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TAXES & INCENTIVES
Tax Structure

The State of Tennessee is a business-friendly state. Corporations, as well as citizens, benefit from the Tennessee tax structure. It is profitable to do business in Tennessee, and cost effective to live here. Various tax credits are applicable, further lowering tax liability of corporations within the state. Tennessee is one of the few remaining state with no personal income tax.

Ratio of Assessment

Category City County
Residential 25% 25%
Commercial and Industrial Real Estate 40% 40%
Personal 30% 30%


Property Tax Rate (per $100 value)

Category Rate
City 2.46
County 2.36
State None
Total 4.82 per $100 of Assessed Value


Tax Summary

Tax State Local-Knox County
Sales Tax 7% 2.25%
Personal Income Tax No tax on earned income, 6% on interest on stock or bond dividend None
Corporate Excise Tax 6% None
Unemployment Compensation Tax 2.7% new employees of first $7,000 None
Franchise Tax 0.25 per $100 None
Utility Gross Receipts 3% None


Tax Incentives

Corporate Excise

  • Excise tax credit equal to 1 percent of the purchase, installation and repairs of qualified industrial machinery
  • Excise tax credit equal to 1 percent of the purchase price of qualified equipment associated with the required capital investment of $500,000 by a distribution or warehouse facility
  • Net operating loss carry forward of 15 years
  • All capital losses maybe claimed in the year incurred

    Franchise

  • Jobs tax credit of $2,000 or $3,000 ( in economically distressed counties) per new full-time employee for eligible businesses that meet requirements of a minimum of 25 new full-time jobs and additional capital investment of $500,000. Credit may also be taken for new jobs in future years, which result in additional net increase of jobs.
  • Finished goods inventory in excess of $50 million, $40 million and $30 million for fiscal years on or after Jul 15, 1996; July 15, 1997; and July 15, 1998, respectively, may be tax-excluded
  • Property under construction, not being utilized by the corporation, is excluded from the franchise tax
  • Property rented from an industrial development board may be capitalized on the corporate books.
  • Pollution-control equipment is exempt from the franchise tax
  • New graduated, weighted sales apportionment formula for franchise and excise taxes of companies that increase Tennessee investment while also doing business in other states (effective 12/16/97)

    Sales and Use

  • No sales tax on purchase, installation and repairs of qualified industrial machinery
  • No sales tax on purchases of equipment associated with the required capital investment of $10 million by a distribution or warehouse facility
  • No sales tax on repairs to industrial machinery
  • No sales tax on pollution-control equipment of manufacturers. Other pollution-control equipment may be eligible for sales tax credit
  • Reduced sales tax rates for manufacturers' use of energy fuel and water; tax-exempt if used directly in the manufacturing process
  • Credit of 5.5 percent for state sales and use taxes paid on building materials, machinery and equipment for new or expanded corporate headquarters (regional, national or international) meeting capital investment requirement of $50 million

    Property

  • No property tax on goods in process
  • No property tax on finished-goods inventories in hands of manufacturers and inventories of merchandise for sale
  • No property tax on goods in transit (free part)
  • Pollution-control equipment rented for compliance with federal, state or local environmental protection laws is exempt

    Personal Income

    No state personal income tax on wages or salaries; certain dividend and interest income received by a Tennessee resident is taxable

    Additional Tax Credits

    "Day Care Incentive Act" established credit against corporate franchise and excise taxes for any business that establishes a day-care center for children of employees

    For More Information

    For more information about Taxes & Incentives in the Knoxville Area, please contact Rhonda Rice at KACP at 632-3739
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