For Immediate Release
July 29, 2002
TENNESSEE INCREASES SALES AND USE TAX RATE– INCOME TAX DEFEATED IN HEATED BATTLE
While the cost of doing business in Tennessee just got more expensive, residents were saved from the imposition of an income tax in order to keep the state’s doors open for business and close the gap in its budget deficit which reaches into the hundreds of millions.
The decision to increase the sales tax reopened the government’s doors, which had been shut for three days, a first for the state. Effective July 15, 2002, the 1% increase raised the state tax level to 7%, except for food and food ingredients (grocery store items, excluding prepared food, dietary supplements and candy) which remain at 6%. Adding in local taxes imposed by counties of up to 2.75%, the rate can soar to 9.75%, one of the highest in the nation.
In addition, a state tax of 2.75% will be imposed on the sale of any single article of tangible personal property in excess of $1,600 but less than or equal to $3,200. The first $1,600 of the sales price will continue to be taxed at the appropriate local rate.
Proponents of an income tax levy claimed consumers would flock to neighboring states to take advantage of lower sales tax rates, while opponents cited other states with budget deficits, that already have an income tax, are faring no better than those without.
If you would like additional information or have any questions, please contact Don Behel, Regional Vice President - Sales & Use Tax Group at (615) 851-5555. E-mail dbehel@thesaltgroup.com
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