-
Overall Rank
8
No change since 2026 -
48
No change since 2026 -
1
No change since 2026 -
45
No change since 2026 -
23
Up 10 places since 2026 -
Unemployment Insurance Tax Rank
16
No change since 2026
Tennessee ranks 8th overall on the 2027 State Tax Competitiveness Index.
Score 5.99 / 10
About Tennessee's Tax Code
Tennessee forgoes an individual income tax, having phased out a narrow tax on interest and dividend income, known as the Hall Tax, in 2021. However, Tennessee is among the minority of states that still have a capital stock tax on the books, despite making structural improvements to it during the 2024 legislative session. Tennessee businesses also face an additional layer of tax on their gross receipts, and not just their net income (profits).
Tennessee excludes most, but not all, net CFC tested income (NCTI) from its tax base, and caps net operating loss carryforwards at 15 years, whereas most states have 20-year or unlimited carryforwards. The state recently conformed to the Tax Cuts and Jobs Act’s treatment of first-year expensing under Section 168(k), but did so in such a way that maintains the phasedown that was reversed under the One Big Beautiful Bill Act (OBBBA). As such, Tennessee offers a bonus depreciation allowance of only 20 percent in 2026 and is on track to see its bonus depreciation allowance zeroed out as of 2027.
Tennessee has among the highest combined state and average local sales tax rates in the nation. The largest portion of the sales tax burden comes from the 7 percent state-level sales tax rate, which is second only to California’s 7.25 percent rate (and tied with the state sales tax rates in Indiana, Mississippi, and Rhode Island). Because income taxes have a greater impact on economic growth than sales taxes, however, Tennessee’s decision to rely on high sales taxes in lieu of income taxes is an economically advantageous one.
Component Scores
#8 overall · 5.99 / 10Each component is scored from 0 to 10, where 10 is best. Select a component for its detail page.
| Component | Rank | Score | |
|---|---|---|---|
| Corporate Taxes | #48 | 3.44 / 10 | |
| Individual Income Taxes | #1 | 10.00 / 10 | |
| Sales Taxes | #45 | 3.80 / 10 | |
| Property Taxes | #23 | 5.12 / 10 | |
| Unemployment Insurance Taxes | #16 | 5.47 / 10 |
Ranking Changes, 2020–2027
#8 in 2027 · up 27 places from 2020Tennessee ranked 35th in 2020 and ranks 8th in 2027, an improvement of 27 places. The axis is zoomed to the state's range. Ranks for 2020 through 2026 are backcast under the current methodology.
Show the Table
| Year | Overall | Corporate | Individual Income | Sales | Property | Unemployment Insurance |
|---|---|---|---|---|---|---|
| 2020 | 35 (4.75) | 49 (3.06) | 8 (6.54) | 46 (3.66) | 34 (4.76) | 17 (5.36) |
| 2021 | 34 (4.80) | 49 (3.21) | 8 (6.66) | 46 (3.65) | 34 (4.70) | 16 (5.33) |
| 2022 | 8 (5.87) | 48 (3.22) | 1 (10.00) | 45 (3.72) | 34 (4.87) | 14 (5.54) |
| 2023 | 8 (5.87) | 48 (3.29) | 1 (10.00) | 45 (3.69) | 33 (4.93) | 17 (5.39) |
| 2024 | 8 (5.88) | 48 (3.41) | 1 (10.00) | 46 (3.71) | 33 (4.87) | 22 (5.22) |
| 2025 | 8 (5.96) | 48 (3.70) | 1 (10.00) | 45 (3.71) | 33 (4.85) | 16 (5.40) |
| 2026 | 8 (6.01) | 48 (3.64) | 1 (10.00) | 45 (3.77) | 33 (4.85) | 16 (5.46) |
| 2027 | 8 (5.99) | 48 (3.44) | 1 (10.00) | 45 (3.80) | 23 (5.12) | 16 (5.47) |
Tennessee Compared across the States
#8 overallEach row places the states on a 0 to 10 score scale for one measure. Tennessee is the large outlined dot, and the dashed line is the 50-state median, so a dot to its right scores better than the typical state. Hover over or tab to any dot for detail, and select it to open that state's profile.
Overall
#8 5.99
Corporate Taxes
#48 3.44
Individual Income Taxes
#1 10.00
Sales Taxes
#45 3.80
Property Taxes
#23 5.12
Unemployment Insurance Taxes
#16 5.47
- Tennessee
- Other states, by rank (1st to 50th)
- 50-state median
Tennessee and Its Neighbors
#8 overallTennessee borders 8 states and ranks 8th overall; it outranks every one of them.
