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Tennessee Tax Law

Figuring out what you have to pay taxes on and how much you have to pay out can be difficult when you have to consider both federal and Tennessee’s state taxes. You could either end up owing more than you planned for or paying too much. Perhaps you missed an opportunity to reduce your tax burden or increase your refund?

Whether you live in Nashville, Memphis or Knoxville, you’ll need to account for the various state and federal taxes in your budget, including everyday sales and gasoline taxes. It can be easy to get lost in all of the taxes you’ll owe, so use the information in LawInfo’s Tennessee tax law articles to become familiar with them and to avoid penalties.

Tennessee Hall Income Taxes

While it is not one of the seven states that don’t impose a personal income tax, Tennessee’s income tax isn’t imposed on typical income sources like wages and salaries. Rather, Tennessee’s Hall income tax is imposed on income from interest and dividends only.

The Hall income tax rate of five percent on stock dividends, promissory note interest and bond interest income. The tax applies to individuals and entities who receive income from these sources.

There is a general exemption on the first $1,250 of individual income returns and the first $2,500 of joint income returns. There are other exemptions for age and disability.

Tennessee Sales and Use Taxes

Any retail sales, rentals or leases on goods and services in Tennessee are levied by sales and use taxes. Tennessee’s sales and use tax rate is seven percent in 2017. Use taxes are levied on products, both tangible and digital, that are imported and used in Tennessee. For example, if you bought something online from a California retailer and had it shipped to Tennessee, you would pay the Tennessee use tax on the transaction.

Local governments may charge additional sales and use tax rates. Local tax rates can range from 1.5 to 2.75 percent. Tennessee also charges a single article sales tax rate of 2.75 percent for single items priced between $1,600 and $3,200.

Tennessee Property Taxes

Both residential and business property owners will need to pay property taxes on real and personal property in Tennessee. Real property consists of residential and business real estate, including land, buildings and permanent structures or fixtures. Personal property consists of any business property that isn’t real estate or permanently attached to real property. That includes gear, tools, machinery and furniture.

Property taxes are levied and collected by Tennessee counties only, so the tax rates can vary. Property tax rates are charged as dollars per $1,000 of the property’s assessed value.

Say that your Chattanooga office had an assessed value of $589,000 in 2016. The Hamilton-Chattanooga county area’s 2016 property tax rate is $5.0742. To calculate your property tax amount, you’d divide the tax rate by $1,000 to get 0.0050742, and then multiply that by your property’s value to get $2,988.70 as your tax amount.

Tennessee Sin Taxes

“Sin” taxes are levied on consumer products like alcohol and tobacco wherever these things are legalized. They act as additional sales taxes (a.k.a. excise taxes) for products or services that are culturally perceived as vices. Sin taxes are meant to dissuade consumers from purchasing or using the taxed products or services without making them illegal.

Tennessee’s sin taxes include:

  • $0.62/pack of 20 cigarettes.
  • 6 percent of the wholesale price on other tobacco products.
  • $35.60/barrel (31 gallons) of beer at the wholesale price.
  • $1.21/gallon of wine.
  • $4.40/gallon of distilled spirits.
  • $1.10/gallon of alcoholic beverages at five to seven percent alcoholic content.
  • 15 percent of the sales price of alcoholic beverages sold at restaurants, bars, etc. for on-premises consumption.
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