Generally, if you conduct business within any county and/or incorporated municipality in Tennessee, then you should register for and remit business tax. Business tax consists of two separate taxes: the state business tax and the city business tax.
With a few exceptions, all businesses that sell goods or services must pay the state business tax. This includes businesses with a physical location in the state as well as out-of-state businesses performing certain activities in the state. If you are an out-of-state business, you must pay the state business tax if you have substantial nexus (see the Tennessee Business Tax Manual) and you:
- sell a service that is delivered to a location in Tennessee,
- lease items in Tennessee,
- sell items that are shipped or delivered to a location in Tennessee, or
- make sales as a natural gas marketer to customers located in Tennessee through the presence of your property in Tennessee, through the holding of pipeline capacity on pipelines located in Tennessee, or by using someone located in Tennessee acting on your behalf.
Additionally, if you have a business location in a city that has enacted the business tax, then you are required to pay the city business tax as well. Click here for a comprehensive list of cities that have enacted business tax.
Note that if your business location is not included on the list, it does not necessarily mean you are not subject to the city business tax. There are many areas in Tennessee that are governed by and part of an adjoining incorporated city.
If you decide to close your business, you must file a final business tax return with the Department of Revenue within 15 days of closing and pay any tax that is due (minimum of $22). Businesses holding minimal activity licenses that do not file tax returns should notify local city and county officials or the Department of Revenue that the business is closed.