To sell new or used vehicles in Tennessee, you must obtain a Tennessee dealer license from the Department of Commerce and Insurance, Motor Vehicle Commission.
To get licensed, you will need to comply with several different licensing requirements. These include securing an established place of business, obtaining liability insurance and a Tennessee auto dealer bond, providing proof of minimum net worth, and several others.
Want to get an auto dealer license in Tennessee? Read our full step-by-step guide below!
1. Register Your Business
You cannot open a dealership in Tennessee without registering your business with the Division of Business Services.
As part of your registration in the state, you are likely to also require a Federal Employer Identification Number (FEIN) from the Internal Revenue Service (IRS). This number is required for tax purposes as well as if you plan on having employees at your dealership.
Moreover, you must also get two types of tax licenses.
You may require a Business Tax License from your local county and/or city clerk. This is to guarantee that you will pay taxes on any vehicles which you sell. Requirements for this license may vary so you need to check with your local office.
2. Pick a Tennessee Dealer License You Want to Apply For
There are three main types of dealer licenses issued by the Motor Vehicle Commission. These are:
- Franchised motor vehicle dealer
- Used motor vehicle dealer
- Franchised motorcycle dealer
The application requirements for these three types of licenses are largely the same.
3. Secure an Established Place of Business
Your dealership location must comply with a number of requirements to be eligible and pass an inspection. These requirements are as follows:
- A permanent location used principally and primarily for the sales and servicing of vehicles, which does not include a private residence of any kind
- Comply with local zoning/land-use provisions, and have written approval testifying of such compliance
- A total area of at least 288 square feet, and have functioning restrooms
- A display lot to which there shall be immediate and contiguous access, and which shall be able to accommodate at least 15 dealership vehicles, and 3 spaces for customer parking
- The lot must consist of compacted gravel, chert, stone or similar materials, and NOT include grass
- A permanently installed sign, clearly visible from the road, with letters at least 8 inches in height
- Open at least 12 hours a week, with 8 of them being between Monday and Friday
- A landline telephone with its number posted on the window of the dealership or on the sign, and listed in the local directory
- A mechanical repair facility on-site or a Service Agreement with a repair garage located within a reasonable distance of the dealership
Note: You will need to attach photos of your display lot, sign, hours and days of operation, phone number, office, and restroom facilities to your application packet.
4. Get a Tennessee Auto Dealer Bond
All applicants for a license must obtain a Tennessee auto dealer surety bond. The bond must have a minimum amount of $50,000 and be issued for two consecutive years.
The purpose of this bond is to guarantee that anyone who issued a car dealer license in Tennessee will comply with all state laws and rules that regulate the business of selling vehicles.
5. Obtain a Certificate of Liability Insurance
Every dealer license applicant must also submit proof of a Certificate of Liability Insurance. The minimum coverage must be $300,000 per occurrence and indicate Garage Liability.
Dealers may also require Workers’ Compensation Insurance. You can learn more about whether this is necessary for you by contacting the state Department of Labor and Workforce Development.
6. Complete Your Dealer Application Form and Attach Additional Documents
Once you’ve satisfied the above requirements, you’re ready to begin with your application. On top of completing your dealer application form online, you will also need to assemble and attach the following supporting documents:
- A floor plan form
- A compiled financial statement that indicates a minimum net worth of $10,000 prepared in the name of the business
- The financial statement must include a compilation letter executed by a Certified Public Accountant (CPA) and must be prepared in accordance with GAAP
- A financial background disclosure form completed by the owner, directors and anyone in the dealership who owns more than 5% of shares or stock
- A letter of acknowledgment for franchised vehicle dealers by a manufacturer, awarding them a franchise agreement and identifying the specific line-makes the dealer is licensed to sell
- A conviction record if any owner, officer or director of a corporation has been convicted of a felony
- A salesperson application form for every salesperson who will be working in the dealership
- A $50,000 Tennessee auto dealer bond
- A Certificate of Liability Insurance
- Business registration and tax documents
- Photos of the dealership
- Proof of zoning compliance
7. Submit Your Application, Pay Fees and Pass a Dealership Inspection
You can submit all your application documents online. Along with your application packet, you will need to pay an application fee:
- $400 per line make for franchised vehicle and motorcycle dealer licensing
- $400 for used vehicle dealer licensing
- $35 for salesperson licensing
You must pay these fees by cash, check, money order, or certified check. Checks must be made payable to the Tennessee Motor Vehicle Commission, whereas cash payments must be made on location at the Department of Commerce and Insurance.
After all of the above has been completed, an on-site inspection of your dealership will be conducted. If you comply with all requirements, your application will be reviewed once more after the inspection to determine your final eligibility to be granted a license.
If you satisfy all requirements, your license will be issued within 14 days of receiving approval.
8. Tennessee Dealer License Renewal
You must renew your license and submit all necessary paperwork 10 days prior to its expiration at the latest. You can apply for the renewal through the online portal where you submit your initial Tennessee dealer license application.
If you have any questions about the renewal process, contact the Commission.