundering or cleaning services for tangible personal property except for coin-operated ones
- Animal bathing services. If both bathing and pet grooming occur as a single charge, sales tax is calculated on the total sales price
- Furnishing of intrastate, interstate, or international communication services
- Ancillary services for telecommunications, such as caller ID, voice mail, or call waiting and forwarding
- Sale or recharging of prepaid calling cards, long-distance calling cards, and prepaid phones
- Enriching uranium materials, compounds, or products
- Charging a rental space to a dealer for making sales, such as a booth rental
- Subscriptions or fees for the use of video programming services such as cable and broadband television services
- Direct-to-home satellite services
- Charges imposed on recreation, amusement, or entertaining activities. Examples include tennis clubs or country clubs providing recreation facilities.
A Seller's Permit
A business offering any of the above-specified services needs to take proactive steps to register for a seller's permit. Then, they can collect and remit sales taxes as part of their obligation to the government. Filing and paying of the sales tax return form SLS-450 are done electronically every 20th of the month. Otherwise, it attracts a penalty of 5% for late filing or a 7.5% interest on unpaid sales tax.
Other Considerations Regarding Tennessee Sales Taxes on Services
First, Tennessee law does not exhaustively specify all taxable services under the law. For example, additional services that help facilitate the sale of a taxable good or service are also subject to sales tax. This may lead to a seller failing to charge and submit sales taxes exposing them to being assessed or audited for unpaid taxes. If this happens, a seller can seek the Tennessee Voluntary Disclosure program, which offers penalty abatement and a limited look-back period of three years.
Businesses that offer television and telecommunication services must file a television and telecommunication tax. This is filed and paid through the Tennessee Taxpayer Access Point (TNTAP). Further, a notice released by the Tennessee General Assembly indicated that the statewide 911 surcharge rate would be revised from $1.16 to $ 1.50 from January 1, 2021. This affects businesses offering communication-related services, including prepaid wireless, wireline, and non-prepaid telecommunication services.
In addition, companies in the computer software businesses can face a tough time ensuring their total sales price to the customer is all-inclusive of services liable to sales tax. The law requires them to add up the necessary expenses that aid in the sale.
Increases Tax Assessment
Also, as of July 1, 2015, Tennessee was among the states that increased sales tax assessment on the licenses or subscription fees of remote access software (SaaS). This requires vendors to obtain a Remotely Accessed Software Direct Pay Permit to mitigate any confusion. In addition, on October 1, 2015, the state repealed tax law on sales tax assessment of computer software maintenance contracts. Currently, the state imposes sales tax on software maintenance contracts. This includes services such as future updates, upgrades, or support services.
Examples of expenses and service cost not enumerated in the law as taxable services include:
- Reimbursable travel expenses
- Consulting and professional services such as designing, programming, or modifying software
- Computer software training services
Learn More About Sales Tax in Tennessee
Filing sales tax returns monthly can be less complicated as long as the businesses work in tandem with the laws laid down by the state. This also includes taking advantage of any resources and tax relief programs availed by the Tennessee Department of Revenue. In addition, provided a business has a seller's permit, they must file the sales tax return even if they record zero sales taxes.
At Sales Tax Helper, you're free to consult with us regarding the important sales tax matters that directly or indirectly affect your business, including the taxability of the services offered. Schedule a free 30-minute call with us today.