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 What does it mean by engaged in taxable activity in Tennessee? Can I be subject to business tax in Tennessee, even if I don’t have a “bright-line presence” in Tennessee? How is substantial nexus defined for business tax purposes? I am an out-of-state business with no business locations in Tennessee. Do I owe business tax? May a taxpayer have substantial nexus in the state if it does not meet the bright–line presence standards?