Tennessee Sales Tax Requirements for Single Article Sales Tax

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We are having a problem setting up Sales tax to work with Tennessee's new (enacted mid-year 2002) sales tax laws. They have introduced a new single article tax that taxes items above $3200 in a very *unique* way. There are essentially 3 stages to the computation.

1. the amount from $1.00 - $1600.00 is taxable at regular rates. (7% state and 2.25% county) - Maximum amount will always be $148.00

2. the amount from $1601.00 - $3200.00 is taxable at a special state rate of 9.75%. (No county tax) - Maximum amount will always $156.00

3. the amount in excess of $3200.00 is taxable at the regular state rate of 7%

Example: and item that sells for 13072.00 would have the following tax breakdown:

$1 - $1600.00 (9.25% 7%state 2.25% county) = $148.00

$1601 - $3200 (9.75% all state) = $156.00

$3201 - $13072 (7% all state) = $691.04

TOTAL TAX: = $995.04

One of the biggest problem we have found in trying to setup this tax rate is that the program groups items on an invoice of the same tax group together then figures tax on the subtotal. This really messes up the first part of the calculation ($148 and $156 per item). We also cannot figure out how to setup the sales tax in general for this 3 layer scheme.


The way to get accurate results, where the total sales amount per line is used for min/max calculation rather than than the Jurisdiction/Group combination in total, is to set up a separate Sales Tax Group for every Sales Line so that each Line item gets calculated independently. Instead of using a Tax Group by Item/GLAccount/Resource/Fixed Asset, you would use a Standard Group of TG1, TG2, etc. for each line of the Invoice/Order so that each is treated independently for the tax calculation. Every state, other than Tennessee and Florida and possibly a few other exceptions, consistently charge taxes based on total invoice and group like items for min/max calculation, which is how the system was designed to work.

There are some limitations for the above steps, particularly if you sell and get to the 3-tier level tax rate in Tennessee. However, by using a unique Tax Group per Sales Order Line, you will more accurately align with the current Tennessee and Florida requirements. The Navision products currently do not support the Tennessee Sales Tax three level tax calculation. There would have to be a customization in the software to meet the Single Article Sales Tax 3-tier requirement.

This article was TechKnowledge Document ID: 32971

Article ID: 861519 - Last Review: 11/02/2013 00:29:00 - Revision: 3.0

Microsoft Business Solutions–Navision 3.70

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