Economic Nexus in Tennessee

Nov 16, 2022 | Blog Posts

Economic Nexus in Tennessee

State laws on economic nexus vary which imposes a compliance burden on businesses operating in multiple states. Our research team has all the information you need as it relates to economic nexus in Tennessee.

With the South Dakota v. Wayfair Supreme Court ruling in favor of South Dakota, states are now able to collect sales tax from eCommerce businesses who have a “significant presence (or nexus)” in their state. Prior to this ruling, nexus was defined as having a physical presence (ex: brick and mortar store, employee, or inventory in a fulfillment center like FBA). But with this recent ruling, now this definition has been expanded to include economic activity in a state. This expanded concept of triggering sales tax responsibility because of a business’s economic activity is now referred to as economic nexus.

Bottomline, this now means that if you pass a state’s economic threshold for total revenue in that state and/or number of transactions in that state, you’re now legally required to register, collect and remit sales tax for that state.

With regard to Tennessee’s economic nexus provisions, here is a summary:

  • Effective Date: October 1, 2019; The threshold fell from $500,000 to $100,000 on October 1, 2020
  • Threshold: As of October 1, 2020, sales into the state exceeding $100,000 in the previous 12 months.
  • Includable SalesRetail sales; Marketplace sales included towards the threshold for individual sellers
  • Grace PeriodSellers must register by the first day of the third month following the month the threshold was met.
  • Summary: According to the state, sellers with sales exceeding the threshold are required to register for a Tennessee sales tax permit, collect sales tax on sales that ship into Tennessee, and remit sales tax back to the state.

If you have met the economic threshold requirement in Tenessee, here are suggested next steps:

  1. Register for a sales tax permit in Tennessee. Learn more about registering here.
  2. Ensure all your eCommerce channels are setup correctly to collect sales tax
  3. Start filing your monthly sales tax return to Tennessee. Learning more about filing here.

As always, sales tax varies by state and if you have questions about your sales tax obligations or would like to outsource the burden, please reach out to our team.