Tennessee does not have an individual income tax on wages or salaries. Tennessee has a flat 6.50 percent corporate income tax rate (excise tax), a 7.00 percent state sales tax rate, and an average combined state and local sales tax rate of 9.61 percent. Tennessee has a 0.52 percent effective property tax rate on owner-occupied housing value. Tennessee does not have an estate tax or inheritance tax. Tennessee’s gas tax is 27.4 cents per gallon, and its cigarette excise tax is $0.62 per pack of 20 cigarettes.
Tennessee raises tax revenue primarily through general sales taxes (46.7 percent of total state and local tax revenue), other taxes (23.5 percent), and property taxes (20.8 percent). Tennessee collects $4,912 in state and local tax collections per capita, carries $5,883 in state and local debt per capita, and has a 115 percent funded ratio of public pension plans. Tennessee’s tax system ranks 8th overall on the 2026 State Tax Competitiveness Index.
Each state’s tax code is a multifaceted system with many moving parts, and Tennessee is no exception. Use the tabs below to compare Tennessee taxes with other states and to see how Tennessee raises tax revenue. You can also browse our tax maps, which are compiled from our annual publication, Facts & Figures 2026: 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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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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Retail sales taxes are an essential part of most states’ revenue toolkits, responsible for nearly a quarter of combined state and local tax collections.
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Forty-four states levy a corporate income tax, with top rates ranging from a 2 percent flat rate in North Carolina to an 11.5 percent top marginal rate in New Jersey. Four states—Georgia, Nebraska, North Carolina, and Pennsylvania—reduced their corporate income tax rates effective January 1, 2026.
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Property taxes are the primary tool for financing local governments. While no taxpayers in high-tax jurisdictions will be celebrating their yearly payments, property taxes are largely rooted in the benefit principle of taxation: the people paying the property tax bills are most often the ones benefiting from the services.
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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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States can better position themselves for success by moving away from economically-damaging taxes like the capital stock tax.
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Gross receipts taxes impose costs on consumers, workers, and shareholders alike. Shifting from these economically damaging taxes can thus be a part of states’ plans for improving their tax codes in an increasingly competitive tax landscape.
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A growing number of cities, in red states like Arkansas and Texas, blue states like California and New Jersey, and purple states like Georgia and Nevada, have pursued streaming taxes in recent years.
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With other states upping their game to attract ever-more-mobile people and businesses, lawmakers and the governor are not content to leave Tennessee’s business taxes in their current, uncompetitive form.
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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:
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While many factors influence business location and investment decisions, sales taxes are something within policymakers’ control that can have immediate impacts.
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At the end of 2022, prices were 14.6 percent higher than they were two years prior. That’s the fastest inflation rate over any two calendar years since the stagflation era of the late 1970s. State policymakers are understandably interested in bringing any tools at their disposal to bear on the problem. And many of them are reaching for tax policy solutions.
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New Jersey levies the highest top statutory corporate tax rate at 11.5 percent, followed by Minnesota (9.8 percent) and Illinois (9.50 percent). Alaska and Pennsylvania levy top statutory corporate tax rates of 9.40 percent and 8.99 percent, respectively.
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The pandemic has accelerated changes to the way we live and work, making it far easier for people to move—and they have. As states work to maintain their competitive advantage, they should pay attention to where people are moving, and try to understand why.
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