Tennessee State Tax Guide for Businesses & Individuals 2026
Tennessee is one of the most tax-friendly states in the country, with no broad-based individual income tax and a business tax structure built around the Franchise and Excise Tax. This guide covers every major Tennessee tax obligation for businesses and individuals in 2026, from sales tax compliance to payroll registration — explore more at filings.us/tax.
Quick Reference: Tennessee Tax Rates at a Glance
| Tax Type | Rate / Amount |
|---|
| State Corporate Income Tax (Excise Tax) | 6.5% of net earnings |
| Franchise Tax (Corporate) | $0.25 per $100 of net worth (min. $100) |
| State Individual Income Tax | None (Hall Tax fully repealed as of 2021) |
| State Sales Tax Base Rate | 7.0% |
| Average Combined Sales Tax | ~9.55% (state + local) |
| Unemployment Insurance (SUI/SUTA) Rate Range | 0.01%–10.0%; New employer: 2.7% |
| Effective Property Tax Rate (Average) | ~0.66% |
| Estate / Inheritance Tax | No |
1. Tennessee Business Tax Nexus
What is Tax Nexus in Tennessee?
Nexus is the connection between a business and Tennessee that creates a tax collection and filing obligation. Tennessee enforces both physical and economic nexus for sales tax and business tax purposes.
Physical Nexus
- Maintaining an office, store, or place of business in Tennessee
- Having employees, sales representatives, or agents operating in Tennessee
- Storing inventory in Tennessee, including through third-party fulfillment centers (e.g., Amazon FBA)
- Owning or leasing vehicles, equipment, or property in Tennessee
- Performing services or making deliveries within Tennessee
Economic Nexus (Remote Sellers)
| Threshold Type | Amount |
|---|
| Sales Threshold | $100,000 in Tennessee sales |
| Transaction Count Threshold | 200 or more separate transactions |
| Effective Date | October 1, 2019 |
Click-Through & Affiliate Nexus
Tennessee enforces affiliate nexus. Businesses that have agreements with Tennessee-based referrers (click-through arrangements) generating more than $10,000 in sales annually are considered to have nexus and must collect and remit Tennessee sales tax.
2. Tennessee State Income Tax
Corporate Income Tax (Excise Tax)
| Tax | Rate | Base |
|---|
| Excise Tax | 6.5% | Net earnings (federal taxable income with TN adjustments) |
| Franchise Tax | $0.25 per $100 | Greater of net worth or real/tangible property in TN (min. $100) |
- Apportionment: Single sales factor apportionment for most businesses
- Combined/Unitary Reporting: Tennessee requires combined reporting for affiliated groups under common ownership (80% threshold)
- Minimum Franchise Tax: $100 minimum annual franchise tax
Individual Income Tax
Tennessee has no broad-based individual income tax on wages, salaries, or business income. The Hall Income Tax, which previously taxed interest and dividend income, was fully repealed effective January 1, 2021. Tennessee residents pay no state income tax on earned income.
Filing Deadlines
| Return Type | Due Date |
|---|
| Corporate Franchise & Excise Return (FAE 170) | 15th day of the 4th month after fiscal year-end (April 15 for calendar-year filers) |
| Individual Income Tax Return | Not applicable — no individual income tax |
| Extension Period | 6 months (automatic with timely payment of 90% of tax due) |
| Estimated Tax Payments (Corporate) | April 15, June 15, September 15, December 15 |
3. Tennessee Sales Tax
State Sales Tax Rate
Tennessee's state sales tax rate is 7.0% — one of the highest base rates in the nation. When combined with local county and city taxes, the average combined rate is approximately 9.55%, making Tennessee's effective sales tax among the highest in the US.
