Tennessee Sales Tax Bond Guide

Tennessee requires businesses that collect sales tax to secure a sales tax bond. This guide covers everything: costs, how to obtain one, how bonds work, types, claims, renewals, exemptions, and FAQs—helping business owners stay compliant and avoid penalties.

The cost of a Tennessee sales tax bond is based on the bond amount set by the Tennessee Department of Revenue. Businesses pay a percentage of this amount—typically between 1% and 5%.

For example:

• A $10,000 bond may cost between $100 and $500 per year.
• A $50,000 bond may cost between $500 and $2,500 annually.
   

Strong credit leads to lower premiums, while poor credit can raise the rate. Learn more about bond basics on our page exploring what is a surety bond.

Getting a Tennessee sales tax bond involves several steps. Each ensures compliance with state requirements. 

Step 1: Determine Your Bond Requirement 

Bond amounts are tied to sales tax liability. Check your requirement through the Tennessee Department of Revenue Sales and Use Tax section. 

Step 2: Apply with a Surety Provider 

Businesses must share financial details and credit history. The surety reviews these to set your premium. 

Step 3: Pay the Premium and File the Bond

After approval, you pay your premium and file the bond with the state. 

Sales tax bonds protect the state by ensuring businesses collect and remit taxes.

• Principal: The business owner posting the bond.
• Obligee: The Tennessee Department of Revenue.
• Surety: The company issuing the bond.
   

If taxes aren’t paid, the state can file a claim. The surety pays the claim, and the business reimburses the surety. For a breakdown, see surety bond vs insurance.

Different industries may require specific bonds:

• General Retail Sales Tax Bonds – For most taxable goods and services.
• Liquor and Alcohol Sales Tax Bonds – For businesses selling alcohol.
• Tobacco Sales Tax Bonds – For sellers of tobacco products.
• Specialty Bonds – For industries such as fuel, automotive sales, or manufacturing.
   

Each ensures compliance with Tennessee’s tax laws.

Yes, but premiums will be higher. A $10,000 bond may cost $300 with good credit, but $700 with poor credit.

Specialized sureties provide options for high-risk applicants. Businesses must still comply, regardless of credit. The Internal Revenue Service also provides guidance on overall tax responsibilities.

Claims occur if a business fails to remit taxes. The process involves:

• The Department of Revenue filing a claim.
• The surety investigating validity.
• Payment to the state if valid, followed by reimbursement from the business.
   

To avoid claims, keep accurate records and file taxes on time using Tennessee Department of Revenue resources.

How long is a Tennessee Sales Tax Bond valid? 

Bonds are valid as long as premiums are paid and compliance is maintained. They are often issued yearly but can be multi-year.

Is the Tennessee Sales Tax Bond refundable if I close my business? 

No. Premiums are considered earned once issued and are not refundable if a business closes. 

Do I need to renew my Tennessee Tax Bond every year? 

Yes. Most bonds renew annually. Providers usually send reminders to avoid lapses, making renewal simple. 

What is exempt from Tennessee sales tax? 

Exemptions include: Prescription drugs, agricultural products sold directly by farmers, certain manufacturing machinery.

The full exemption list is available on the Tennessee Department of Revenue exemptions page.

Internal Revenue Service. (2024). Understanding your tax responsibilities. U.S. Department of the Treasury. Retrieved from
https://www.irs.gov/businesses/small-businesses-self-employed 

Tennessee Department of Revenue. (2024). Tennessee Department of Revenue Homepage. Retrieved from
https://www.tn.gov/revenue.html 

Tennessee Department of Revenue. (2024). Sales and Use Tax. Retrieved from
https://www.tn.gov/revenue/taxes/sales-and-use-tax.html 

Tennessee Department of Revenue. (2024). Exemptions from Sales and Use Tax. Retrieved from
https://www.tn.gov/revenue/taxes/sales-and-use-tax/exemptions-certificates-credits.html  

JW Surety Bonds. (2024). Tennessee Sales Tax Bond. Retrieved from
https://www.jwsuretybonds.com/states/tennessee/sales-tax-bond

JW Surety Bonds. (2024). What is a Surety Bond. Retrieved from
https://www.jwsuretybonds.com/edu/what-is-a-surety-bond

JW Surety Bonds. (2024). Surety Bond vs Insurance. Retrieved from
https://www.jwsuretybonds.com/edu/surety-bond-vs-insurance

JW Surety Bonds. (n.d.). Tennessee surety bonds. JW Surety Bonds.
https://www.jwsuretybonds.com/states/tennessee/