Taxes, Exemption and Credits

Plain English Breakdown

The official source material does not provide specific details on revenue loss or impacts on private school teachers, leaving these points as unknowns.

Tennessee Sales Tax Exemption for Educators

This bill creates a sales and use tax exemption in Tennessee for certain school supplies purchased by teachers employed by local education agencies or public charter schools.

What This Bill Does

• Exempts from sales and use taxes the sale of school supplies, art supplies, and instructional materials with a price of $100 or less to teachers working in Tennessee's local education agencies or public charter schools.
• Requires retailers selling exempt items to report these sales to the commissioner of revenue on their tax returns.
• Specifies that discounts reduce the item’s price for determining eligibility under this exemption, and requires allocation of discounts if both eligible and taxable items are purchased together.
• Recommends teachers apply for an exemption certificate from the department of revenue by submitting proof of employment as a teacher in Tennessee.
• Requires retailers to keep copies of exemption certificates provided by teachers.

Who It Names or Affects

• Teachers employed by local education agencies or public charter schools in Tennessee.
• Retailers selling school supplies, art supplies, and instructional materials to these teachers.

Terms To Know

Teacher

An individual who holds a teaching license from the state board of education and spends at least 50% of their time instructing students in class or through other methods like online instruction.

Limits and Unknowns

• The bill does not specify how much revenue will be lost due to this exemption.
• It is unclear if the bill will affect teachers employed by private schools or those who work less than 50% of their time instructing students.

Official Summary Text

This bill
provides that t
here is exempt from the
sales and use
tax the sale of the following items of tangible personal property, if the materials are sold to a teacher employed in this state by a local education agency (LEA) or public charter school:



School supplies with a sales price of $100 or less per item
.


School art supplies with a sales price of $100 or less per item
.


School instructional materials with a sales price of $100 or less per item.

However, this bill clarifies that such
exemption does not include
c
lothing
, c
omputers
, c
omputer software
, v
ideo game consoles
, a
ny item for personal use outside the classroom
,
or
a
ny item for use in a trade or business.

This bill requires each
retailer making exempt sales under this
bill to
report the amount of such sales to the commissioner of revenue on the retailer's sales and use tax returns.

This bill provides that a
discount by the retailer reduces the sales price of the property
,
and the discounted sales price determines whether the sales price is within a price threshold
described
above
. A coupon that reduces the sales price is treated as a discount if the retailer is not reimbursed for the coupon amount by a third party. If a discount applies to the total amount paid by a purchaser, rather than to the sales price of a particular item
, and the purchaser has purchased both eligible propert
y and taxable property, then the retailer must allocate the discount based on the total sales price of the taxable property compared to the total sales price of all property sold in that same transaction
. Additionally, i
tems that are normally sold as a single unit must continue to be sold in that manner. Such articles cannot be priced separately and sold as individual items in order to obtain the exemption.

This bill requires a
teacher employed by a local education agency (LEA) or public charter school who is seeking the exemption
to
submit an application for exemption to the commissioner of revenue, providing proof of employment in this state as a teacher by a local education agency or public charter school. The application must be submitted on forms prescribed by the commissioner.

If the exemption is approved by the commissioner, then
this bill requires
the department of revenue
to
issue a sales and use tax exemption certificate to the applicant that declares that the applicant is a teacher entitled to the exemption.

This bill requires a
teacher who has obtained an exemption certificate issued by the department
to
provide a retailer with a copy of the certificate of exemption, which must include the exemption account number included on the certificate issued by the commissioner. The retailer
must
maintain a copy of such exemption in the retailer's records to document that the purchaser was entitled to the exemption.

"TEACHER" DEFINED

As used in this bill, a
"teacher"
m
eans an individual who holds a license to teach issued by the state board of education and who spends 50% or more of the individual's time on the job instructing students in class, or through
other instructional methods such as online instruction
. However, the term does
not include licensed individuals, including licensed support personnel, administrators, or supervisors, if the licensed individual spends less than 50% of the individual's time on the job instructing students.

Current Bill Text

SENATE BILL 1919
By Seal

HOUSE BILL 1540
By Jones R
HB1540
010410
- 1 -

AN ACT to amend Tennessee Code Annotated, Title 67,
Chapter 6, relative to sales and use tax
exemptions for educators.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF TENNESSEE:
SECTION 1. Tennessee Code Annotated, Title 67, Chapter 6, Part 3, is amended by
adding the following as a new section:
(a) There is exempt from the tax imposed by this chapter the sale of the
following items of tangible personal property, if the materials are sold to a teacher
employed in this state by a local education agency (LEA) or public charter school:
(1) School supplies with a sales price of one hundred dollars ($100) or
less per item;
(2) School art supplies with a sales price of one hundred dollars ($100)
or less per item; and
(3) School instructional materials with a sales price of one hundred
dollars ($100) or less per item.
(b) The exemption provided in subsection (a) does not include:
(1) Clothing;
(2) Computers;
(3) Computer software;
(4) Video game consoles;
(5) Any item for personal use outside the classroom; or
(6) Any item for use in a trade or business.

- 2 - 010410

(c) Each retailer making exempt sales under this section shall report the amount
of such sales to the commissioner of revenue on the retailer's sales and use tax returns.
(d) The exemption provided in this section is subject to the following:
(1) A discount by the retailer reduces the sales price of the property and
the discounted sales price determines whether the sales price is within a price
threshold described under subsection (a). A coupon that reduces the sales price
is treated as a discount if the retailer is not reimbursed for the coupon amount by
a third party. If a discount applies to the total amount paid by a purchaser, rather
than to the sales price of a particular item, and the purchaser has purchased both
eligible property and taxable property, then the retailer must allocate the discount
based on the total sales price of the taxable property compared to the total sales
price of all property sold in that same transaction; and
(2) Items that are normally sold as a single unit must continue to be sold
in that manner. Such articles cannot be priced separately and sold as individual
items in order to obtain the exemption.
(e)
(1) A teacher employed by a local education agency (LEA) or public
charter school who is seeking the exemption provided under this section must
submit an application for exemption to the commissioner of revenue, providing
proof of employment in this state as a teacher by a local education agency or
public charter school. The application must be submitted on forms prescribed by
the commissioner.
(2) If the exemption is approved by the commissioner, then the
department of revenue shall issue a sales and use tax exemption certificate to

- 3 - 010410

the applicant that declares that the applicant is a teacher entitled to the
exemption provided by this section.
(3) A teacher who has obtained an exemption certificate issued by the
department shall provide a retailer with a copy of the certificate of exemption,
which must include the exemption account number included on the certificate
issued by the commissioner. The retailer shall maintain a copy of such
exemption in the retailer's records to document that the purchaser was entitled to
the exemption.
(f) For purposes of this section, "teacher":
(1) Means an individual who holds a license to teach issued by the state
board of education and who spends fifty percent (50%) or more of the individual's
time on the job instructing students in class, or through other instructional
methods such as online instruction; and
(2) Does not include licensed individuals, including licensed support
personnel, administrators, or supervisors, if the licensed individual spends less
than fifty percent (50%) of the individual's time on the job instructing students.
SECTION 2. This act takes effect July 1, 2026, the public welfare requiring it.