Taxation If Tennessee is the principal location from which the business or trade of a company is managed or directed, then it is considered a 'tax resident' and can be subject to Franchise and Excise tax under TCA 67-4-2004(5); 2101; and 2001.
Franchisetax is calculated by determining the greater of: 1) The apportioned Tennessee net worth of the business (based up the 3-factor apportionment formulae found in the Uniform Division of Income for Tax Purposes Act and the Multistate Tax Commission regulations on apportionment and allocation); OR 2) The book value of a company's combined tangible personal property and real property.
Currently the franchise rate is assessed at 0.25%, or $2.50 for every thousand dollars.
Excise tax is calculated at 6.5% of the apportioned Tennessee net earnings under TCA 67-4-2001.
Other taxes apply to dividends received from foreign companies, which are calculated at a 6% rate to both individuals and businesses. Businesses, however, receive a credit of tax paid against their franchise and excise tax, to the extent it otherwise affects their net earnings or worth.
There are no taxes owing in Tennessee on either dividend or interest payments tendered to foreign shareholders; nor are state taxes assessed against import or export activities. Royalties paid from copyrights, trademarks, and patents are similarly tax-free for state purposes but must be reported on the company's franchise and excise tax return.