Starting a Business in Tennessee
Tennessee is known for the famous music history of Nashville and Graceland. It is also a great place for a startup company as well as for companies who would like to relocate there. This is due to an extremely favorable low tax environment, a very affordable cost of living as well as access to a moderately priced labor pool. Major industries include Agriculture, Energy Production, Auto Manufacturing, Film Production, Health Care, and Manufacturing. After starting a business in Tennessee you can look at the various programs that are offered. There are tax credits, business tax incentives, business grants and Sales Tax Exemptions available.
STEPS TO STARTING A BUSINESS IN TENNESSEEThe Tennessee Department of Revenue is responsible for tax regulation and procedures related to filing sales tax returns. The Tennessee Secretary of State helps assist with business formations. After forming a company with the Tennessee Secretary of State, you can do other things that will prepare your business to operate legally. One of these administrative jobs is to be able to collect sales tax. In order to do this you would need to apply online for a Tennessee Sales Tax License. Once you have the tax license you would be able to issue resale certificates. These would exempt you from paying sales tax on items that you will purchase for resale. Another important job that will need to be done to meet compliance standards would be to seek out the correct Business Licenses for your operations. Having accurate numbers is important if you are trying to pinpoint a Tennessee sales tax rate. Tennessee is one of the states that if you are considered a remote seller, you will be required to register for SST multi-jurisdictional sales tax. Below are some of the more favorable programs available to help you expand your Tennessee business:
- The Tennessee Small Business Loan Program offers financing to start-up companies who just recently started operations. The goal of the program is to expand company growth, including providing quality jobs and capital enhancement. Loan amounts can vary from $10,000 -$2.9 million for up to 20 years.
- Tennessee Sales Tax Exemptions are given in many forms to institutions in order to compensate them for productive efforts. An exemption can be taken against R & D equipment used in operations. Another incentive is the manufacturing exemption which is a partial exemption of Sales and Use Tax. Equipment and machinery, along with their components, that is used in service operations is exempt, as well as energy expenditures related to the equipment.
- The Tennessee Data Center Tax Exemption gives Sales and Use Tax Abatements to a data center business that invests up to $250 million. Sales Tax Exemptions can be taken against data center equipment as well as the power costs to run it in daily operations. Telephone call centers are also eligible for exemptions on any telecommunication services that they use in the operations of the centers.
- The Tennessee Headquarters Tax Credit provides a state tax credit to businesses in order to update or expand their headquarters facility in the state. The goal is to bring the majority of the company’s human capital in to the state. The credit is taken against the company’s state sales and use tax obligation with the exception of sales tax on TPP.
- Tennessee has a workforce expansion incentive known as the Jobs Tax Credit. This program offers tax credits against corporate income tax. A qualifying business plan must be made and once this is done the investment time frame can begin. Qualified vehicles are categorized as compliant software as well as tangible and real property. The program is broken down into 3 tiers.
- Tier 1: A business must provide at least 25 qualifying jobs and make a minimum capital investment of at least $500,000 within 1 year of the completion of the business plan. All rural areas in New Mexico excluding tier 2 areas. The maximum tax credit allowed per qualifying job in this category is $4500 per job. The credit can be taken against half of the franchise and excise tax burden per year and can be carried forward for 15 years.
- Tier 2, 3, and 4: Locations that are outside the boundaries of metro areas qualify for extended periods. For tier 2, the maximum tax credit allowed per qualifying job is $4500 per job for up to 3 years. Tier 3 or 4 areas get a credit of $4500 per job for up to 5 years.