Taxes, Sales

Plain English Breakdown

The bill summary and text do not provide specific details on revenue impact or the extent of labor cost exemptions.

Tennessee Sales Tax Exemption for Labor and Services

This bill changes Tennessee's sales tax rules to exclude labor costs from the taxable price of goods when these costs are listed separately on an invoice.

What This Bill Does

• Changes how sales tax is calculated by excluding labor costs if they appear separately on a receipt or invoice.
• Makes repair services for tangible items and computer software exempt from sales tax.
• Exempts installation charges for tangible property and computer software, even when these are not part of the sale of goods.

Who It Names or Affects

• Businesses selling or repairing items with labor costs
• Consumers buying products with separate labor charges

Terms To Know

sales price

The total amount charged for a product before taxes, without any deductions.

tangible personal property

Physical items that can be touched and owned, like furniture or electronics.

Limits and Unknowns

• It is not clear how much revenue the state will lose from these changes.
• The bill does not specify if it applies to all types of labor costs or only certain ones listed in the text.

Official Summary Text

For purposes of determining sales tax, present law defines a "s
ales price
" as the amount
subject to sales tax without any deduction
for several types of costs, including
labor or service cost
s and i
nstallation charges
. This bill provides that l
abor and service costs, including repair and installation labor charges, that are separately stated on an invoice or similar billing document given to the purchaser
are not included in the "sales price". Additionally, this bill makes the following services untaxabl
e for sales tax purposes:



The performing, for a consideration, of any repair services with respect to any kind of tangible personal property or computer software
.



The installing of tangible personal property that remains tangible personal property after installation and the installing of computer software, where a charge is made for the installation, whether or not the installation is made as an incident to the sale of tangible personal property or computer software, and whether or not any tangible personal property or computer software is transferred in conjunction with the installation service
.

Present law provides that a
tax is levied at the rate of the tax levied on the sale of tangible personal property at retail on the repairing of tangible personal property or computer software, the laundering or dry cleaning of tangible personal property, the installing of tangible
personal property that remains tangible personal property after installation, and the installing of computer software, when such repair, cleaning, or installation occurs at a place of business outside this state and the serviced
tangible personal property or computer software is delivered by the seller to the purchaser or the purchaser's designee within the physical limits of this state or to a carrier for delivery to a place inside the physical limits of this state for use or co
nsumption in this state.
This bill removes this provision given the changes described above.

Current Bill Text

HOUSE BILL 1682
By Reeves

SENATE BILL 1465
By Lowe
SB1465
008774
- 1 -

AN ACT to amend Tennessee Code Annotated, Title 67,
Chapter 6, relative to the taxation of labor
performed on tangible personal property.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF TENNESSEE:
SECTION 1. Tennessee Code Annotated, Section 67-6-102(87)(A)(ii), is amended by
deleting the language "labor or service cost,".
SECTION 2. Tennessee Code Annotated, Section 67-6-102(87)(A), is amended by
deleting subdivision (v) and renumbering the subsequent subdivision accordingly.
SECTION 3. Tennessee Code Annotated, Section 67-6-102(87)(B), is amended by
adding the following as a new subdivision:
(v) Labor and service costs, including repair and installation labor charges, that
are separately stated on an invoice or similar billing document given to the purchaser;
SECTION 4. Tennessee Code Annotated, Section 67-6-205(c), is amended by deleting
subdivisions (4) and (6) and renumbering the remaining subdivisions accordingly.
SECTION 5. Tennessee Code Annotated, Section 67-6-203, is amended by deleting
subsection (d).
SECTION 6. For the purpose of promulgating rules, this act takes effect upon becoming
a law, the public welfare requiring it. For all other purposes, this act takes effect July 1, 2026,
the public welfare requiring it.