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Local Option Sales Tax: Municipality

Reference Number: MTAS-1854
Reviewed Date: 11/23/2022

Revenue Class: Local Taxes

Fund: General

Account No.: 31620

Description: Receipts from municipal local option sales tax.

Authorization: T.C.A. § 67-6-701 et seq. (1963 Local Option Revenue Act).

Requirements or Restrictions: Where county tax exists, municipality may levy a tax equal to the difference between the county tax and the maximum rate of 2.75 percent. T.C.A. § 67-6-703. Tax can be increased only by ordinance after voters approve by referendum. T.C.A. § 67-6-706. Tax is applicable only to the first $1,600 on the sale or use of any single article of personal property. T.C.A. § 67-6-702. See also the requirements and restrictions listed under Account # 31610 – Local Option Sales Tax: Countywide (MTAS document MTAS-1853)

Current Rate: Varies, but cannot exceed 2.75 percent.

Frequency of Payment: Monthly.

Late Pay Penalty: N/A

Exemptions: Same as account 31610.

Collection: State collects (and keeps 1.125 percent for administrative expenses), forwards the remainder to the county, and the county distributes 50 percent for school purposes and 50 percent to the jurisdiction where collected or as contracted between jurisdictions (less a 1% administrative fee retained by the County Trustee). Local sales tax revenues that the Department of Revenue cannot identify to a particular situs will be distributed 50 percent to municipalities based on population and 50 percent to counties based on population. The county then forwards their porton to the municipality where collected.

Use Restrictions: None.