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Reviewed Date: October 28, 2016
Festivals and celebrations
Tax exempt organizations
Sales Tax on Merchandise Sold by City at an Annual Festival
If a city sells t-shirts at a festival for a temporary period on an annual basis, these sales do not constitute 'engaging in business' in Tennessee, and would not be subject to the sales and use tax.
Knowledgebase-Sales Tax on Merchandise Sold by City at an Annual FestivalMay 26, 2016TO: Greg CothronAssistant General CounselComptroller of the TreasuryOffice of General Counsel505 Deaderick Street, Suite 1700Nashville, TN 37243615 747-5246Greg, Thanks for reaching out with your question. You asked whether a municipality that holds an annual festival where it sells t-shirts in conjunction with the festival is subject to sales and use tax on those sales. These sales are not subject to sales and use tax pursuant to Tenn. Code Ann. §§ 67-6-201 & -102(8)(B) (2013 & Supp. 2015). The Tennessee sales tax is a tax on the privilege of engaging in the business of selling tangible personal property at retail in the state. Tenn. Code Ann. § 67-6-201. The term “business” does not include “occasional and isolated sales” by a person not regularly engaged in business. The definition of “business” further excludes persons making temporary sales on a semiannual or less frequent basis. Tenn. Code Ann. § 67-6-102(8)(B). A sales period is presumed to be temporary if it is of 30 consecutive days duration or less. Tenn. Comp. R. & Regs. 1320-5-1-.09(4). Therefore, if a city sells t-shirts at a festival for a temporary period on an annual basis, these sales do not constitute “engaging in business” in Tennessee, and would not be subject to the sales and use tax. I hope this helps. Please let me know if you have any other questions.Grant Marshall | Assistant General CounselAndrew Jackson Building, 11th Floor500 Deaderick Street, Nashville, TN 37242p. 615-532-2888 f. firstname.lastname@example.org/revenue