Use tax is an extension of the Tennessee sales tax system. The basic principle behind use tax is that all goods used, consumed or stored within the state of Tennessee are subject to the combined state and local sales tax amounts. It applies to both business entities and every citizen. If the citizen or entity paid taxes on the item in another state, then that tax amount is deducted from the use tax amount to avoid tax duplication on the items.
The Tennessee Department of Revenue handles enforcement and collection of use tax. They work with other states in an audit-sharing program to track any purchases that would qualify for use tax. The auditors supply the name and address of the entity purchasing the property so that the Tennessee Department of Revenue can assess taxes.