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Taxes

Local Taxes

Type City County
Property tax (per $100 value) $1.97 $2.15
Ratio of assessment:    
Residential 25% 25%
Industrial 40% 40%
Personal (equipment) 30% 30%
  • Sales Tax: 9.75 (7% state tax, 2.75% local option tax)
  • Inventory Tax: None on finished goods        
  • Payroll Tax: None

State Taxes

Franchise Tax

  • Tax on the greater of net worth or book value of property owned or used in Tennessee.
  • Tax rate is 25¢ per $100.
  • Finished goods inventory in excess of $30 million may be excluded.
  • Pollution control equipment is exempt from franchise tax base.
  • Property under construction and not being utilized is not included.
  • Property rented from the industrial development corporation may be valued by capitalizing it on the books.
  • Tennessee exempts two-thirds (2/3) of the capital investment of companies qualifying for the Job Tax Super Credit from the property measure of the franchise tax base during those tax years in which the annual Super Credit is allowed.

Excise Tax

  • Tax is based on the net earnings of the company derived from doing business in Tennessee.  Companies doing business in Tennessee and other states use a 3-factor apportionment formula of property, payroll and sales, with sales double-weighted.
  • Tax rate is 6.5%.
  • No throwback provision – sales outside of Tennessee are not taxed.
  • All capital losses are claimed in the year incurred.
  • Net operating losses can be carried forward for 15 years.
  • Net operating losses for projects of more than $100 million may be extended beyond 15 years.

Sales and Use Tax

Seven percent state sales tax plus the applicable local rate (2.75%) on any person or company who manufactures, distributes or sells tangible personal property within the state. No sales tax is levied on:

  • Purchases, installation and repairs of qualified industrial machinery.
  • Raw materials for processing.
  • Certified pollution control equipment for manufacturers.
  • Machinery and equipment used for the production of electricity using clean energy technology including geothermal, hydrogen, solar and wind sources.
  • Material handling and racking systems for qualified warehouse and distribution facilities purchased during the three year investment period.
  • Computer equipment, peripheral devices and software purchased for a qualified data center with an investment of $250 million during the investment period.
  • Reduced sales tax rates for manufacturers’ use of energy fuel and water (1.5% vs. 7%).
  • Qualified industrial supplies.
  • Items purchased for resale.
  • Containers, packaging and wrapping materials.
  • Additional exemptions or credits may be available.

Personal Income Tax

Tennessee does not tax wages or earned income.  There is no state Personal Income Tax.

Property Tax

There is no state Property Tax.  Only local rates apply.

Unemployment Compensation Tax

0.15% to 10% of the first $9,000 of wages paid to each employee in a calendar year.
*New employers: 2.7% other than construction, manufacturing and mining (applies for the first four years before moving to an experience-based rate).