There are a number of exemptions and exceptions from the requirement to collect and remit sales tax. Most of the entity-based exemptions require a special exemption certificate, but most of the product-based exemptions do not. If you make a tax-exempt sale based on an exemption certificate, you must retain the certificate in your records.
If a purchaser who is also a retailer buys something with the intent of reselling that item and presents a valid resale certificate, then no sales tax is owed on that purchase. You must retain a copy of the resale certificate in your records. Tennessee recognizes resale certificates issued by other states to make tax-exempt purchases in Tennessee for resale outside of Tennessee to end users located outside of Tennessee.
Some exemptions are based on who the purchaser is or what the purchaser does. For example, qualified farmers and qualified manufacturers can make purchases of certain items tax free or at a discounted tax rate. Purchases by government entities and non-profit organizations are also exempt.
Some exemptions are based on the product purchased. For example, gasoline, textbooks, school meals, and a number of healthcare products are not subject to the sales tax. If you sell any exempt products you should not collect sales tax on the sales.
To apply for entity exemptions available in Tennessee, go to the Sales and Use Tax Forms on the left. Tennessee does not recognize the use of exemption certificates issued by other states, except for resale certificates for purposes of making tax-exempt purchases in Tennessee for resale outside of Tennessee to end users located outside of Tennessee.