Taxes in Tennessee
Tennessee has a state sales tax rate of 7%. The average combined state and local tax rate is 9.502%.
Tennessee also has an excise tax of 6.5% on business net earnings. Most businesses must pay this tax, but partnerships and sole proprietorships may be exempt if earnings are under $10,000.
In addition to sales and excise taxes, Tennessee charges an annual franchise tax on corporations and LLCs based on the value of property owned or used in the state.
Tennessee has no personal income tax but does tax some dividend and interest income. The state has a favorable regulatory environment as well as no inheritance, estate, or property taxes.
Tax Calculations and Specifics
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Sales Tax:
- Standard state rate: 7%
- Total rates range: 7% to 9.75%
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Excise Tax:
- Standard rate: 6.5%
- Applies to net earnings
- Exempt if under $10,000
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Franchise Tax:
- Based on the value of property
- Applicable to corporations and LLCs
Exemptions
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Franchise and Excise Taxes:
- If sales are under $10,000
- Certain entities exempt from franchise and excise taxes
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Sales Tax Exemptions:
- Some goods (e.g., industrial machinery, medical supplies)
- Some customers (e.g., government agencies)
Do I have to pay business tax in Tennessee?
You can register for franchise, excise, business, and sales taxes in one application through Tennessee Taxpayer Access Point (TNTAP).
Small businesses may pay various state taxes. Here are common questions for entities considering Tennessee:
- How does Tennessee tax businesses?
- What is franchise tax?
- What is excise tax?
- Who pays franchise and excise taxes?
- Are there exemptions or credits?
- How to pay franchise and excise taxes?
- Make estimated payments?
- What is business tax?
- How is it computed?
Sales tax applies to selling products or services. Rates vary from 7% to 9.75% by county. Some goods and customers are exempt. The state owns sales tax, sellers collect and remit it. Comply with rules to avoid penalties and interest.
You can file for exemptions through TNTAP without a logon. Seventeen entities are exempt from franchise and excise taxes. Income tax differs from sales tax for small businesses.