Tri-Cities Local
Tax guidance specific to Johnson City, Kingsport, and Erwin residents
2 questions answered in this category
What tax considerations are unique to Tri-Cities, Tennessee residents?
Tennessee has no state income tax, making it favorable for retirees and remote workers. Local sales tax rates are among the highest nationally (around 9.75%). Property taxes are relatively low compared to neighboring states. For business owners, Tennessee's franchise and excise taxes apply to certain entities. Tri-Cities residents near the Virginia border should understand multi-state implications if working across state lines.
How does Tennessee tax small businesses?
Tennessee imposes a franchise tax (0.25% of net worth, minimum $100) and excise tax (6.5% of net earnings) on most business entities. Sole proprietors are exempt, but single-member LLCs owned by individuals are subject to franchise and excise tax even though they are disregarded federally. S-Corps pass through income to shareholders who then report on their individual returns. Understanding these taxes is crucial when choosing your business structure.