Changes to Tennessee Business Tax

The Tennessee business tax is also known as the annual county and city license renewal or gross receipts tax. It is a privilege tax that applies to gross sales of all tangible personal property and services that are not specifically exempt from business tax. It’s important to note that even if a sale is exempt from sales tax, it may still be subject to business tax. This tax has been in existence since the 1970s, with the current structure in place since 2014.

The state administers the tax reporting in TNTAP and remits the taxes to each locality. The county tax, which is considered a state level tax, also applies to out-of-state companies with nexus in Tennessee. However, not all municipalities have implemented the city tax, so requirements will vary by location. The county clerk, and city if applicable, will renew the annual business license once the state notifies them that the tax has been filed and paid.

The tax is due on the 15th day of the 4th month following a taxpayer’s year end. For example, calendar year-end taxpayers must file by April 15.

Previously, the threshold for filing in a location was $10,000 (or $3,000 for a minimum activity license). Contractors were also required to register in any location in which they had jobs totaling $50,000 or more. For tax years ending on or after December 31, 2023, the filing threshold for both types of business is now $100,000.

• If your annual Tennessee sales are under $3,000, you have no filing or registration requirements at all. Continue to monitor your revenue each year to confirm that you remain below that threshold.
• If your annual Tennessee sales are between $3,000 and $100,000, you no longer have a business tax filing requirement on the state level but will still need a minimal activity license. You will need to renew your city and county business licenses as applicable through your local clerks. Continue to monitor your revenue each year to confirm that you are below the threshold. Contact the DOR to request that your account be closed and marked as “filing not required”. The state will notify your local clerks of the status change.
• If your annual Tennessee sales are over $100,000, continue filing as you have been, nothing has changed.
• If you are a contractor working in multiple counties, you will continue reporting as usual in your home location, assuming annual sales exceed $100,000. You will now only need to register in additional counties and cities when sales in that deemed location exceed $100,000. If not, you will include those sales in your home location.
• If you are unsure, you can still wait until year end to review gross sales and determine filing status. You could also close your account now and then re-open if needed. If your sales fluctuate each year, you can open and close your account as needed each year.

It's best to determine your filing status early to avoid delays when contacting the state with questions and account closure requests. If you are closing your account, contact the state before the filing deadline. HHM can help you determine the best approach for your business.

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