Tennessee Department of Revenue outlines consumer use tax rules, new tax on certain services and how to file

Tennessee Department of Revenue staff explained who must pay consumer use tax, what purchases and recent service changes are taxable, and how individuals and businesses can file and pay during a webinar featuring Taxpayer Education staff and audit experts.

Billy Trout, with the Tennessee Department of Revenue’s Taxpayer Education section, opened the webinar and described the consumer use tax as “one of our least known about taxes” that “reaches out and touches a lot of people that you don't even realize.” Katie Julian, a Taxpayer Education specialist, said use tax is “the counterpart to sales tax” and stressed that it is owed when a seller does not collect Tennessee sales tax and the item or specified service is brought into Tennessee for use or consumption.

The tax matters to consumers and in‑state merchants because it is intended both to raise revenue and to protect local businesses from out‑of‑state sellers that do not collect Tennessee tax. The department said the law imposing use tax was enacted alongside sales tax in 1947, and staff cited a more recent legislative change that made certain services taxable.

What is taxable: Staff said use tax generally follows sales tax and covers tangible personal property (TPP) imported for use or consumption in Tennessee. Examples given included purchases from out of state or online where Tennessee tax was not collected, purchases from transient vendors that do not collect Tennessee tax, and computer software and specified digital products imported for use in Tennessee. Katie Julian said, “All residents in Tennessee as well as businesses must pay use tax when goods, and actually certain services as of recently, are purchased from outside of Tennessee and then brought into Tennessee to use when whoever sold…