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Tennessee #8 Score 5.99 This state -
Missouri #9 Score 5.66 1 place behind -
North Carolina #11 Score 5.60 3 places behind -
Georgia #24 Score 5.26 16 places behind -
Kentucky #26 Score 5.20 18 places behind -
Mississippi #27 Score 5.19 19 places behind -
Virginia #31 Score 5.02 23 places behind -
Arkansas #32 Score 5.01 24 places behind -
Alabama #35 Score 4.87 27 places behind
What Each Component Includes
The five components of the Index, what each one covers, and where Tennessee lands. Open any component for the full breakdown.
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Corporate Taxes
Rank #48Includes corporate income taxes and gross receipts taxes. Measures the impact of each state’s principal tax on business activities.
Full Breakdown for Tennessee → -
Individual Income Taxes
Rank #1Covers the tax individuals pay on income, and with it a significant number of businesses — sole proprietorships, partnerships, and S corporations — that report their income through the individual income tax code.
Full Breakdown for Tennessee → -
Sales Taxes
Rank #45Covers the general sales tax levied on the purchase price of goods and services, plus excise taxes on gasoline, diesel, tobacco, vapor products, beer, and spirits, and taxes on digital advertising.
Full Breakdown for Tennessee → -
Property Taxes
Rank #23Includes taxes on real and personal property, net worth, and the transfer of assets — among them capital stock, estate, inheritance, and real estate transfer taxes.
Full Breakdown for Tennessee → -
Unemployment Insurance Taxes
Rank #16Covers the taxes employers pay into the state unemployment insurance program to finance benefits for workers recently unemployed.
Full Breakdown for Tennessee →
Tax Data Explorer
Every policy variable behind Tennessee's 2027 scores, grouped by the report's tables, as of July 1, 2026. Its bordering states are shown alongside to start. Search the variables and values, or add up to 4 states to compare side by side.
156 data points · Shaded values differ from Tennessee
Corporate Taxes: Corporate Income Tax Rates
| Variable | Tennessee | Alabama | Arkansas | Georgia | Kentucky | Mississippi | Missouri | North Carolina | Virginia |
|---|---|---|---|---|---|---|---|---|---|
| Bracket 1 | 6.5% > $0 | 6.5% > $0 | 1.0% > $0 (differs) | 4.99% > $0 (differs) | 5.0% > $0 (differs) | 4.0% > $5,000 (differs) | 4.0% > $0 (differs) | 2.0% > $0 (differs) | 6.0% > $0 (differs) |
| Bracket 2 | n.a. | n.a. | 2.0% > $3,000 (differs) | n.a. | n.a. | 5.0% > $10,000 (differs) | n.a. | n.a. | n.a. |
| Bracket 3 | n.a. | n.a. | 3.0% > $6,000 (differs) | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. |
| Bracket 4 | n.a. | n.a. | 4.3% > $11,000 (differs) | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. |
| Gross Receipts Tax | Yes | No (differs) | No (differs) | No (differs) | No (differs) | No (differs) | No (differs) | No (differs) | No (differs) |
| Gross Receipts Tax Minimum Rate | 0.02% | n.a. (differs) | n.a. (differs) | n.a. (differs) | n.a. (differs) | n.a. (differs) | n.a. (differs) | n.a. (differs) | n.a. (differs) |
| Gross Receipts Tax Maximum Rate | 0.1875% | n.a. (differs) | n.a. (differs) | n.a. (differs) | n.a. (differs) | n.a. (differs) | n.a. (differs) | n.a. (differs) | n.a. (differs) |
| Gross Receipts Tax Rate Used in the Index | 0.15% | n.a. (differs) | n.a. (differs) | n.a. (differs) | n.a. (differs) | n.a. (differs) | n.a. (differs) | n.a. (differs) | n.a. (differs) |
Corporate Taxes: Tax Credits and Gross Receipts Deductions
| Variable | Tennessee | Alabama | Arkansas | Georgia | Kentucky | Mississippi | Missouri | North Carolina | Virginia |
|---|---|---|---|---|---|---|---|---|---|
| Job Credits | Yes | Yes | Yes | Yes | Yes | Yes | Yes | No (differs) | No (differs) |
| Research and Development Credits | No | No | Yes (differs) | Yes (differs) | Yes (differs) | No | Yes (differs) | No | Yes (differs) |
| Investment Credits | Yes | Yes | Yes | Yes | Yes | Yes | Yes | No (differs) | No (differs) |
| Compensation Expenses Deductible | No | n.a. (differs) | n.a. (differs) | n.a. (differs) | n.a. (differs) | n.a. (differs) | n.a. (differs) | n.a. (differs) | n.a. (differs) |
