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Who must pay business tax in Tennessee?

Now that Tax Day 2017 is officially in the rearview mirror, it's understandable if people want to take a bit of a break from this subject. After all, they might have had to race to complete their forms, race to their accountant's office and race to the post office to get their returns mailed on time.

While individuals can set aside tax concerns for weeks or even months at a time, business owners don't necessarily have this luxury. Indeed, they have to keep a close watch on their operations on a year-round basis to ensure that when Tax Day 2018 arrives they can claim the necessary deductions and remit the necessary taxes.

Indeed, it's important for prospective business owners here in Tennessee to understand not just what their tax obligations are at the federal level, but also what their obligations are at the state level.

What are a business owner's tax obligations at the state level?  

In general, those who conduct business within any county or incorporated municipality within the Volunteer State will need to register and pay business tax, meaning the state business tax and the city business tax.

Who's required to pay the state business tax?

The state business tax must be paid by all businesses that sell goods or services, including those entities with a physical in-state location, and those that are based out-of-state and perform certain activities here.  

Would types of activities would subject an out-of-state business to the state business tax?

An out-of-state business has to pay the state business tax if it does any of the following:

  • Sells items delivered/shipped to an in-state location
  • Sells services delivered to an in-state location
  • Leases items in the state

What about the city business tax?

Simply put, if a business owner has an operation in a city that has enacted the business tax, they must pay it. Most of the major cities have taken this step.

Does this mean multiple tax returns would need to be filed?

Yes, multiple tax returns would need to be filed if a business meets the above outlined criteria for the state business tax and city business tax.

If you have questions about this issue, business formation or other business law concerns, consider speaking with a skilled legal professional.

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