Free guide for contractors
Do contractors charge sales tax in Tennessee?
General information, not tax advice. Tax rules change and depend on the details of each job. Confirm how they apply to your business with your accountant or the state's revenue department before relying on them.
TN Tennessee
Usually no tax on the invoiceNo, for work on real property. Tennessee contractors pay tax on installed materials and may not itemize it to the client.
Tennessee contractors and subcontractors are the users and consumers of materials that become part of real property. Construction labor and markup are not taxable, and the tax cannot be itemized separately and collected from the client. The contractor stays liable for tax on materials even when the client is an exempt entity.
Repair of tangible personal property, and installation of property that stays tangible personal property, are taxable services. Labor on real property generally is not.
Work on real property is untaxed only when it is billed separately from work on tangible personal property. One lump sum for maintenance on both makes the entire amount taxable.
The state rate is 7%, and local option rates run from 1.50% to 2.75%.
It turns on: whether the work is on real property or tangible personal property; whether real property work is billed separately from work on movable property.
Watch out for
- A lump-sum maintenance charge covering both real property and tangible personal property is taxable in full (TN Sales and Use Tax Manual, p. 72).
“The sales or use tax cannot be itemized separately and collected from the contractor's client.”TN Sales and Use Tax Manual (Aug. 2026)