| Cost of Goods Sold Deductible | No | n.a. (differs) | n.a. (differs) | n.a. (differs) | n.a. (differs) | n.a. (differs) | n.a. (differs) | n.a. (differs) | n.a. (differs) |
Corporate Taxes: Net Operating Losses
| Variable | Tennessee | Alabama | Arkansas | Georgia | Kentucky | Mississippi | Missouri | North Carolina | Virginia |
|---|---|---|---|---|---|---|---|---|---|
| Conforms to Federal NOL Treatment | No | No | No | Yes (differs) | Yes (differs) | No | No | No | Yes (differs) |
| Carryback (Years) | 0 | 0 | 0 | Conforms to federal treatment (differs) | Conforms to federal treatment (differs) | 2 (differs) | 2 (differs) | 0 | Conforms to federal treatment (differs) |
| Carryback Cap | $0 | $0 | $0 | Conforms to federal treatment (differs) | Conforms to federal treatment (differs) | Unlimited (differs) | Unlimited (differs) | $0 | Conforms to federal treatment (differs) |
| Carryforward (Years) | 15 | 15 | 10 (differs) | Conforms to federal treatment (differs) | Conforms to federal treatment (differs) | 20 (differs) | 20 (differs) | 15 | Conforms to federal treatment (differs) |
| Carryforward Cap | Unlimited | Unlimited | Unlimited | Conforms to federal treatment (differs) | Conforms to federal treatment (differs) | Unlimited | Unlimited | Unlimited | Conforms to federal treatment (differs) |
Corporate Taxes: Treatment of Capital Investment
| Variable | Tennessee | Alabama | Arkansas | Georgia | Kentucky | Mississippi | Missouri | North Carolina | Virginia |
|---|---|---|---|---|---|---|---|---|---|
| Section 168(k) Expensing | 20% | 100% (differs) | 0% (differs) | 0% (differs) | 0% (differs) | 100% (differs) | 100% (differs) | 15% (differs) | 0% (differs) |
| Conforms to Section 163(j) Limitation | No | Yes (differs) | No | No | Yes (differs) | No | No | Yes (differs) | Yes (differs) |
| GILTI Inclusion | 5% Inclusion | Decouples (differs) | Decouples (differs) | Decouples (differs) | Decouples (differs) | Decouples (differs) | Decouples (differs) | Decouples (differs) | Decouples (differs) |
| Section 174 Expensing | Yes | Yes | Yes | Yes | No (differs) | Yes | Yes | No (differs) | No (differs) |
| Section 168(n) Expensing | No | Yes (differs) | No | No | No | Yes (differs) | Yes (differs) | No | No |
Corporate Taxes: Other Corporate Base Variables
| Variable | Tennessee | Alabama | Arkansas | Georgia | Kentucky | Mississippi | Missouri | North Carolina | Virginia |
|---|---|---|---|---|---|---|---|---|---|
| Federal Income Used as State Tax Base | Yes | Yes | No (differs) | Yes | Yes | No (differs) | Yes | Yes | Yes |
| Conformity Status | Rolling | Rolling | Static (not current) (differs) | Static (current) (differs) | Static (current) (differs) | Static (not current) (differs) | Rolling | Static (not current) (differs) | Static (current) (differs) |
| Allows Federal ACRS or MACRS Depreciation | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Allows Federal Depletion | Partial | Yes (differs) | Yes (differs) | Yes (differs) | Yes (differs) | Partial | Yes (differs) | Partial | Yes (differs) |
| Throwback Rule | No | No | Yes (differs) | No | No | Yes (differs) | No | No | No |
| Foreign Tax Deductibility | Yes | Yes | Yes | No (differs) | No (differs) | No (differs) | Yes | No (differs) | No (differs) |
| Corporate AMT | No | No | No | No | Yes (differs) | No | No | No | No |
| Brackets Indexed for Inflation | Flat CIT | Flat CIT | No (differs) | Flat CIT | Flat CIT | No (differs) | Flat CIT | Flat CIT | Flat CIT |
Individual Income Taxes: Individual Income Tax Rates
| Variable | Tennessee | Alabama | Arkansas | Georgia | Kentucky | Mississippi | Missouri | North Carolina | Virginia |
|---|---|---|---|---|---|---|---|---|---|
| Bracket 1 | No Income Tax | 2.0% > $0 (differs) | 2.0% > $0 (differs) | 4.99% > $0 (differs) | 3.5% > $0 (differs) | 4.0% > $10,000 (differs) | 2.0% > $1,348 (differs) | 3.99% > $0 (differs) | 2.0% > $0 (differs) |
| Bracket 2 | n.a. | 4.0% > $500 (differs) | 3.7% > $4,700 (differs) | n.a. | n.a. | n.a. | 2.5% > $2,696 (differs) | n.a. | 3.0% > $3,000 (differs) |
