Focus on Tennessee

This month, we travel to the south to Tennessee, the Volunteer State. Popular culture finds several well-known attractions in the state. Nashville is the country music capital of the world, and is home to the Grand Ole Opry. Memphis, in the far southwest portion of the state, is home to Elvis Presley’s Graceland and the blues clubs of Beale Street. Sun Records resides in Memphis, which is where Elvis Presley, Johnny Cash, Roy Orbison, Carl Perkins and Jerry Lee Lewis began their recording careers. The state also has an agricultural and business climate that many companies find very attractive.

Business Climate

Ranked among the top 10 destinations in the U.S., domestic and international tourism play a major role in the state’s economy. Tourists are flocking to the very popular Great Smokey Mountains National Park (the most visited state park in the U.S.), Graceland, the Ryman Auditorium, the Gaylord Opryland Resort, Lookout Mountain and the Tennessee Aquarium. With these attractions and others, tourism accounted for $17.7 billion of the state’s economy in 2014.

Other major industries include agriculture and manufacturing. 59% of the 82,000 farms supply cattle while soybeans are the major cash crop of the western portion of the state. Industrially, FedEx, AutoZone, International Paper and Volkswagen are some of the major corporations headquartered in Tennessee.

With its well-known low cost of living, Tennessee ranks ninth among states where people retire. In 2014, 3,368 people over the age of 60 migrated to Tennessee.

Tax Climate

Tennessee has a tax climate that is favorable to both your employees and your company.

For your employees, there is no income tax on W-2 earnings. However, most passive income from stocks, bonds and notes is taxable at a 6% rate. This is the 19^th highest among states that levy an individual income tax. Sales and use taxes, at a 7% rate, are applied to most items except food staples that are taxed at 5.25%. Non-staples, like candy, dietary supplements and prepared food are taxed at the full 7% rate. Other individual taxes include gasoline tax at 21.4 cents per gallon (39^th highest in U.S.) and a cigarette tax at 62 cents (40^th highest).

Ranking 9^th lowest nationally, Tennessee’s state and local governments collected $799 per person in property taxes in 2012.

Tax Credits & Incentives

For your business, Tennessee has a favorable corporate income flat rate tax of 6.5%, the 24^th highest among states that levy a corporate income tax. To further encourage companies to relocate to, or expand in, Tennessee offers an attractive package of incentives. These incentives are based on the number of new jobs that are created, the amount of capital invested and the type of business.

To encourage your business to relocate to Tennessee, the state offers:

Job Tax Credit: A credit of $4,500 per job to offset up to 50% of the franchise and excise (F&E) taxes in any given year with a carry forward for up to 15 years. A requirement of this credit is that the company must create at least 25 new full-time jobs within a 36 month period and invest at least $500,000 in a qualified business enterprise.

Enhanced Job Tax Credit: For areas of the state that are economically depressed, a more generous credit is offered. A company may receive a credit of up to $4,500 on top of the standard job tax credit. This can offset up to 100% of the F&E liability however these do not have any carry forwards. The same requirement as above applies here in that the company must create at least 25 new full-time jobs within a 36 month period and invest at least $500,000 in a qualified business enterprise.

Super Job Tax Credit: A $5,000 per job tax credit is given for either:

1. a) companies making a capital investment of $100 million or more and creating a minimum of 100 new jobs paying at least 100% of the state’s occupational wage or
2. b) companies establishing or expanding a regional, national or international headquarters with a capital investment of $10 million or more and creating 100 headquarter jobs paying at least 150% of the state’s occupational wage.

Industrial Machinery Tax Credit: Industrial Machinery Tax Credit- A tax credit of 1% to 10% is offered for the purchase, third party installation and repair of qualified machinery. This credit includes manufacturing, warehousing and distribution and headquarters and call centers.

Random Facts

• When the constitutional convention met in 1796 to organize a new state out of the Southwest Territory, it adopted “Tennessee” as the name of the state.
• Tennessee is nicknamed the volunteer state, which came about after the War of 1812 due to the prominent role of volunteers supplied by the state in the war effort.
• Tennessee is bordered by eight states and one river.
• Tennessee is home to over 10,000 caves, which is the most in the United States.
• Tennessee leads the nation in the percentage of total tornadoes with fatalities.
• There are 54 state parks in the state.
• The Gulf of Mexico is the main driving force in determining the climate of the state.
• The state flag has three stars representing the three grand divisions of the state: West, Middle and East Tennessee.
• The official state fruit is the tomato. As of 2003, it was the largest fruit crop in Tennessee.