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 it did not collect Tennessee sales tax.”

Services: Jimmy Faberbone, identified as a subject matter expert in the audit division, explained that a change effective July 1, 2024, makes certain services taxable when they are performed on tangible personal property outside Tennessee and the serviced property is later shipped or delivered into Tennessee for use. He described the legislative change as recognizing that the owner “is enjoying the benefits of those repair services in the state of Tennessee.” Examples named by staff included repair, laundering/dry cleaning of TPP, installation of items that remain personal property after installation, and installation or maintenance of computer software performed out of state and delivered for use in Tennessee. (Staff noted that laundering/dry cleaning can include pet grooming because pets are treated as TPP for tax purposes unless the work is a veterinary medical service.)

Contractors and resale: The presenters discussed contractor and reseller rules at length. A contractor or contractor‑dealer who purchases material on a resale certificate but then uses that material in work that becomes real property is treated as the end user and must accrue and report use tax on those purchased materials. Jimmy Faberbone gave an example of a fabricator who buys metal on a resale certificate, fabricates a gate, and either (a) sells the finished gate as tangible personal property (charging sales tax to the buyer), or (b) installs the gate as part of real property (in which case the fabricator is the end user and must accrue use tax on materials used). Staff repeatedly recommended the department’s sales tax manual and a dedicated contractors webinar for detailed guidance.

Exceptions and special cases: Staff identified several exceptions. A bona fide change of residence can exempt personal items brought into Tennessee from use tax (business imports, aircraft and many boats are handled differently). Boats imported by a new resident are generally taxable based on purchase price or fair market value when imported; staff said there is a carve‑out for boats valued under $10,000 at import. Items imported and merely stored and exported without exercising ownership may be exempt under the import‑for‑export provision. Tangible personal property held for resale is not subject to use tax when properly documented with resale certificates and records showing intent to resell.

Rates, single‑article rules and credits: Staff said the consumer use tax rate matches the applicable sales tax: generally a 7% state rate plus applicable local rates; food and food ingredients have a 4% state rate plus local rate; some specified digital products have a special local treatment. The department reminded listeners of Tennessee’s single‑article tax rules for items with a single‑item value above $1,600 and said the TINTAP portal asks filers to report single‑article purchases so the system can calculate tax correctly. If a purchaser paid a legitimately imposed sales tax in another state, Tennessee will give credit for that like‑kind sales tax; taxes such as VAT or customs duties are not creditable.

Filing and timing: The webinar walked through filing a Tennessee consumer use tax return via the TINTAP online portal (tn.gov/revenue → TINTAP → view return links → Tennessee consumer use tax return). Individuals must provide Social Security numbers and businesses an EIN during the quick registration; filers must verify their address during registration. The return is due at least annually by Jan. 20 following the calendar year of the purchases, though filers may file more frequently. Jimmy Faberbone explained that the tax is due when the taxable transaction occurs, but the department provides the return deadline; interest begins to accrue back to the date of the taxable transaction if the return and payment are not made by the due date.

Assessments and audits: Staff said the department receives data from U.S. Customs and other sources and sometimes issues assessments without first sending an inquiry if the department’s information supports an assessment. Because of reporting lags between agencies, an assessment can arrive long after the import date and the assessment will include interest back to the date the tax was due. The department said that customs data are often generalized (tariff codes) and that taxpayers should provide invoices or other documentation if they receive an assessment and believe a single‑article or other adjustment applies.

Payment options and fees: TINTAP accepts ACH (bank account) debits with no card fee; payments by card (including debit cards treated as card payments) incur a small convenience fee charged by the card processor and remitted to the state treasury for the service.

Contact and follow‑up: Staff encouraged attendees to use the department’s webpages, sales tax manual, webinars, and the TINTAP portal. For case‑specific questions or to respond to audit or collection letters, the department asked taxpayers to use revenue.support@tn.gov or the department’s general tax line. Presenters also listed upcoming webinars and training opportunities.

Speakers and participants quoted in this summary spoke during the department’s recorded webinar; the department provided slides and a PDF of the presentation for participants.