Tennessee Repeals Rule Regarding Drop Shipments

After the repeal of Rule 96, Tennessee suppliers can accept resale certificates issued by other states or the Streamlined Sales and Use Tax Exemption Certificate. This is applicable when a Tennessee supplier sells personal property or taxable services for resale to an out-of-state dealer and then drop ships the goods to the out-of-state dealer’s Tennessee customer. Before Rule 96 was repealed, the “Tennessee supplier had to collect Tennessee sales tax on the sales price of the product sold to the out-of-state dealer unless the out-of-state dealer provided a Tennessee resale certificate or Streamlined Sales Tax Exemption Certificate with a Tennessee sales tax ID number.” However, effective January 10, 2022, any state’s resale certificate is accepted by Tennessee suppliers for goods drop shipped to the out-of- state dealer’s Tennessee customers. If the out-of-state dealer is not registered in any state, they can provide a Tennessee supplier with a fully completed Streamlined Sales and Use Tax Exemption Certificate that includes a tax ID number for another tax type. Foreign sellers not registered in any state may do the same with their tax ID number issued by their home country. (Tennessee Department of Revenue, Notice #22-01 Drop Ship Rule Repealed, effective January 10, 2022)

Posted on January 28, 2022