How is substantial nexus defined for business tax purposes?

Substantial nexus means that an entity has enough contact with the state, whether direct or indirect, for the state to require the payment of tax.  The law provides a non-exclusive list of ways an entity can have substantial nexus in Tennessee, including the following:

  1. The entity is organized or commercially domiciled in Tennessee
  2. The entity owns or uses its capital in Tennessee
  3. The entity has systematic and continuous business activity in Tennessee that that produces receipts from customers in Tennessee
  4. The entity has a bright-line presence in Tennessee

An entity has a bright-line presence in Tennessee if:

  1. Its Tennessee receipts exceed the lesser of $500,000 or 25% of its total everywhere receipts,
  2. The average value of its real and personal property in Tennessee exceeds the lesser of $50,000 or 25% of the average value of its total property everywhere, or
  3. The amount it pays for compensation in Tennessee exceeds the lesser of $50,000 or 25% of the total compensation it paid during the tax period.
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