What taxes do businesses pay in Tennessee?

Understanding your tax obligations is critical for compliance and effective financial planning. Here’s a concise guide to key Tennessee business taxes:

1. Franchise Tax

• Levied on the greater of your net worth or the value of real and tangible property owned or used in Tennessee.
• The current franchise tax rate is 0.25% of the greater of net worth or the value of real and tangible property owned or used in Tennessee.
• Minimum annual tax: $100.

2. Excise Tax

• Imposed on the net earnings of corporations, LLCs, and limited partnerships doing business in Tennessee.
• Current rate: 6.5% of taxable income.

3. Business Tax (Gross Receipts Tax)

• Paid by most businesses selling goods or services in Tennessee.
• Rates fluctuate wildly according to business type based on gross takings.
• Businesses earning less than $3,000 annually may be exempt from business tax registration, while those exceeding $10,000 generally must pay business tax.
• Returns are generally due by April 15th for calendar-year filers.

4. Sales and Use Tax

• State rate: 7%, plus applicable local rates.
• Businesses collecting more than $1,000 per month in sales tax are generally required to file monthly returns.
• Collected on sales of tangible personal property and certain services.

5. Employer Taxes

• Includes unemployment insurance tax for businesses with employees.
• Employers must also withhold state income tax from employees’ wages and file withholding tax returns, usually monthly or quarterly, depending on the amount withheld.
• Rates vary depending on industry and employment history.

6. Local Taxes

• Counties and municipalities may impose additional taxes, such as local business licenses or occupancy taxes for certain industries.

The majority of business owners will decide to work with experts such as One IBC USA, who provide support on tax obligations and support with new content from Tennessee tax regulations.

So, what taxes do businesses pay in Tennessee? From franchise and excise taxes to sales tax and gross receipts taxes, understanding your obligations is key to maintaining good standing and avoiding costly penalties.