Tax State Local
Sales and Use 7% 1 – 2.75%
General Business Tax None $0.10 – $3.89 for each $100 of assessed value (city)

$1.42 – $5.17 for each $100 of assessed value (county)

Local Business Tax None up to 1/8 of 1% gross sales
Corporate/Excise 6.5% None
Franchise .25 per $100 None
Personal Income 6% of interest, dividends None
Initial Corporate Organization Fee $100 – $600 None
Unemployment Insurance 2.7% new employers None
Utility Gross Receipts 3% None

Tennessee Tax Incentives

Corporate Excise

  • Excise tax credit equal to 1% of the purchase, installation, and repairs of qualified industrial machinery. Excise tax credit equal to 1% of the purchase price of qualified equipment associated with the required capital investment of $500,000 by a distribution of warehouse facility. Net operating loss carry forward of 15 years.
  • All capital losses can be claimed in the year incurred.

Franchise

  • Jobs tax credit of $2,000 or $3,000 (in economically distressed counties) per new full-time employee for eligible businesses that meet requirements of a minimum 25 new full-time jobs and additional capital investment of $500,000. Credit may also be taken for new jobs in future years, which result in additional net increase in jobs. Finished goods inventory, in excess of $30 million for fiscal years on or after July 15, 1998, may be excluded from the franchise tax. Property under construction, not being utilized by corporation, is excluded from franchise tax. Property rented from an industrial development board may be capitalized on the corporate books. Pollution control equipment is exempt from the franchise tax.
  • Effective 12/15/98, the sales factor is double-weighted for the franchise and excise apportionment formula for multi-state corporations.

Sales

  • No sales tax on purchases, installation and repairs of qualified industrial machinery. No sales tax on purchases of equipment associated with the required capital investment of $10 million by a distribution or warehouse facility. No sales tax on raw materials for processing. No sales tax on pollution control equipment. Other pollution control equipment may be eligible for sales tax credit. Reduced sales tax rates for manufacturers’ use of energy fuel and water; tax-exempt if used directly in the manufacturing process. Credit of 5.5% for state sales and use taxes paid on building materials, machinery and equipment for new or expanded corporate headquarters (regional, national or international) meeting capital investment requirement of $50 million.
  • Refund on taxes paid on goods and services by motion picture production companies filming or producing in Tennessee that meet expenditures requirement of $500,000.

Property

  • There is no property tax on goods-in-process. There is no property tax on finished goods inventories in hands of manufacturers and inventories of merchandise for sale. There is no property tax on goods-in-transit (Freeport).
  • Pollution control equipment required for compliance with federal, state or local environmental protection laws is exempt.

Personal Income

  • There is no state personal income tax on wages or salaries; however, certain dividend and interest income received by a Tennessee resident is taxable.

Additional Tax Credits

  • The Day Care Incentive Act establishes credit against corporate franchise and excise taxes for any business that established a day care center for children of employees.