Excise Taxes

The Tax - Tennessee levies this tax on the net earnings of businesses (foreign or domestic) doing business in state OR Tennessee's portion of total earnings of interstate business.

Tax Rate - Excise tax: 6.5% 

Tax Incentives and Exemptions - Receive excise tax credit equal to 1 % of:

• The purchase, installation and/or repair of qualified industrial machinery.
• The purchase of telephone equipment and telephone units, computers, software and any peripheral devices purchased to reach the required capital investment to qualify for the Jobs Tax Credit.
• Total tax credit for one year cannot exceed 50% of the company's tax liability. Companies can carry over excess credit for 15 years.
• Warehouse and distribution, which qualify for the Sales and Use tax exemption, can apply for the 1 % excise tax credit.
• Net operative loss may carry forward 15 years.
• All capital losses may be claimed the year they are incurred.
• All taxes are deductible in determining the state excise tax base.
• Insurance companies may deduct gross premium taxes from the sum of franchise and excise taxes.

Jobs Tax Credit - This tax credit has been expanded to apply to the excise tax, as well as to the franchise tax.

Tax credit of $2000 ($3000 in special enhancement counties - formerly economically distressed counties) per new full-time employee:

• In eligible businesses that create a minimum of 25 new jobs and capital investment of $500,000.
• For new jobs in the future resulting in a net increase in jobs.

Application of franchise and excise credits beginning with fiscal years on or after July 1, 1999 are as follows:

% of Franchise/Excise Tax Liability Offset Allowed

33-1/%
50%
75%
100%

Total Full Time Company Employment in Tennessee at Fiscal Year End


Less than 1,000
1,001 or more but less than 3,000
3,001 or more but less than 5,000
5,001 or more 

Credits created before the 1999 revision are used under the old method.