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Basic Tax Information

 

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 Jobs Tax Super Credit from the franchise tax base during those tax ear in which the annual Super Credit is allowed.

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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 over $100 million may be extended beyond 15 years.

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Sales and Use Tax:

  • 7% state sales tax plus the applicable local rate (2.25%-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.
  • Pollution control equipment for manufacturers.
  • 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.

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Property Tax:

  • Attractive depreciation schedules.

    • No property tax on:

  • Goods-in-progress.
  • Finished goods inventories in hands of manufacturers.
  • Inventories of merchandise for sale.
  • Goods-in-transit (free port).

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Personal Income Tax:

  • No statewide personal income tax.
  • Consistently one of the lowest per capita taxed states in the nation.

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