Does Tennessee have a state income tax? No

Tennessee does not tax wages or salaries, and since 2021 it has not taxed interest or dividends either. The Department of Revenue says the Hall income tax was repealed for tax periods that begin on January 1, 2021, or later, and asks people not to file a return for any of those years. On its list of taxes, the Department now files the Hall tax under archived taxes, and no other income tax appears.

The constitution has ruled out a wage tax since 2014. An amendment approved on the November 4, 2014 ballot added a sentence to Article II, Section 28. It says the Legislature “shall not levy, authorize or otherwise permit” a state or local tax “upon payroll or earned personal income,” or one measured by payroll or earned personal income. Taxes already in effect on January 1, 2011, and changes to their rates, are left outside the ban.

The ban is on taxing payroll and earned income. The same section still gives the Legislature power to tax income derived from stocks and bonds that are not taxed ad valorem, which is what the Hall tax did. The Hall tax ended because the General Assembly phased it out by law, cutting the rate a point a year from 2017 under the IMPROVE Act.

The Hall income tax was enacted in 1929 and was imposed only on interest from bonds and notes and dividends from stock. The Department’s manual says it did not apply to earned income such as salaries, wages and commissions. Distributions from IRAs and other retirement accounts, and capital gains from selling stock or real estate, were not taxed by it, though capital gain distributions from mutual funds were.

The rate came down by a point a year: 4% for tax years beginning in 2017, 3% for 2018, 2% for 2019 and 1% for 2020. For tax years beginning on or after January 1, 2021, there is no Hall tax and no Hall return.

The repeal covers only those later years. If you are catching up on 2020 or an earlier year, that year’s rules apply, and the Department’s forms page still carries a return kit for each tax year from 2000 through 2020. Its 2022 Hall manual says a person domiciled in Tennessee had to file when taxable interest and dividends were more than $1,250, or $2,500 on a joint return.

Living in Tennessee changes nothing on your federal return. You still file Form 1040 when the IRS rules require one, which depends on your income, filing status and age, or on things like self-employment earnings.

A move into or out of Tennessee creates no Tennessee income tax return, but it can create one in the other state. If the state you left has an income tax, its own part-year resident rules decide whether you file there and what you report.

Those rules can reach past the move date. A state can tax a part-year resident on income received while living there, and a nonresident on income from sources inside it, such as wages from a job there or rent from property there. The same question comes up when a Tennessee resident works in, or owns rental property in, a state with an income tax.

For 2026, Tennessee’s general state sales tax rate is 7%. It applies to most goods and taxable services. Every county, and some cities, add a local rate of 1.5% to 2.75%, the most the law allows, so an item taxed at the general rate carries at most 9.75% in state and local sales tax. Use tax applies at the same rates when you buy something taxable without paying Tennessee sales tax, for example from an out-of-state seller that is not required to register in Tennessee.

In 2026, food and food ingredients are taxed at a reduced state rate of 4%, plus the local rate. Prepared food, candy, dietary supplements, alcoholic beverages and tobacco are not food for this purpose, so they carry the full 7%. Local tax on food can be lower in some places: a city whose rate is above its county’s may cut or drop that extra rate on food, and from October 1, 2026, a county with a metropolitan government may cut or remove its local rate on food.

Costly single items get a special rule. In most places, the local rate applies only to the first $1,600 of the price of any one item. On top of the 7%, a state single article tax of 2.75% applies to the part of the price between $1,600 and $3,200. In the Department’s August 2026 manual, a $14,000 generator bought in Nashville, at a 2.25% local rate, carries $980 of general state tax, $44 of state single article tax and $36 of local tax: $1,060 in all.

Tennessee taxes businesses that give their owners limited liability, and it taxes them at the entity level. Corporations, including S corporations, are taxed, and so are LLCs, limited partnerships, registered limited liability partnerships and business trusts that are formed, registered or doing business in Tennessee. They file one return, Form FAE170, for two taxes: the excise tax on net earnings and the franchise tax on net worth. The Department’s manual calls Tennessee unique in taxing pass-through entities directly instead of taxing their owners.

Sole proprietors and general partnerships pay neither tax, because their owners have no limited liability. A single-member LLC is different: even when the IRS disregards it, Tennessee treats it as a separate taxpayer unless its single member is a corporation. Some entities can claim an exemption by filing form FAE 183 and renewing it every year, among them family-owned entities that mostly earn passive investment income or farm (FONCE) and LLCs or LPs whose members are fully liable for the entity’s debts (OME).

For tax years ending in 2026, the minimum franchise tax is $100. It is owed every year by an entity registered with the Secretary of State, whether the entity is active or not. Estimated payments are required when the combined tax is $5,000 or more for both the prior year and the current year. The return is due the 15th day of the fourth month after the tax year ends, which is April 15 for a calendar year, and the Department grants a seven-month extension if you request it and pay enough of the tax by the original due date.

Until 2024 the franchise tax had a second measure: it was figured on the greater of net worth or the book value of real and tangible property owned or used in Tennessee, reported on Schedule G. Public Chapter 950, signed on May 10, 2024, removed that property measure for tax years ending on or after January 1, 2024, so the franchise tax is now figured on net worth alone.

The same law opened a limited refund window for franchise tax paid on the property measure, for tax years ending on or after March 31, 2020, on returns filed on or after January 1, 2021. A claim needed an amended return and a special claim form, filed by December 2, 2024; the law’s deadline, November 30, fell on a Saturday. Taxpayers based in 14 counties declared federal disaster areas had until May 1, 2025. The Department says no refund was or could be paid if either step was missed, and the law gave it no power to extend the deadline.

Older years keep the old rule. A return for a tax year ending on or before December 31, 2023, including one filed late, still uses the greater of net worth or the property measure, and so does an audit or a voluntary disclosure agreement covering those years.

The professional privilege tax is a flat $400 a year, due June 1, on a Tennessee license or registration as an attorney, securities agent, broker-dealer, investment adviser or lobbyist. Someone in more than one of these professions pays it once. The 2026 tax was due June 1, 2026, and the next is due June 1, 2027.

The list used to be far longer. A 2019 law, Public Chapter 478, ended the tax for most professions starting with the tax year that began June 1, 2020, among them accountants, architects, dentists, engineers, pharmacists and real estate principal brokers. A 2022 law, Public Chapter 1083, then ended it for physicians and osteopathic physicians for taxes due after May 31, 2023.

The tax follows an active license or registration. The Department’s 2022 guide says a license made inactive on or before June 1 is not liable for that year, and that for securities agents, investment advisers and broker-dealers the tax is based on the registration of an individual, a business or both. Returns are filed and paid online through the Department’s TNTAP system, unless you have a hardship exception or are 65 or older, and a firm can pay for several employees in one bulk filing.

Tennessee’s business tax is separate from franchise and excise tax, and it is figured on gross sales, not profit. It has a state part and, where the city has adopted one, a city part. Generally, a business making sales in a Tennessee county or city that grosses $100,000 or more registers for it and files a return; that threshold rose from $10,000 for tax years ending on or after December 31, 2023. Below it, a business with more than $3,000 in gross sales gets a minimal activity license from the county, and from the city where the city tax applies, for each location.

It is not limited to LLCs and corporations. The tax applies to a “person” doing business, a term defined to include individuals, so a sole proprietor with enough sales can owe it. In 2026, rates depend on the business’s classification and on whether it sells at retail or wholesale, and every taxpayer pays at least $22. The return is due the 15th day of the fourth month after the tax year ends, which is April 15 for a calendar year.