Multi-state Income Taxes | Companies expanding into Tennessee

Fusion CPA recently expanded into new states bringing us firsthand experience and knowledge.

Doing business in Tennessee can be advantageous as the state offers numerous benefits that include good infrastructure, education, workforce development, and global business relations.  Tennessee is especially known for its large hub of small businesses and its strong optimal geography. The state has a favorable transportation presence, which means that any business operating from this state will find logistics for interstate business operations and multi-office businesses, a lot easier to operate in this state.

Tennessee Multi-State tax requirements is especially known for its large hub of small businesses and it's strong its optimal geography.

If you have recently expanded your business into this state, or if you’re considering doing so, understanding the cost of apportionment is important to help you accurately report earnings to the IRS and local governments. 

S Corporations

      • Filing Requirements
      • Generally, if you conduct business within any county and/or incorporated municipality in Tennessee, then you should register for and remit business tax.  The 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
      • Allocation and Apportionment
        • Triple Weighted Sales
        • Market-based rule
          • Tennessee follows the market-based rule in sourcing receipts from performance of services to the state. Receipts from sales of services are sourced to Tennessee to the extent that the service is delivered to a location in Tennessee. If the location where the service is delivered cannot be determined, it must be reasonably approximated. If reasonable approximation is not possible, the receipt is excluded from both the numerator and denominator of the receipts factor
  • Partnerships

    • Filing Requirements
        1. Partnerships are not among the business entities upon which Tennessee franchise, excise taxes are imposed.
        2. For many years, the Tennessee Department of Revenue has taken the position that a foreign corporate limited partner is not doing business in Tennessee so as to be subject to Tennessee corporate franchise, and excise taxes if its activities are limited as follows:
          • The corporate limited partner’s only business activity in Tennessee is the holding of a limited partnership interest in a partnership(s) with nexus in Tennessee; and
          • The corporate limited partner exercises no power, management, or control over the partnership(s) except such powers or capacities outlined in T.C.A. § 61-2-302 which limited partners may exercise without participating in the management or control of a partnership.
  • Employees & individual filers

    • Tennessee does not tax an individual’s earned income, so you are not required to file a Tennessee tax return. Since the Hall Tax in Tennessee has ended. Starting with Tax Year 2021 Tennessee will be among the states with no individual income.

Download our Multi-State Tax Filing Requirements Guide

Ensuring Accurate Tax Filing

Keeping a handle on these different laws and tax implications might be difficult for your staff members but can be accomplished by outsourcing a CPA. Allow an expert who deals with business structuring, accounting, and taxation regularly set up accounting software to factor in applicable tax laws for each US state.

Fusion CPA recently expanded into new states bringing us firsthand experience and knowledge. We have a team of certified public accountants who are highly skilled in handling multistate taxes. Our team of professionals understands the federal and state laws in various states and jurisdictions.


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This blog article is not intended to be the rendering of legal, accounting, tax advice, or other professional services. Articles are based on current or proposed tax rules at the time they are written and older posts are not updated for tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive.