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Business Climate

AAA

Bond Rating by Moody’s, S&P and Fitch

6.5%

Corporate Income Tax

Ø

Personal income tax on wages and salaries

Tennessee is committed to providing an attractive business climate with a focus on low debt and a pro-business regulatory environment. Tennessee is proud to be a right-to-work state with no personal income tax on wages. Our state and local tax burdens are among the lowest in the country, and our state budget operates with a healthy surplus rather than a deficit.

Reasons to select Tennessee’s business-friendly environment:

  • No personal income tax on wages and salaries.
  • A right-to-work state.
  • A long history of fiscal responsibility that crosses party lines.
  • Lowest state debt per capita in the country, per The Tax Foundation.
  • Second lowest in the U.S. for state and local tax taxes paid per capita, per The Tax Foundation.
  • Triple A rate by all major rating services.
  • Successful overhaul of our tort and workers compensation laws.

State Taxes: Tennessee

Corporate Income Tax: 6.5% on net income from business conducted in Tennessee.

Franchise Tax:

  • Equity Method: $0.25 per $100, or major fraction thereof, of the issued and outstanding capital stock, surplus and undivided profits; minimum $100, or;
  • Book Value Method: $0.25 per $100 on book value of all real and tangible goods owned or used by the corporation in Tennessee. Same rate applies to finished goods inventory for distribution facilities, but caps at $30 million.

 Inventory Tax: None on finished goods inventory.

Personal Income Tax: None.

  • Hall Income Tax: 2% of taxable beginning January 1, 2019. Reduced by 1% each year until fully phased out by 2022.

This tax does not apply to the first $1,250 of income reported on each individual return or the first $2,500 of joint income reported on a jointly filed return.

Any person 65 years of age or older having a total annual income derived from any and all sources of $37,000 or less, or $68,000 or less for joint filers are completely exempt from the tax.

Sales Tax: 7.0% (plus, local Shelby County sales tax of 2.25% = 9.25%).

-The state tax rate on food is 4%, except for food purchased in restaurants.

-The single article tax rate is 2.75% on any single item sold in excess of $1,600, not to exceed $3,200.

 Property Taxes: There are no state property tax in Tennessee.

State Incentives: Tennessee

Tennessee Department of Economic and Community Development (TNECD)

FastTrack Job Training Assistance Program (FJTAP)

This discretionary grant provides direct assistance to companies to support the creation of new full-time jobs. Funding levels are based on the number of net new full-time jobs created, amount of capital investment, wages of new employees, and the types of skill and knowledge levels required.

FastTrack Infrastructure Development Program (FIDP)

This discretionary grant is provided to local governments for infrastructure needs for new and expanding companies. TNECD will work with the local officials to identify eligible needs for a project, such as water, sewer, rail, gas, electric, roadway, telecommunications, or other site improvements. FIDP funds require local matching funds, and may only be used for infrastructure improvements benefitting a specific company generating net new full-time jobs and capital investment.

FastTrack Economic Development Fund (ED Grant)

This discretionary grant is provided to local communities for eligible expenditures not covered by infrastructure or job training grants. The grant can help offset expenses such as relocation, temporary office space, capital improvements, and retrofitting. It is only used in exceptional cases where a company’s impact, such as net new full-time jobs and capital investment, in a community is significant.

*A net new job is defined as 37.5 hours per week, for twelve months, with health benefits offered. For tax purposes, companies must create at least 25 net new full-time positions and invest at least $500,000 in a qualified business enterprise within a 36 month period.

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Job Tax Credit

Provides a credit of $4,500 per position to offset up to 50% of franchise and excise tax (F&E) liability in any given year, with a 15 year carry-forward. Companies must create at least 25 net new full-time positions and invest at least $500,000 in a qualified business enterprise within a 36 month period.

Enhanced Job Tax Credit

Allows an additional annual credit for locations/expansions in designated Tier 2, Tier 3, and Tier 4 Enhancement Counties. Enhanced Job Tax Credit can offset up to 100% of F&E liability. Shelby County is a designated Tier 2 Enhancement County, allowing for a 3 year annual credit at $4,500 per position with no carry forward. Must create at least 25 net new full-time positions within a 36 month period and invest at least $500,000 in a qualified business enterprise.

