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. Physical presence is not a necessary requirement for a taxpayer to be subject to business tax.
Out-of-state businesses must pay the state business tax if the businesses have substantial nexus and:
- Sell a service that is delivered to a location in Tennessee;
- Lease items in Tennessee;
- Sell items that are shipped or delivered to a location in Tennessee; or
- Make sales as a natural gas marketer to customers located in Tennessee through the presence of your property in Tennessee, through the holding of pipeline capacity on pipelines located in Tennessee, or by using someone located in Tennessee acting on your behalf.
Substantial nexus includes, but is not limited to, any of the following:
- The taxpayer is organized or commercially domiciled in Tennessee;
- The taxpayer owns or uses its capital in Tennessee;
- The taxpayer has a systematic and continuous business activity in this state that has produced gross receipts attributable to customers in Tennessee; or
- The taxpayer has a bright-line presence in Tennessee. A person has a bright-line presence in this state for a tax period if any of the following applies:
- TN Receipts: > $ 500,000 or 25% of total receipts
- TN Property: > $ 50,000 or 25% of total property
- TN Payroll: > $ 50,000 or 25% of total compensation paid
Reference: Tenn. Code Ann. § 67-4-702(a)(22).