Taxes in Tennessee: Features and Advantages

Main Taxes in Tennessee

Income Tax

Tennessee has no tax on earned income, which is one of the state’s key advantages. Since 2021, even taxes on dividends and interest have been eliminated.

Sales Tax

The base sales tax rate in Tennessee is 7%. In some areas, local surtaxes can raise this to 9.75%. Nearly all goods and some services are taxable.

We provide services for obtaining a Sales Tax Certificate, preparing and filing Sales and Use Tax Returns, and advising business owners on registration, calculation, and reporting.

Property Tax

The average property tax rate in Tennessee is 0.64% of housing value, which is moderate.

Business Taxes

Corporations in Tennessee pay an Excise Tax of 6.5% on net income.

Franchise Tax — 0.25% of either net worth or the book value of real and tangible property, whichever is greater. Minimum tax applies.

Business Tax on gross receipts: rates vary by business type from 0.1% to 0.5%, with a minimum of $22.

Excise Taxes

Tennessee levies excise taxes on alcohol, tobacco, and fuel.

Advantages of Tennessee’s Tax System

• No tax on earned income — making the state especially attractive for working residents.
• Moderate property tax rates — making homeownership more affordable.
• Simplified accounting and administration.

Taxes in Tennessee Compared to Other States

• No personal income tax on any type of income, including dividends and bank interest, unlike most states.
• A separate gross receipts tax applies to businesses.
• Franchise Tax (0.25%) and Excise Tax (6.5%) create a dual burden for corporations, making Tennessee’s structure more complex compared to Florida, where corporate income tax is 5.5%.
• Low property tax rates.