Tennessee’s incentives for companies expanding within the state or relocating to the state include a combination of tax credits, job training reimbursement grants and public infrastructure development around a project site. The amount and duration of the incentives depends on the type of company, number of jobs created and the amount of capital invested. Below are some frequently asked questions regarding Tennessee tax incentives.
What are Tennessee’s tax credits for expanding or relocating businesses?
Tax credits include:
- Standard Job Tax Credit — A tax credit of $4,500 per job that can be used to offset a company’s franchise and excise tax liability.
- Enhanced Job Tax Credit — A tax credit that of $4,500 per job that is in addition to the Standard Job Tax Credit for companies that locate or expand in Tennessee counties designated as Tier 2 or Tier 3 Enhancement Counties, which are those with greater economic distress.
- Super Job Tax Credit — A $5,000 per job tax credit for either (a) companies making a capital investment of $100 million or more and creating a minimum of 100 new jobs paying at least 100% of Tennessee’s average occupational wage or (b) companies establishing or expanding a regional, national or international headquarters with a capital investment of $10 million or more and creating 100 HQ jobs paying at least 150% of Tennessee’s average occupational wage.
- Industrial Machinery Tax Credit — A tax credit of 1% - 10% for the purchase, third-party installation and repair of qualified industrial machinery.
What are incentives based on?
The amount of the incentives is based on:
- Number of new jobs created
- Amount of capital invested
- Type of business
Can any type of company qualify for the incentives?
No. Tennessee’s incentives are limited to the following types of companies:
- Headquarters — Administrative, research and development, planning, marketing, personnel, legal not manufacturing, distribution, wholesaling or call centers.
- Manufacturing — Principle business is fabricating or processing of tangible property for resale.
- Data Centers — Building or buildings, either newly constructed or remodeled, housing high-tech computer systems and related equipment.
- Warehousing and Distribution — Storage or distribution of finished tangible personal property. Does not include a location where tangible personal property is processed, manufactured, sold to customers or assembled.
- Call Centers — Uses telecommunications in customer service, soliciting sales, reactivating accounts, surveys or research, fundraising, collecting receivables, reservations, taking or receiving orders.
Does TNECD administer tax incentives?
No. Tax credits and exemptions are handled by the Tennessee Department of Revenue. FastTrack reimbursable grants are administered by TNECD and the Tennessee Department of Labor and Work Force Development manages the applicant recruitment and screening services.
What are Tennessee’s sales and use tax exemptions?
The exemptions include:
- State sales tax exemption for industrial machinery and reduced state sales tax rate for utilities at qualified manufacturing facilities.
- Reduced state sales tax rate for qualified personal property purchased for a qualified headquarters facility.
- State sales tax exemption for certain equipment purchased for a qualified warehouse or distribution center.
- Tax exemption on any sales of interstate telecommunication and international telecommunication services to a business for use in the operation of one or more qualified call centers.
- State sales tax exemption for certain hardware and software purchased for a qualified data center.
What are the basic business taxes in Tennessee?
- Franchise Tax 0.25% — Greater of the company’s net worth or book value of its real or tangible property owned or used in Tennessee.
- Excise Tax 6.5% — An apportionment formula based on the proportion of the company’s payroll, sales and property in Tennessee, with the sales proportion double-weighted.
- Sales and Use Tax — 7% at the state level plus 1.5% to 2.75% at the local level. Applied to tangible personal property purchased or used within the state.
Why isn’t taxpayer information available for companies receiving tax incentives?
Taxpayer confidentiality provisions in Tenn. Code Ann. § 67-1-1702 state that all returns, tax information and tax administration information is confidential. In addition, except as authorized in the law, no officer or employee of the state or any other person who has access to such information can disclose any tax information obtained as a result of performance of the officer or employee’s duties or obtained by any other means.