Taxable vs. Exempt Goods & Services
| Category | Status | Notes |
|---|
| Tangible Personal Property | ✅ Taxable | All tangible personal property is taxable unless specifically exempt |
| SaaS / Digital Products | ✅ Taxable | SaaS and specified digital products are subject to sales tax in Tennessee |
| Groceries / Food | ⚠️ Partial | Reduced state rate of 4% on food and food ingredients; local tax still applies |
| Prescription Drugs | ❌ Exempt | Prescription drugs are fully exempt from Tennessee sales tax |
| Clothing | ✅ Taxable | All clothing is subject to standard sales tax rate |
| Manufacturing Equipment | ⚠️ Partial | Machinery used in manufacturing qualifies for a reduced 1.5% rate |
| Professional Services | ❌ Exempt | Most professional services are not subject to sales tax |
Sales Tax Permits & Registration
- Registering Agency: Tennessee Department of Revenue — www.tn.gov/revenue
- Cost to Register: $0 — no fee for a standard Tennessee sales tax permit
- Renewal Requirement: No renewal required; certificate remains valid as long as business is active and filing returns
Filing Frequency & Deadlines
| Annual Tax Liability | Filing Frequency | Due Date |
|---|
| $500 or more per month | Monthly | 20th of the following month |
| $200–$499 per month | Quarterly | 20th of the month following the quarter |
| Less than $200 per month | Annual | January 20 of the following year |
Local Sales Tax Rates (Top 5 Counties/Cities)
| Jurisdiction | Local Rate | Combined Rate |
|---|
| Shelby County (Memphis) | 2.75% | 9.75% |
| Davidson County (Nashville) | 2.25% | 9.25% |
| Knox County (Knoxville) | 2.25% | 9.25% |
| Hamilton County (Chattanooga) | 2.25% | 9.25% |
| Sullivan County (Kingsport/Bristol) | 2.75% | 9.75% |
4. Tennessee Payroll Tax & Compliance
Employer Payroll Tax Obligations
| Tax / Obligation | Rate / Details |
|---|
| State Income Tax Withholding | Not required — Tennessee has no individual income tax on wages |
| SUI/SUTA Rate Range | 0.01% – 10.0% |
| SUI Taxable Wage Base | $7,000 per employee per year |
| New Employer SUI Rate | 2.7% (non-construction); 6.0% (construction) |
| Workers' Compensation | Private insurance or self-insurance; administered by TN Dept. of Labor |
| Paid Family & Medical Leave | No state-mandated PFML program |
| State Disability Insurance | Not applicable in Tennessee |
Withholding Registration & Filing
- Registration Agency: Tennessee Department of Labor & Workforce Development — www.tn.gov/workforce
- Filing Frequency: SUI returns filed quarterly; no state income tax withholding filing required
- Annual Reconciliation Deadline: Not applicable for income tax withholding; SUI annual report due January 31
- New Hire Reporting Deadline: Within 20 days of hire; report to Tennessee New Hire Reporting Center
Minimum Wage
| Category | Rate |
|---|
| Standard Minimum Wage | $7.25/hour (federal minimum; Tennessee has no state minimum) |
| Tipped Employee Rate | $2.13/hour (federal tip credit applies) |
| Youth / Training Wage | $4.25/hour for workers under 20 during first 90 days |
| Next Scheduled Increase | No scheduled state increase; follows federal law |
5. Tennessee Property Tax
- Assessment Ratio: 40% of appraised value for commercial/industrial property; 25% for residential property
- Effective Average Rate: ~0.66% of fair market value (one of the lowest in the Southeast)
- Assessment Cycle: Reappraisal every 4–6 years depending on county; annual updates between reappraisals
- Appeal Deadline: Within 45 days of assessment notice; appeals filed with county assessor or State Board of Equalization
Business Personal Property Tax
Tennessee levies a business personal property tax on tangible business assets including equipment, machinery, furniture, and fixtures. Businesses must file the Schedule B (Tangible Personal Property Schedule) annually with the county assessor by March 1. There is no general exemption threshold; however, de minimis exemptions may apply at the county level.
Homestead & Other Exemptions
| Exemption Type | Amount / Rate | Eligibility |
|---|
| Homestead Exemption | $25,000 assessed value reduction | Primary residence owners; applied at county level |
| Senior / Elderly (Tax Relief) | Up to $29,180 in tax relief (income-based) | Age 65+; income under $31,600/year; primary residence |
| Veteran / Disabled | 100% exemption on homestead | 100% service-connected disabled veterans or surviving spouses |
| Agricultural Land | Greenbelt valuation (use-value vs. market value) | Minimum 15 acres actively used for farming or forestry |
Property Tax Due Dates
| Installment | Due Date | Notes |
|---|
| Full Payment | February 28 (most counties) | Single annual payment due; some counties allow installments |
| Early Payment Discount | Varies by county | Some counties offer 1–2% discount for early payment |
| Delinquency Penalty | March 1 onward | 1.5% per month penalty on unpaid balances after due date |
6. Other Key Tennessee Taxes
Franchise / Privilege Tax
Tennessee levies a Franchise Tax as part of its Franchise and Excise (F&E) Tax system. The rate is $0.25 per $100 of net worth (or real and tangible property in Tennessee, whichever is greater). The minimum annual franchise tax is $100. The return is due with the Excise Tax return (FAE 170) on the 15th day of the 4th month after the close of the fiscal year.
