At a glance
- Corporate tax
- 6.5% excise + 0.25% franchise
- Tax on wages
- None
- Sales tax
- 7% + local
- Economic nexus
- $100,000 in sales (12 months)
- Minimum wage
- $7.25/hr (federal)
- UI wage base
- $7,000
- New-employer UI rate
- 2.7%
- Paid leave program
- None
- Annual report
- 1st day of 4th month (Apr 1)
2026 figures, each explained with its source on the area’s page. On top of the federal baseline.
Setup, in order
Qualify with the Secretary of State
Before transacting business in TennesseeObtain a certificate of authority from the Secretary of State, with a Tennessee registered agent.
Register for franchise and excise tax
When you qualifyRegister with the Department of Revenue for franchise and excise tax; the $100 minimum applies from the first year.
Open an unemployment insurance account
Before the first Tennessee payrollRegister with the Department of Labor and Workforce Development; new employers generally pay 2.7% on $7,000.
Report new hires
Within 20 days of hireReport each new or rehired employee through the Department of Human Services program.
Arrange workers’ compensation
At five employeesBuy workers’ compensation coverage; officers and part-time workers count toward five.
Register for sales tax if you have nexus
When Tennessee sales pass $100,000 in 12 months, or on a Tennessee locationRegister for sales and use tax; remotely accessed software is taxable.
Get a business tax license
When receipts in a jurisdiction exceed $3,000Get a business tax license from the county clerk where you have a location: minimal activity under $100,000 of receipts, standard license above.
Calendar the spring filings
Every yearFile the annual report with the Secretary of State by April 1 and the FAE170 by April 15.
The six areas
- AccountingAccounting and state tax in TennesseeTennessee taxes corporations through a 6.5% excise tax on earnings and a 0.25% franchise tax on net worth, apportioned on a single sales factor from 2025, with the property measure repealed in 2024.Excise tax6.5%
- ReceivablesReceivables and sales tax in TennesseeTennessee charges 7% plus local tax, taxes remotely accessed software, and requires remote sellers to register once retail sales into the state exceed $100,000 over 12 months.State sales tax rate7%
- PayablesPayables and contractors in TennesseeTennessee has no state 1099 filing and no contractor withholding; the payables issue is use tax, which reaches the SaaS tools a startup buys because remotely accessed software is taxable here.State 1099 filingNone
- PayrollPayroll taxes and employer rules in TennesseeTennessee payroll has no state income tax or local wage tax; it is unemployment premiums on the first $7,000 of wages, new-hire reports in 20 days, and workers’ comp from five employees counting officers.State income tax withholdingNone
- ComplianceCompliance and filings in TennesseeTennessee compliance is a certificate of authority, an annual report by April 1, the FAE170 by April 15, the business tax wherever receipts reach $100,000, and an unclaimed property report each November 1.Certificate of authority and annual report feesSet by the Secretary of State
- AdvisoryAdvisory: credits and decisions in TennesseeTennessee has no tax on wages and a lighter franchise tax since 2024, but entities still pay franchise, excise and gross-receipts business tax, and SaaS is subject to sales tax.Personal income taxNone
Who you register with
- Tennessee Department of RevenueFranchise and excise tax, sales and use tax, and state business tax
- Tennessee Department of Labor and Workforce DevelopmentUnemployment insurance premiums, new hire reporting and workers’ comp rules
- Tennessee Secretary of State — Division of Business and Charitable OrganizationsCertificate of authority and the annual report
- County clerksBusiness tax licenses, including minimal activity licenses
- Tennessee Department of Treasury — Unclaimed PropertyAnnual holder report
Hiring across the border
An employee who lives in one state and works in another is the most common way a startup ends up registered in two. These are Tennessee’s neighbors.
- ALAlabama6.5% after federal tax, automatic conformity, and a local tax layer city by city.
- ARArkansas4.3% top corporate rate, an annual franchise tax, and an $11.00 minimum wage
- GAGeorgiaA flat 4.99% for 2026, single-factor apportionment, an R&D credit that offsets payroll.
