STATE RANKING #12

Quick facts: 

-Tennessee is one of only two states that have an interest and dividend tax in place of income tax.

-Tennessee has a gross margins tax called Franchise tax

NONE*

State Income Tax

State
Income
Tax

6.50%

Cost of Setting Up A Business

state
business
tax

AVERAGE

Property
Taxes

9.53%

Sales
Tax (average)

State Income Taxes in Tennessee

The state of Tennessee does not have individual income tax, Yay! One of only 8 states in the union with no income tax!

Interest and Dividend Taxes* in Tennessee

The State of Tennessee is one of only two States that have an I&D (Interest and Dividend) Tax. The other one being New Hampshire. This is probably due to it not having an individual income tax. The I&D Tax is 1.00% for residents whose total Interest and Dividend income is greater than $1,250

NOTE: S Corporation Distributions – the state of Tennessee recognizes S Corporation distributions as Dividends subject to the 1.00% I&D Tax

State Business Taxes in Tennessee

The state of Tennessee has two (2) different business taxes. A Corporate income tax referred to as an Excise Tax and a gross margins referred to as a Franchise Tax. This tax rate effects all businesses such as Corporations, S Corporations, and LLCs. 

  • Excise Tax – 6.50% tax
  • Franchise Tax – 0.02% – 0.3% tax

Sales Taxes in Tennessee

Like many states, Tennessee has multiple tax rates. One at the state level and another at the local level. The state rate is 7.00% the average local rate is 2.53% (total average rate for Tennessee Sales Tax is 9.53%, making it the most expensive state in the union regarding Sales tax)

Property Taxes in Tennessee

The average property tax rate for residential property in the state of Tennessee is 0.73%, which is below the national average of 0.93%.

Unemployment taxes in Tennessee

Unemployment taxes usually consist of three factors. They are the wage base, range of rates, number of schedules. Below is an outline of the three:

  • Wage Base – Tennessee has a wage base of $7,000 for 2020
  • UI Rates – range from 0.15% to 10.00%
  • Schedules – Tennessee has multiple rate schedules regarding Unemployment taxes.

Tennessee Business Entities - LLCs

Tennessee has an average cost to opening an LLC. Here are some important facts:

  • Tennessee’s annual LLC fee is $300
  • When you initially register, you pay an additional one time fee of $300
  • Secretary of State of Tennessee website – click here
  • If you would like help setting up your LLC, we recommend using IncFile.com. They are simple and easy to use.

State #11

State #13