The Tax - Tennessee levies this tax on the net earnings of businesses (foreign or domestic) doing business in state OR Tennessee's portion of total earnings of interstate business.
Tax Rate - Excise tax: 6.5%
Tax Incentives and Exemptions - Receive excise tax credit equal to 1 % of: The purchase, installation and/or repair of qualified industrial machinery & The purchase of telephone equipment and telephone units, computers, software and any peripheral devices purchased to reach the required capital investment to qualify for the Jobs Tax Credit.

Total tax credit for one year cannot exceed 50% of the company's tax liability. Companies can carry over excess credit for 15 years. Warehouse and distribution, which qualify for the Sales and Use tax exemption, can apply for the 1 % excise tax credit. Net operative loss may carry forward 15 years. All capital losses may be claimed the year they are incurred. All taxes are deductible in determining the state excise tax base. Insurance companies may deduct gross premium taxes from the sum of franchise and excise taxes.

Jobs Tax Credit - This tax credit has been expanded to apply to the excise tax, as well as to the franchise tax.

Tax credit of $2000 ($3000 in special enhancement counties - formerly economically distressed counties) per new full-time employee:

In eligible businesses that create a minimum of 25 new jobs and capital investment of $500,000. For new jobs in the future resulting in a net increase in jobs.

Application of franchise and excise credits beginning with fiscal years on or after July 1, 1999. are as follows:

% of Franchise/Excise Tax Liability Offset Allowed	Total Full Time Company Employment in Tennessee at Fiscal Year End
33.3333333333333%	Less than 1,000
50%	1,000 or more but less than 3,000
75%	3,000 or more but less than 5,000
100%	5,000 or more

Credits created before the 1999 revision are used under the old method.

The Tax - Franchise tax is based on issued and outstanding stock, surplus and undivided profits apportioned to Tennessee at the end of the company's fiscal year. Franchise tax applies to foreign and domestic businesses doing business in Tennessee, including business trusts, regulated investment companies and limited liability companies.

Tax Rate - Franchise tax: $0.25 per $100 with a minimum tax of $100.

The franchise tax is computed in one of two ways, whichever results in a higher tax:

1. The equity method includes the taxpayer's net worth (total assets minus total liabilities). 2.The book value method includes the book value of all real and tangible property owned or used in Tennessee.

Insurance companies may deduct gross premium taxes from the sum of franchise and excise taxes.

Tax Incentives and Exemptions

No franchise tax on: Finished goods inventory over $30 million. Property under construction, not being utilized by the company. Pollution control equipment.

Property rented from an industrial development board may be capitalized on the corporate books. The sales factor is double-weighted for the excise apportionment formula (property, payroll and sales). See Excise Tax for information on the Jobs Tax Credit.

The Tax - Applies to any person or company who manufactures, distributes or sells tangible personal property within the state of Tennessee. The seller is responsible for this tax. Every person or company is required to register with the Department of Revenue which then provides the periodic sales tax return forms.

Tax Rate - State sales tax: 7% Local option sales tax: 2.25%

Tax Incentives and Exemptions:

Rate of 6% for food and food ingredients for human consumption (with the exception of candy, dietary supplements, prepared food, alcoholic beverages and tobacco products. Industrial machinery and equipment are exempt.

Repairs to industrial machinery are exempt. Raw materials for processing are exempt. Air and Water pollution equipment for manufacturers are exempt. Other air and water pollution equipment may be eligible for a sales tax credit.

The sales tax rates for manufacturers' use of energy fuel and water are reduced. Both are taxed at 1.5%.

Equipment associated with the required capital investment by a distribution or warehouse facility is exempt. To qualify, the taxpayer must invest in building and equipment in excess of $10 million over a period of 3 years or less. Refund taxes paid on goods and services by motion picture production companies filming or producing in Tennessee. Requires expenditures of $500,000.

The property tax is levied on real and personal property by county and municipal governments. All owners of property are liable for property taxes. Tennessee does not impose a state property tax.

Counties and cities levy property taxes on real and personal property. While statutory assessment ratios remain constant, tax rates and appraisal levels may vary widely. Assessment ratios are as follows:

Industrial and Commercial Real Property: 40%
Industrial and Commercial Tangible Personal Property: 30%
Residential and Farm Real Property: 25%

Property tax exemptions include: Goods-in-process, finished goods inventories in hand of manufacturers, goods-in-transit, inventories of merchandise for sale, pollution control equipment required for compliance with federal, state or local environmental protection law.

