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Consumer Use Tax

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1. What is the Tennessee Consumer Use Tax?

Tennessee, like other states that impose a sales tax, also taxes the use of property brought into the state untaxed when purchased. This "use tax" was enacted in 1947, the same year as the sales tax, to allow taxation of merchandise coming from out-of-state sources that do not collect the state's sales tax.

2. What is the purpose for the tax?

The use tax protects local merchants, who must collect sales tax, from unfair competition from out-of-state sellers who do not collect Tennessee's sales tax and provides revenue for the operation of state government.

3. Who owes the tax?

If Tennessee sales tax is added to the purchase price, use tax is not owed. However, if merchandise is bought through the internet, over the telephone, from mail-order catalogs, etc., and sales tax is not added to the price, the purchaser is responsible for paying use tax directly to the Department of Revenue. Also, Tennessee residents who travel outside the state and purchase untaxed merchandise that is shipped to their homes in Tennessee are liable for use tax.

4. What is the tax rate?

The use tax is charged at the same rate as sales tax in Tennessee. The formula is based on a combination of the state tax rate of 7% (5.5% on food or food ingredients) plus the local tax rate levied by your local government. A local government rate chart is available at: http://tn.gov/revenue/pubs/taxlist.pdf. The tax is applied to the purchase price of the merchandise plus any delivery or other charges that the merchant adds to your bill.

The local use tax rate on purchases or downloads of digital videos, digital books, and digital music, as defined in Tenn. Code Ann. Section 67-6-102, is established at 2.50% regardless of the actual local tax rate in effect in the jurisdiction of the user and consumer.

The local rate is applicable only on the first $1,600 of the purchase price of any single article of tangible personal property. In addition, a state single article tax of 2.75% is applicable to the purchase price amount of any single article purchased from $1,600.01 to a maximum of $3,200, effectively making the maximum rate of state single article tax to be $44.

5. When do I file this tax?

Depending on the frequency of purchases, consumers must file the use tax return and pay the taxes either monthly, quarterly, semiannually, or annually. The return is due on or before the 20th of the month following the close of the applicable period. For example, taxpayers filing an annual calendar year return would submit the return and payment on or before January 20 of the following year. Most Tennesseans can simply file a use tax return annually if items subject to use tax are purchased infrequently.

If use tax is due on food items that are taxed at the 5.5% state rate and there are other purchases taxed at the 7% state rate, two returns should be filed to report the food and non-food items separately.

6. How do I file and pay my Tennessee Consumer Use Tax?

Taxpayers are encouraged to file and pay their use tax obligations online. This easy-to-use process allows taxpayers to submit their payment using a one-time bank draft free of charge. Taxpayers wishing to pay using a Mastercard, American Express, or Discover credit card may do so, with a 2.49% processing fee.

Paper tax forms sent to the Department of Revenue with a check for the proper amount of tax are also acceptable. Click here to download the form.

7. What happens if I do not voluntarily pay my use tax obligation?

As with many other state taxes, taxpayers in Tennessee are asked to voluntarily comply with statutory requirements for filing and remitting the proper payments. Taxpayers who file and pay timely avoid potential enforced collection action.

8. How can I get more information?

If you need additional assistance, please contact the Taxpayer Services Division at (800) 342-1003. Callers in Nashville or out-of-state may call (615) 253-0600. The consumer use tax return and information about the use tax are also available on Revenue's Web site.