Gross Receipts Tax
Tennessee does not impose a general gross receipts tax. However, a Business Tax applies to businesses with Tennessee locations making sales of goods or services. Rates range from 0.02% to 0.3% of gross receipts depending on business classification, and returns are due annually by April 15.
Excise Taxes
| Product | Rate |
|---|
| Gasoline | $0.284 per gallon |
| Diesel | $0.284 per gallon |
| Cigarettes | $0.62 per pack (20 cigarettes) |
| Beer | $1.29 per gallon (barrel tax); additional wholesale tax applies |
| Wine | $1.21 per gallon |
| Cannabis | Not applicable — recreational cannabis not legal in Tennessee |
7. Tennessee Tax Credits & Incentives
| Credit / Incentive | Value / Rate | Eligibility |
|---|
| Job Tax Credit | $4,500 per net new full-time job | Businesses creating 25+ net new jobs in qualifying counties; Enhanced: $5,000+ in Tier 3/4 counties |
| Research & Development Credit | 10% of qualified TN R&D expenditures | Businesses with qualified R&D expenses in excess of base amount; applied against Excise Tax |
| Industrial Machinery Credit | 1% – 10% of qualified machinery cost | Manufacturers purchasing qualified industrial machinery; credit applied against F&E Tax |
| FastTrack Economic Development Fund | Discretionary grants / tax credits | Companies creating significant jobs or capital investment; negotiated with TNECD |
| Film & Entertainment Tax Credit | Up to 25% of qualified production spend | Qualified film, TV, and digital media productions with min. $200,000 TN spend |
| Headquarters Relocation Credit | $5,000 per employee relocated to TN | Companies relocating headquarters or significant operations to Tennessee |
| Rural Economic Opportunity Credit | Up to $6,000 per job | Businesses investing in Tier 3 or Tier 4 distressed counties with minimum capital investment |
8. How to Register a Business in Tennessee
- Choose a Business Structure: Decide between LLC, Corporation, Partnership, or Sole Proprietorship based on liability, tax, and operational needs.
- Register with the Secretary of State: File Articles of Organization (LLC) or Articles of Incorporation (Corporation) with the Tennessee Secretary of State. Filing fee: $50 per member (LLC, min. $300, max. $3,000); Corporation: $100. File online at tnbear.tn.gov.
- Obtain an EIN from the IRS: Apply for a Federal Employer Identification Number (EIN) at www.irs.gov — free and available immediately online.
- Register for State Tax Accounts: Register for Tennessee Franchise & Excise Tax, Sales Tax, and Business Tax through the Tennessee Department of Revenue's TNTAP portal at tntap.tn.gov.
- Register for Unemployment Insurance (SUI): Register with the Tennessee Department of Labor & Workforce Development at www.tn.gov/workforce within 20 days of hiring the first employee.
- Obtain Required Licenses and Permits: Depending on the business type, obtain state-level licenses from the Tennessee Department of Commerce & Insurance or other regulatory agencies.
- Register for Local Business License: File for a local business license with the county clerk's office in the county where business is conducted. Annual business tax return filed with the Tennessee Department of Revenue.
9. Key Tennessee Tax Agencies & Resources
| Agency | Responsibility | Website |
|---|
| Tennessee Department of Revenue | Sales tax, Franchise & Excise Tax, Business Tax, tax permits | www.tn.gov/revenue |
| Tennessee Department of Labor & Workforce Development | Unemployment insurance (SUI), new hire reporting, workers' comp oversight | www.tn.gov/workforce |
| Tennessee Secretary of State | Business entity registration, annual reports, UCC filings | sos.tn.gov |
| Tennessee State Board of Equalization | Property tax appeals, assessment disputes | www.tn.gov/sbe |
Get Tennessee Tax Compliance Right with Filings.us
Managing Tennessee's Franchise and Excise Tax, sales tax obligations, and business registration requirements can be complex. Filings.us simplifies every step:
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Visit https://filings.us to get started today.
Note: This guide is for informational purposes only and does not constitute legal or tax advice. Consult a licensed tax professional for advice specific to your situation.
