Is it necessary to have a physical presence in Tennessee in order to be subject to business tax? No. An out-of-state business will be subject to Tennessee business tax if the business is engaged in taxable activity in Tennessee and has substantial nexus in Tennessee. April 29, 2019 18:04 Related articles Can I be subject to business tax in Tennessee, even if I don’t have a “bright-line presence” in Tennessee? What does it mean by engaged in taxable activity in Tennessee? How is substantial nexus defined for business tax purposes? Are computer software consulting services subject to sales and use tax? I am an out-of-state business with no business locations in Tennessee. Do I owe business tax?