How does Tennessee’s tax code compare? Tennessee does not have an individual income tax. Tennessee has a 6.5 percent corporate income tax rate and levies a state gross receipts tax. Tennessee also has a 7.00 percent state sales tax rate and an average combined state and local sales tax rate of 9.55 percent. Tennessee has a 0.48 percent effective property tax rate on owner-occupied housing value.
Tennessee does not have an estate tax or inheritance tax. Tennessee has a 27.4 cents per gallon gas tax rate and a $0.62 cigarette excise tax rate. The State of Tennessee collects $4,236 in state and local tax collections per capita. Tennessee has $7,418 in state and local debt per capita and has a 105 percent funded ratio of public pension plans. Tennessee’s tax system ranks 8th overall on the 2025 State Tax Competitiveness Index.
Each state’s tax code is a multifaceted system with many moving parts, and Tennessee is no exception. The first step towards understanding Tennessee’s tax code is knowing the basics. How does Tennessee collect tax revenue? Click the tabs below to learn more! You can also explore our state tax maps, which are compiled from our annual publication, Facts & Figures 2024: How Does Your State Compare?
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The State Tax Competitiveness Index enables policymakers, taxpayers, and business leaders to gauge how their states’ tax systems compare. While there are many ways to show how much state governments collect in taxes, the Index evaluates how well states structure their tax systems and provides a road map for improvement.
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Facts & Figures serves as a one-stop state tax data resource that compares all 50 states on over 40 measures of tax rates, collections, burdens, and more.
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Tax burdens rose across the country as pandemic-era economic changes caused taxable income, activities, and property values to rise faster than net national product. Tax burdens in 2020, 2021, and 2022 are all higher than in any other year since 1978.
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Individual income taxes are a major source of state government revenue, accounting for more than a third of state tax collections. How do income taxes compare in your state?
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Graduated corporate rates are inequitable—that is, the size of a corporation bears no necessary relation to the income levels of the owners.
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Retail sales taxes are an essential part of most states’ revenue toolkits, responsible for 32 percent of state tax collections and 13 percent of local tax collections (24 percent of combined collections).
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It is important to understand how the SALT deduction’s benefits have changed since the SALT cap was put into place in 2018 before repealing the cap or making the deduction more generous. Doing so would disproportionately benefit higher earners, making the tax code more regressive.
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Neither Anchorage, Alaska, nor Portland, Oregon, impose any state or local sales taxes. Honolulu, Hawaii, has a low rate of 4.5 percent and several other major cities, including Milwaukee and Madison, Wisconsin, keep overall rates modest.
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Although state budgets may be in unusual places this year, sales tax holidays remain the same as they always have been—ineffective and inefficient.
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