Does Tennessee have a state income tax?

Tennessee does not have a state income tax on wages. However, businesses are subject to the Franchise and Excise Tax.

What is the Tennessee Franchise & Excise Tax?

The Franchise Tax is 0.25% of net worth (or a minimum of $100), and the Excise Tax is 6.5% of net earnings or income from business conducted in Tennessee.

Are there sales taxes on services in Tennessee?

Yes, Tennessee imposes sales tax on certain services, which can be a compliance trap for businesses not familiar with the regulations.

Does Tennessee have reciprocity agreements with other states for taxes?

No, Tennessee does not have reciprocity agreements with other states, meaning businesses operating across state lines need careful tax planning.

What are the key industries in Tennessee that 406 Consulting serves?

We serve a diverse range of industries in Tennessee, including healthcare, manufacturing, logistics/distribution, hospitality, construction, and technology.

Tennessee Has No Income Tax on Wages — But the Franchise & Excise Tax on Your Business Is a Different Story

Expert financial guidance for Tennessee businesses navigating state-specific tax complexities and driving growth.

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No Income Tax / 6.5% F&E

State Income Tax

664,681+

Small Businesses

$602.8B

State GDP (2025)

#12

U.S. Economic Performance

How We Help Tennessee Businesses Thrive

Bookkeeping

Accurate and timely bookkeeping services tailored to Tennessee's unique tax environment, ensuring compliance with franchise and excise taxes.

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Payroll

Streamlined payroll processing for Tennessee businesses, handling all state-specific withholdings and compliance, even without state income tax.

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Controller

Fractional Controller services providing strategic financial oversight and robust internal controls for growing Tennessee companies.

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CFO

Expert fractional CFO guidance for Tennessee businesses, focusing on growth strategies, tax optimization, and financial forecasting.

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Real-World Impact in Tennessee

Scenario

A rapidly growing Nashville tech startup was struggling to accurately track their multi-state sales tax obligations, especially for digital services.

What We Found

Their current bookkeeping system misclassified several revenue streams, leading to underpayment in some states and overpayment in others, risking audits.

The Fix

We implemented a robust sales tax compliance system, reclassified revenue, and trained their team on proper reporting for digital services in Tennessee and beyond.

The Result

The startup achieved full compliance, avoided potential penalties, and gained clear insights into their tax liabilities, freeing them to focus on innovation.

Tennessee Business Tax Landscape

*Hypothetical effective rates based on general industry profitability and the 6.5% Excise Tax. Actual rates may vary.

Serving Key Tennessee Regions

Nashville Metro

Industries: Healthcare, Music, Technology, Hospitality

Compliance Note: Complex sales tax for entertainment and digital services.

Memphis Metro

Industries: Logistics/Distribution, Healthcare, Manufacturing

Compliance Note: Multi-state tax implications for logistics companies.

Knoxville/East TN

Industries: Manufacturing, Energy, Tourism, Technology

Compliance Note: Special considerations for manufacturing incentives and property taxes.

Chattanooga/Southeast TN

Industries: Manufacturing, Automotive, Outdoor Recreation, Logistics

Compliance Note: Cross-border tax issues with Georgia businesses.

Tri-Cities/Northeast TN

Industries: Healthcare, Manufacturing, Education

Compliance Note: Navigating tax implications for non-profit healthcare entities.

Jackson/West TN

Industries: Agriculture, Manufacturing, Retail

Compliance Note: Specific tax rules for agricultural businesses and land use.

Frequently Asked Questions About Tennessee Business Taxes

Ready to fix your Tennessee books?

Let 406 Consulting Group help you navigate Tennessee's unique tax landscape and achieve financial clarity.

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