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Business Tax Transition FAQs

1. When will business tax returns be due? How will a business transition to its new filing schedule?

Business tax returns will be due the 15th day of the fourth month after the business' fiscal year end. For example, a taxpayer with a fiscal year ending September 30, 2013, will file its business tax return by January 15, 2014. Likewise, a business with a December 31, 2013, fiscal year end will file its business tax return by April 15, 2014.

During the transition from the current filing schedule to the new filing schedule, some taxpayers will be filing for a tax period that's either longer or shorter than 12 months. Any taxpayer who owes the minimum tax will prorate the tax for any period other than 12 months.

See this chart to see a list of business' fiscal year end dates along with their corresponding tax filing dates.

2. How will taxpayers know about changes to the business tax law and how it affects their business tax filing?

In early December, the Department will begin mailing letters to taxpayers, starting with businesses with fiscal year ends in September, October or November.

The letter will provide each business with the opportunity to review the accuracy of the tax information the Department has on file, and it will advise the business when the tax returns are due and for what period. The letter will also explain how to compute the personal property tax credit, and it will also tell the taxpayer the period for which the business needs to report all gross receipts.

You can find a chart of how to compute the personal property tax credit here.

3. When does a business need a minimal activity business license?

Businesses with between $3,000 and $10,000 in gross receipts during the tax year must obtain a minimal activity license annually for $15 from the local county and/or municipal clerk. Businesses with less than $3,000 in gross receipts per year may pay the $15 fee and get a minimal activity business license if they would like to, but it is not required.

For example, a business with $5,000 in gross receipts located in Murfreesboro, which is in Rutherford County, would have to obtain a minimal activity business license both from the city as well as the county. Alternatively, the taxpayer could pay for and print the minimal activity business license online, using the Department of Revenue's website.

4. Are there any changes to know about for the business license in 2014?

Yes. Starting in 2014, all businesses licenses will expire 30 days after the due date of the tax return for the current period. For example, if a business' tax period ends on December 31, the due date for the return and payment is April 15th of the following year, and the business' current license expires on May 15th of the following year.

5. How is the business tax now more uniform across the state's 95 counties?

Clay, Claiborne and Morgan counties will now have a business tax (these three counties previously did not impose the tax), and Hardin, McNairy and Lauderdale counties will go to the standard state rate (previously, these counties imposed business tax at a reduced rate).

6. What other changes were made by the new law, the Uniformity and Small Business Relief Act of 2013, that relate to the business tax?

  • The business tax rate for gasoline and diesel fuel wholesalers is lowered to 0.0003125 from 0.000375 (new classification - 1E), as of January 1, 2014.
  • The law codifies business tax Rule 28, which says that when a business located in one county and/or city extends its operations into another county and/or city without establishing a business location, then tax on the total receipts from all taxable sales will be due to the county and/or city where the business is located. For example, a repair business with an office in Brentwood, which is located in Williamson County, performs services in Brentwood as well as the surrounding counties. However, the business only has an office in Brentwood. All of the business' taxable sales should be sourced to Brentwood and Williamson County.
  • There was no change in the statute regarding contractors who receive more than $50,000 in gross income from projects in another city and/or county. The contractor is still required to obtain business licenses in those jurisdictions and file returns based on their gross income. For instance, a contractor based in Nashville that receives $75,000 in gross income from a building project in Murfreesboro would need Murfreesboro and Rutherford County business licenses. That contractor must file and pay taxes to the Department of Revenue based on gross income received in that location. Both a city and state business tax return would be required in this situation because the location is inside a city that has a business tax ordinance.
  • The law lists the types of in-state activities performed by out-of-state businesses that will subject them to the business tax. These include:
    • Performing services in Tennessee.
    • Leasing tangible personal property located in Tennessee.
    • Delivering tangible personal property in Tennessee, if the seller uses his own vehicle.
    • Purchasing and selling tangible personal property in Tennessee by an employee, agent or independent contractor of the seller.