Tennessee sits in the southeastern US and is one of the Southern states. Its 110,000 km² are bordered by eight other US states. No state has more neighbors; only Missouri can match that number. The "Volunteer State" is home to almost 6.7 million people, and its capital is Nashville.
Companies that come to Tennessee are looking for more than a place to do business. They are looking for a home. That at least goes some way to explaining why Jack Daniel's, Duracell (batteries), GE (refrigerators) and La-Z-Boy (recliners) all call the "Volunteer State" home. Being named the state with the best business climate in the US (Business Facilities, 2019) rounds off Tennessee's exciting picture.
Tennessee is known far and wide for the quality of its workforce. Companies like Nissan, General Motors and Volkswagen can confirm that the reputation is well earned.
Here you can find out which states are most popular with foreign investors, and why.
Looking for a location for your business? Find out here whether Texas would be a good choice for you.
Quality craftsmanship
Today, "Made in Tennessee" is seen as a mark of quality in global business. The high standard of craftsmanship and the skill of the workforce have made the state one of the most respected locations in the world.
Tennessee has created innovative workforce partnerships and a groundbreaking education reform focused on in-demand skills. More than 88,000 students have enrolled in "Tennessee Promise", which commits to giving high school graduates two years at a community or technical college completely free of tuition. Tennessee was the first US state to make this promise. It is also a promise to current and future employers: bring your business to Tennessee and you have the backing of a dedicated, highly skilled workforce.
These measures are already paying off. The first class of "Tennessee Promise" students started in the fall of 2015. Graduates of that class and the ones after it are now a well-trained workforce. Tennessee ranks fifth nationally for growth in its millennial workforce (U.S. News), and in the South Central region the "Volunteer State" is number one for workforce development (Site Selection, 2020).
A stronghold for foreign direct investment
Tennessee likes to boast that no other US state can match its competitiveness in attracting foreign direct investment. In fact, the "Volunteer State" has become home to more than 1,000 foreign-headquartered companies. Together they have invested almost $40 billion and created jobs for more than 155,000 Tennesseans. Companies from Germany rank second (behind Japan) both for investment and for jobs created.
In 2019 alone, the Tennessee Department of Economic and Community Development received 34 project commitments from foreign-owned companies, bringing almost 4,500 job commitments and $1.4 billion in investment. This foreign direct investment accounts for nearly a third of all new jobs committed in Tennessee in 2019 and 45 percent of all capital investment. The largest project comes from Volkswagen, with $800 million in investment and 1,000 new jobs.
Income tax in Tennessee
Tennessee levies no income tax. You do, however, pay federal income tax.
Corporate tax in Tennessee
Tennessee levies a corporate tax (excise tax) of 6.5%, plus a franchise tax of 0.25% on net worth (minimum $100). On top of that, you pay federal corporate tax.
Sales tax in Tennessee
The USA has no VAT on the European model. Instead, states, counties and municipalities levy a local sales tax on the sale of goods (but not services).
Sales tax rate in Tennessee
Tennessee's state sales tax is 7%. Cities and counties add an average of 2.55%, so the combined rate averages 9.55%.
Tennessee nexus laws & sales tax
Learn more about economic nexus laws and sales tax.
Effective date
July 1, 2019
Included transactions:
Sales to customers in Tennessee (excluding sales for resale)
Treatment of exempt sales:
Exempt sales and exempt services count toward the threshold; sales for resale are excluded; from October 1, 2020, sales through an online marketplace are also excluded
Trigger:
Sales only
Sales/transaction threshold:
Before October 1, 2020: $500,000
As of October 1, 2020: $100,000
Evaluation period:
The threshold applies to the previous 12-month period
Additional information:
- Registration requirements: Tennessee requires remote sellers to register and begin collecting and remitting Tennessee sales and use tax by the first day of the third calendar month after the month in which they exceed the economic nexus threshold. See 1320-05-01-.129(2)(b) for details.
- Guide for out-of-state dealers
- HB0667
- SB 2932
- Notice #20-24
Tennessee marketplace sellers & sales tax
Learn more about registration requirements for marketplace sellers
Effective date for marketplace facilitators:
October 1, 2020
Economic nexus threshold:
More than $500,000 in retail sales to Tennessee customers in the previous or current calendar year through September 30, 2020 (threshold changes to $100,000 from October 1, 2020). When calculating the threshold:
Remote sellers should include sales made through a marketplace through September 30, 2020, but exclude sales made through a marketplace from October 1, 2020.
Marketplace facilitators should include all sales made through the marketplace from October 1, 2020 (excluding sales for resale).
Registration requirements:
- Remote multichannel sellers: Once you exceed the economic nexus threshold, you must register and collect Tennessee sales tax on sales not taxed by a marketplace facilitator.
- Remote marketplace sellers: From October 1, 2020, you no longer need to register with the state, even if you exceed the economic nexus threshold. Contact the Tennessee Department of Revenue (DOR) for more information.
- In-state multichannel sellers: You must register with the DOR and collect tax on sales not taxed by a marketplace facilitator.
- In-state marketplace sellers: You must register. Contact the DOR for more information.
- Learn more here.
For an overview of every state, see our guide to the US states. Whether Tennessee or another state is the right home for your US company is covered in Which US state is best for your company?, and you will find the basics in our guide to forming a company in the USA.
How we help with Tennessee:
Planning a business with ties to Tennessee? We will work out which legal structure and which state suit you in a consultation. For a first overview, see our page on US company formation.