F&E Apportionment-5 - Manufacturers May Elect to Apportion Using a Single Sales Factor

For tax years beginning on or after January 1, 2017, manufacturers were able to elect to apportion net earnings and net worth to Tennessee based on a single sales factor.   A taxpayer is considered a manufacturer if more than 50 percent of its revenue from its activities in this state, excluding passive income, is from fabricating or processing tangible personal property for resale and consumption off the premises.  

The Tennessee Works Tax Act transitions Tennessee to a mandatory single sales factor state over a three-year period beginning with tax years ending on or after December 31, 2023. Manufacturers that are already electing to apportion using a single sales factor will continue to use that formula during the entire three-year phase-in period. These manufacturers will not be subject to the variable weighting of the sales factor during the three-year phase-in. Please see F&E Apportionment – 9 for more information.

All manufacturers will apportion using single sales factor for tax years ending on or after December 31, 2025. Manufacturers will no longer need to make an election after this date.

See Important Notice 23-11 and the Department’s Franchise and Excise Tax Manual for more information.

Note: This article was updated on May 16, 2023, as a result of a law change. The previous version of F&E Apportionment-5 is available here.

Reference: Tenn. Code Ann. §§ 67-4-2012(l); 67-4-2111(l). Pub. Ch. 377 (2023).

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