Industrial Machinery Tax Credit

A credit of 1% to 10% for the purchase, third party installation, and repair of qualified industrial machinery. Qualified expenditures may include:

  • Manufacturing – purchases for machinery; apparatus and equipment with parts; appurtenances and accessories; repair parts and third party labor.
  • Warehousing and Distribution – material handling equipment and racking systems with a minimum $10M capital investment within 36 months.
  • Headquarters and Call Centers – computers; networks; software or peripheral computer devices purchased in making required capital investment for job tax credit.

 

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These incentives are offered to both existing companies and those considering locating new operations in the State of Tennessee. Application for these incentives should occur before any property for the project is leased or bought in the county.

Workforce Investment Network (WIN) 

Incumbent Worker Training (IWT)

The Incumbent Worker Training (IWT) program is co-administered by WIN and the Tennessee Department of Labor and Workforce Development (TDOLWD). This program focuses on upgrading the skills of existing full-time employees so that employers can remain competitive and the State of Tennessee can continue to retain viable, progressive businesses. All IWT applications are reviewed by the WIN IWT Board Committee and are rated based upon objective criteria. Maximum award is $50,000 per grant, with a total funding limit of $50,000 per employer in consecutive program years. A 10-50% employer match is required based on the number of full time employed.

On-the-Job Training (OJT)

WIN contracts with businesses in the public, private non-profit, and private sectors to provide On-the-Job Training (OJT) to eligible WIN participants. Depending upon the details of the agreement, businesses may be reimbursed up to 50 -75% of the trainee’s wage during the training period up to a maximum of $50,000. The amount of each OJT contract varies, depending on the number of eligible employees being trained, the wages of those employees, and the length of the training period (based on funds available).

 

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Local Incentives: Memphis/Shelby County

Powered by partnership, EDGE and other regional partners provide incentives, finance vehicles and small business development programs that will help your business grow.


A PILOT is a temporary, partial abatement of future real and/or personal property taxes that an applicant would otherwise have paid.  In return, the applicant commits and contracts with local minority/women owned firms and small businesses to create or retain jobs with specified payroll and benefits; make the agreed upon investment; and contract with local minority/women/small firms.  EDGE offers several PILOT programs designed for firms looking to expand or relocate in Memphis and Shelby County.

For more information on EDGE PILOT programs, please visit the PILOT page or visit the EDGE Resource Library.

Tax Increment Financing (TIF)

TIF reinvests part of the increase in real and personal property taxes paid on a single property or defined area to offset project related costs.  TIFs can fund public improvements and public infrastructure.  With state approval, TIFs can also help finance private-owned facilities.

Foreign Trade Zone FTZ-77

Foreign Trade Zones allow companies importing products or parts from other countries to delay, and in some cases, reduce or even eliminate the customers duties (taxes) that would otherwise be owed.  Firms may also benefit from reduced administrative costs.  FTZ-77 covers all of Shelby County.  EDGE is the Zone Administrator.

Sales Tax Reduction on Utilities

Electricity and natural gas are normally taxed at the rate of 7.0%; water is taxed at the combined rate of 9.25%. However, manufacturers may be granted a reduced rate of 1.5% for industrial machinery or a full exemption if the energy fuel or water comes in contact with the product.

General Manufacturing Credit

The General Manufacturing Credit offers power cost savings to qualifying manufacturers to help retain manufacturing load in the Tennessee Valley. The credits are applied to the electric portion of the utility bill and are subject to eligibility requirements.

The Investment Credit

The Investment Credit is an economic development incentive jointly offered by TVA and participating distributors of TVA power. Investment Credit awards are paid as monthly power bill credits to qualifying companies that make a five-year or ten-year commitment to several economic and power system categories. To receive an Investment Credit award, an eligible company must submit a certified Investment Credit Award Application. Investment Credit awards may be adjusted according to the company’s performance.

Performance Grant

Through the Performance Grant, TVA makes direct cash investments in major economic development projects in the Tennessee Valley. Funding is paid directly to the company and it may be used in a variety of ways including public or private infrastructure development, the purchase of fixed assets, energy efficiency or other purposes.

Learn how our region can assist in your next strategic investment project.

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