# How is the Tennessee Tiered Tax applied?

## Overview

You want to know how AvaTax applies the special tiered tax rate in Tennessee.

AvaTax

## Resolution

• Tennessee has a special tax applied when the value of a single physical item (Quantity of 1) has a value exceeding \$1,600, up to the value of \$3,200.
• A single article of tangible personal property (TPP) is defined as any unit capable of being sold as an independent unit, or as a common unit of measure, a regular billing, or other obligation.
• AvaTax determines if the invoice line item qualifies for the tiered tax based on the tax code you use, the amount, and the quantity.
• For an invoice line with a quantity larger than 1, we use the value of the line amount, divided by the quantity, to determine the single unit value.
• Generally, the maximum upon which the local option sales or use tax will apply is \$1,600 dollars times the local tax rate.
• For example, if the county has a 2.25% local option tax rate, the local tax calculation would be 2.25% * \$1,600 = \$36.00.
• Some counties have different rates, and a few have lower maximum amounts. These rates can be found at the TN State Dept of Revenue.
• Tennessee Tiered Taxing Example:
• State tax rate of 7% is applicable to all amounts.
• Local tax rate between 2.25%  and 2.75% is applicable between 0- \$1,600 for all items.
• State single article tax rate of 2.75% is applicable for all single items between \$1,600-\$3,200.
• Example: Single item sold for \$4000 to Nashville
• State tax: \$4000 * .07 = 280
• Local tax: \$1600 * .0225 = 36
• Single Article tax: \$1600 * .0275 = 44
• Total tax: \$360
• Example: Two items sold for \$2000 each to Nashville
• State tax: 2 * (\$2000 * .07) = 280
• Local tax: 2 * (\$1600 * .0225) = 72
• Single Article tax: 2 * (\$400 * .0275) = 22
• Total tax: \$374