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Consumer Use Tax

Overview

Use Tax is the counterpart to the sales tax.  All Tennessee residents, as well as businesses operating in the state, must pay use tax when goods are purchased from outside the state of Tennessee and brought or shipped into the state and the seller did not collect sales tax on the purchase.  Purchases made from outside the state  include, but are not limited to, mail-order catalog purchases, purchases made online, over-the-phone purchases, and purchases made from a store located in another state.  Use tax does not apply to the purchase of services.  

The purpose of the use tax is not only to raise revenue, but also to protect local merchants, who must collect the sales tax, from unfair competition from out-of-state sellers who do not collect Tennessee's sales tax.  The 45 states that impose a sales tax also levy a use tax.