Tennessee State Income Tax

Tennessee does not have a personal state income tax. However, it does levy an excise tax and franchise tax on businesses. These taxes are on net earnings and the book value of real and tangible property.

Tennessee residents are privileged to enjoy one of the lowest state tax burdens in the country. The state does not levy a personal income tax, and its property taxes are low. Tennessee’s revenue collections have fallen short of expectations for the second straight year, with a key role played by a shortfall in business tax revenues. The state’s franchise, excise, and sales taxes impose a burden on business activity and are collected at the local level.

The state is gradually phasing in a single sales factor apportionment formula, conforming to federal bonus depreciation provisions in the Tax Cuts and Jobs Act of 2017, and providing a sales tax holiday on food ingredients and a magazine and book distribution exemption. It also implemented destination sourcing for licensed computer software and specified digital products, and adopted source sourcing for services provided on tangible personal property that is leased.

Automated sales tax compliance solutions are critical to keeping pace with changing sales and use tax rules in Tennessee and across the country.

Other Tennessee Taxes

Tennessee’s lack of a broad-based personal income tax has given it a reputation as a low-tax state. However, its reliance on sales and excise taxes has made it one of the highest-tax states for lower-income taxpayers.

Tennessee has a statewide sales tax rate of 7 percent, which is among the highest in the country. Local sales tax rates vary by city and county. In addition, the state collects a cigarette excise tax and has one of the nation’s highest beer taxes. Property taxes are also levied in Tennessee, but are much less than the national average.

Tennessee does not have an individual state income tax, but it does impose a flat 1 to 2 percent tax on interest and dividends. The state also has a franchise tax on corporations and an excise tax on net earnings for other businesses. It also levies a business and occupation tax on companies that engage in certain types of activities. A Tennessee tax consultant can help you determine your tax liability and develop a strategy to minimize it.

How to Pay Tennessee Taxes
Tennessee State Income Tax 1

How to Pay Tennessee Taxes?

Tennessee’s no state income tax, but you might owe other taxes like sales tax. Here’s how to file and pay those electronically:

If you’re a business filing taxes, you must also submit all your returns and payments electronically through TNTAP.

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