That seems a little misleading. This is based on an 01 XJ, however, there is a Vehicle Speed Sensor, that is located in the tail shaft of the transfer case. There are two transmission shaft speed sensors, input and output, located on the drivers side of the transmission.
You need to find out from the inspection folks what the failed indication is/was that caused them to claim a transmission speed sensor failure.
The vehicle speed sensor on the t-case sends the signal which is used for the speedometer. The transmission shaft speed sensors are used by the transmission control module to select upshift, downshift and clutch lock-up points. All these sensors are either on or off type of deals, they either work or they dont. The transmission shaft speed sensors are just magnetic pickups inserted into the transmission near the input and output shafts. The vehicle speed sensor converts a spinning gear to a pulse train for the speedometer.