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 any of the following:
- The entity is organized or commercially domiciled in Tennessee
- The entity owns or uses its capital in Tennessee
- The entity has systematic and continuous business activity in Tennessee that that produces receipts from customers in Tennessee
- The entity has a bright-line presence in Tennessee
An entity has a bright-line presence in Tennessee if:
- Its Tennessee receipts exceed the lesser of $500,000 or 25% of its total everywhere receipts;
- 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
- 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.
Reference: Tenn. Code Ann. § 67-4-702(a)(22).