Deal Pack Blog
Tennessee Auto Dealers: Beware of Business Taxes
Business Tax is levied for the freedom of carrying out daily business activities within any county and/or incorporated municipality. All counties in Tennessee with the exception of Clay, Claiborne, and Morgan counties, and many cities have passed local business tax regulations that require businesses to be licensed and taxes paid. If your business is situated in a city and a county that both have approved a business tax, the company would need to file two separate tax returns.
There are different Rates for several different classification systems (1A, 1B, 1C, 1D, 2, 3, 4, and 5). In relation to a dealer, your company would fall under the rate of Class 5 which is defined as “Industrial loan and thrift companies required to obtain a certification and license under Tenn. Code Ann 45, Chapter 5 are subject to the business taxation under Classification 5.” The rate for class 5 on both Retail and Wholesale sales is .003%.
To understand this tax it is important you understand the definition of the term “Sales Price.” According to Tenn. Code Ann. Section 67-4-702 – “Sales Price means the total amount for which tangible personal property or services rendered is sold, including any services that are part of the sale, valued in money, whether paid in money or otherwise. Sales price includes any amount for which credit is given to the purchase by the seller, without any deduction on account of the cost of the property sold, the cost of materials used, labor or service cost, losses, or any other expense whatsoever.”
For a dealer, sales are subject to a business tax rate of .003% and include, but not limited to vehicle retail price, administrative fees, delivery fees, service warranties, physical damage coverage [GAP], misc fees, and VSI. The entire sales price including all of the listed items are taxed at the rate of .003% and the amount is included in the total taxable amount for State and Local taxes if applicable.
Business owners should contact their local county or municipal clerk for any information relative to obtaining a business license. For questions on tax law, filling and paying business taxes, and other account-related issues, please contact the Department of Revenue at 615-253-0600 (local for Nashville) or 800-342-1003.