SaaS Sales Tax in Tennessee
Tennessee taxes SaaS as specified digital products.
If you sell SaaS products to customers in Tennessee, you may need to collect and remit sales tax at 7% (plus any applicable local taxes). This applies whether your business is based in Tennessee or elsewhere — what matters is whether you have economic nexus in the state.
Economic Nexus in Tennessee
Following the 2018 South Dakota v. Wayfair Supreme Court decision, Tennessee can require out-of-state sellers to collect sales tax if they meet certain thresholds. The most common thresholds are $100,000 in sales or 200 transactions per year in the state, though Tennessee's specific rules may vary.
This means even if your business is in Ireland, Germany, or another country entirely, you may need to register for sales tax in Tennessee if your sales exceed the nexus threshold.
How to Comply
1. Determine nexus: Track your sales volume to Tennessee customers
2. Register: Apply for a sales tax permit with Tennessee's tax authority
3. Collect: Add 7% to invoices for Tennessee customers
4. File & remit: Submit periodic returns (monthly, quarterly, or annually depending on volume)
International Sellers
If you're selling from outside the US (EU, UK, or elsewhere) to customers in Tennessee:
You may still need to register and collect Tennessee sales tax if you exceed the economic nexus thresholds. Being a foreign company does not exempt you from US state sales tax obligations.
Frequently Asked Questions
Does Tennessee charge sales tax on SaaS?
Yes. Tennessee taxes SaaS (Software as a Service) at a state rate of 7%. Tennessee taxes SaaS as specified digital products.
What is the sales tax rate in Tennessee?
The state sales tax rate in Tennessee is 7%. Local taxes may apply on top of this, varying by county and city.
Do I need economic nexus in Tennessee to charge sales tax?
Yes. Most states, including Tennessee, follow economic nexus rules established by the 2018 South Dakota v. Wayfair Supreme Court decision. Typically, you establish nexus if you exceed $100,000 in sales or 200 transactions in the state per year. Check Tennessee's specific thresholds.
How do I invoice a customer in Tennessee?
Include 7% sales tax on your invoice for SaaS products sold to customers in Tennessee. Show the tax as a separate line item. Use our free invoice generator at paytaxfa.st to create compliant invoices.
I'm an EU/UK seller — do I need to charge Tennessee sales tax?
Potentially, yes. If you have economic nexus in Tennessee (typically $100K+ in sales), you may need to register, collect, and remit Tennessee sales tax even as a foreign seller. Consult a US tax professional for your specific situation.