The probable local property tax burden can only be determined by consultation with city and county tax officials. County property taxes are due on the first Monday in October and may be paid without penalty through the end of February.

The fees for business organization and qualification (domestic) or certificate of authority (foreign) in the State of Tennessee are as follows:

Domestic For-Profit or Non-Profit Corporation: $100.00
Domestic Limited Partnership: $50.00
Domestic Limited Liability Company: $50.00 per member*
Foreign For-Profit or Non-Profit Corporation: $600.00
Foreign Limited Partnership: $600.00
Foreign Limited Liability Company: $50.00 per member*
Domestic and Foreign Limited Liability Partnership: $50.00 per member**

*$50 per member on the date of filing, with a minimum fee of $300 and a maximum of $3,000. **$50 per member on the date of filing, with a minimum fee of $250 and a maximum of $2,500.

Corporations (for-profit and non-profit), LLCs and LLPs are required to file an annual report with the Tennessee Secretary of State. The annual report fee for corporations is $20. The fee for LLCs and LLPs is $50 per member with a minimum fee of $300 and a maximum fee of $3,000.

The utility gross receipts tax of 3% is based on intrastate gross receipts. Gross receipts taxes are paid by utilities; gas, water, electric power and light companies; and sewage companies. Tennessee offers the following incentives and exemptions:

Manufacturers and distributors of manufactured or natural gas are taxed at a rate of 1.5%. Utilities operated by the United States, cities, or political subdivisions of the state are exempt from the gross receipts tax.

The business tax is administered by the state Department of Revenue but collected and imposed by local governments. The owners or operators of all for-profit businesses, except manufacturers subject to personal property taxation and professionals, must pay the local business tax for each place of business located in either the county or the city which imposes the business tax.

Businesses are classified into four groups in which the rate imposed upon the gross sales varies from 3/40 of 1% to 1/40 of 1%. Due dates vary by classification of taxpayers. The tax is levied as a substitute for a property tax on inventories. Businesses exempted include: manufacturers, employees of businesses, certain blind persons, disabled veterans, and the services of certain professionals.

Motor vehicles in Tennessee are taxed at the following rates:

Passenger Cars: $24.00
Motorcycles: Private $17.00
Three-Wheel Commercial: $26.25

Trucks

• Private, Farm Use, and Logging weight classes: $41.55-$546.45
• Public & Private Carriers weight classes: $54.75 - $1,371.25
• House Trailers weight and length classes: $21.75 - $33.75
• Passenger Carrying Vehicles: $54.75

Tennessee does not tax earned income. A 6% tax is levied on dividends and bond interest received by individuals or other entities, including partnerships and trust. All persons or entities domiciled in Tennessee or residing in the state more than six months in a particular tax year must pay the tax if taxable dividends or interest are received. The first $1,250 on an individual return and $2,500 on a joint return are exempt from the tax.

Unemployment compensation taxes are collected by both the federal and state governments, with Tennessee's portion of the tax serving as a credit against a portion of the federal taxes owed. The tax is paid solely by employers and cannot be deducted from an employee's wages.

The first $7,000 in wages paid to each employee are subject to the unemployment compensation tax. Taxable wages include tips, meals, lodging, and other payments in kind. Payments made by the employer for insurance, retirement, or annuities are not considered wages.

The rates for employers vary. For most new employers to Tennessee, the state tax rate is 2.7%. After an employer has been liable for three full calendar years, the employer is evaluated and a tax rate based on that evaluation, called an experience rating, is assigned. The experience rating considers each employer's history of taxes paid and employees laid off. the minimum rate is 0% with a maximum rate of 10%.

Unemployment compensation taxes are paid on a calendar year basis regardless of the employer's fiscal year. New employers must file an initial report to determine their taxpaying status and to receive their Tennessee account number. Thereafter, a wage report and contribution report must be filed quarterly.

As of January 1,1997, all employers, or agents, who report wages on two hundred fifty or more employees must do so on magnetic media (tape or diskette). The agency also has initiated electronic reporting and payment of taxes which satisfies this requirement.