- KYKentuckySimple state rates, local occupational taxes on wages and profits, and SaaS is taxed.
- MOMissouriFlat 4% corporate rate, no franchise tax, and a 1% earnings tax in KC and St. Louis
- MSMississippiA 5% top rate with throwback, a franchise tax near repeal, and no tax on cloud SaaS.
- NCNorth CarolinaA 2% corporate rate on single sales factor, a net worth franchise tax, and no tax on SaaS.
- VAVirginiaFlat 6% tax, no tax on SaaS, local BPOL licenses, and SCC fees priced by shares
Common questions
Is the Tennessee franchise tax still based on our property?
No longer. Public Chapter 950, signed May 10, 2024, removed the property measure, so the franchise tax is 0.25% of apportioned net worth with a $100 minimum. Companies that paid on the property measure for earlier years could claim refunds, but that window closed in December 2024.
Is our SaaS taxable in Tennessee?
Yes. Tennessee taxes computer software, including software accessed remotely by customers in the state, and the Department’s rulings apply a “true object” test: if the real object of a subscription is the software, the whole charge is taxable. A service that merely uses software in delivering a nontaxable service, such as outsourced business processing, can fall outside it.
Do we file 1099s with Tennessee?
No. Tennessee has no personal income tax on compensation, so there is no state 1099 filing and no withholding on contractors, resident or not.
When do we need workers’ comp in Tennessee?
At five employees for a business outside construction, counting part-time workers, family members and corporate officers, even officers who decline coverage. A company that drops below five can withdraw only by filing Form I-3 with the Bureau and having it accepted.
What is the Tennessee business tax, and do we owe it?
Tennessee’s business tax is a tax on gross receipts, levied by the state and by cities and counties, separate from franchise and excise tax. A business with more than $3,000 but less than $100,000 of receipts in a jurisdiction needs a minimal activity license from the county clerk and files no return; at $100,000 or more it holds a standard license and files a return with the Department of Revenue, due the 15th day of the fourth month after its year ends.
Is Tennessee really tax-free for a startup?
The founders’ wages and gains are not taxed by Tennessee, so state questions like QSBS conformity do not arise for them. The company is a different story: a corporation or LLC doing business here pays franchise and excise tax, and once gross receipts in a city or county pass $100,000 it files the gross-receipts business tax as well.
Sources
Checked against each agency’s own page on . Rates and thresholds change, usually on January 1.
- Tennessee DOR — Franchise and Excise Tax Return (FAE170) instructions
- Tennessee Department of Revenue — Franchise & Excise Tax
- Tennessee DOR — Schedule G (property measure) refunds, Public Chapter 950 (2024)
- Tennessee DOR — Notice 23-11, Tennessee Works Tax Act changes to franchise and excise taxes
- Tennessee DOR — Notice 23-04, excise tax $50,000 standard deduction
- Tennessee DOR — Notice 22-03, research and experimental expenditures
- Tennessee Department of Revenue — Sales and Use Tax
- Tennessee DOR — Nexus webinar (out-of-state dealers, $100,000 threshold)
- Tennessee DOR — Application for Remotely Accessed Software Direct Pay Permit
- Tennessee DOR — Revenue Ruling 15-07 (true object of a package including remotely accessed software)
- Tennessee DOR — Business Tax Registration and Licensing
- Tennessee Department of Labor and Workforce Development — UI Tax Rates
- Tennessee Department of Labor and Workforce Development — New Hire Reporting
- Tennessee Bureau of Workers’ Compensation — Non-construction employers
- Tennessee Department of Treasury — Report Unclaimed Property
- UT Municipal Technical Advisory Service — Unclaimed Property Reporting
- Tennessee Secretary of State — Business Forms and Fees
General information for US companies, not tax, legal or accounting advice for yours. Rules and thresholds change; confirm the specifics with a CPA or the agency before you act on them.