| Bracket 3 | n.a. | 5.0% > $3,000 (differs) | n.a. | n.a. | n.a. | n.a. | 3.0% > $4,044 (differs) | n.a. | 5.0% > $5,000 (differs) |
| Bracket 4 | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. | 3.5% > $5,392 (differs) | n.a. | 5.75% > $17,000 (differs) |
| Bracket 5 | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. | 4.0% > $6,740 (differs) | n.a. | n.a. |
| Bracket 6 | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. | 4.5% > $8,088 (differs) | n.a. | n.a. |
| Bracket 7 | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. | 4.7% > $9,436 (differs) | n.a. | n.a. |
| Standard Deduction (Single Filer) | n.a. | $3,000 (differs) | $2,470 (differs) | $12,000 (differs) | $3,360 (differs) | $2,300 (differs) | $16,100 (differs) | $12,750 (differs) | $8,750 (differs) |
| Personal Exemption (Single Filer) | n.a. | $1,500 (differs) | n.a. | n.a. | n.a. | $6,000 (differs) | n.a. | n.a. | $930 (differs) |
| Personal Exemption Credit (Single Filer) | n.a. | n.a. | $29 (differs) | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. |
| Personal Exemption per Dependent | n.a. | $1,000 (differs) | n.a. | $5,000 (differs) | n.a. | $1,500 (differs) | n.a. | n.a. | $930 (differs) |
| Personal Exemption Credit per Dependent | n.a. | n.a. | $29 (differs) | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. |
| Average Local Income Tax Rate | None | 0.50% (differs) | None | None | 2.25% (differs) | None | 1.00% (differs) | None | None |
| Surtaxes on Wage Income | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. |
Individual Income Taxes: Marriage Penalty, Capital Income, Indexation
| Variable | Tennessee | Alabama | Arkansas | Georgia | Kentucky | Mississippi | Missouri | North Carolina | Virginia |
|---|---|---|---|---|---|---|---|---|---|
| Marriage Penalty | n.a. | No (differs) | Yes (differs) | No (differs) | No (differs) | No (differs) | No (differs) | No (differs) | Yes (differs) |
| Married Couples Can File Separately on One Return | n.a. | No (differs) | Yes (differs) | No (differs) | Yes (differs) | No (differs) | Yes (differs) | No (differs) | No (differs) |
| Convenience Rule | No | No | No | No | No | No | No | No | No |
| Interest Taxed | n.a. | Yes (differs) | Yes (differs) | Yes (differs) | Yes (differs) | Yes (differs) | Yes (differs) | Yes (differs) | Yes (differs) |
| Dividends Taxed | n.a. | Yes (differs) | Yes (differs) | Yes (differs) | Yes (differs) | Yes (differs) | Yes (differs) | Yes (differs) | Yes (differs) |
| Capital Gains Taxed | n.a. | Yes (differs) | Yes (differs) | Yes (differs) | Yes (differs) | Yes (differs) | No (differs) | Yes (differs) | Yes (differs) |
| Combined Capital Gains Tax Rate | n.a. | 5% (differs) | 1.85% (differs) | 4.99% (differs) | 3.5% (differs) | 4.4% (differs) | 0% (differs) | 3.99% (differs) | 5.75% (differs) |
| Tax Brackets Indexed for Inflation | n.a. | No (differs) | Yes (differs) | Yes (differs) | Yes (differs) | No (differs) | Yes (differs) | Yes (differs) | No (differs) |
| Standard Deduction Indexed for Inflation | n.a. | No (differs) | Yes (differs) | No (differs) | Yes (differs) | No (differs) | Yes (differs) | No (differs) | No (differs) |
| Personal Exemption Indexed for Inflation | n.a. | No (differs) | Yes (differs) | No (differs) | Yes (differs) | No (differs) | Yes (differs) | Yes (differs) | No (differs) |
| Progressivity Ratio | n.a. | 1.00 (differs) | 1.00 (differs) | 1.00 (differs) | 1.00 (differs) | 1.00 (differs) | 1.00 (differs) | 1.00 (differs) | 1.00 (differs) |
Individual Income Taxes: Other Individual Base Variables
| Variable | Tennessee | Alabama | Arkansas | Georgia | Kentucky | Mississippi | Missouri | North Carolina | Virginia |
|---|---|---|---|---|---|---|---|---|---|
| Federal Income Used as State Tax Base | n.a. | No (differs) | No (differs) | Yes (differs) | Yes (differs) | No (differs) | Yes (differs) | Yes (differs) | Yes (differs) |
| Conformity Status | n.a. | Rolling (differs) | Static (not current) (differs) | Static (current) (differs) | Static (current) (differs) | Static (not current) (differs) | Rolling (differs) | Static (not current) (differs) | Static (current) (differs) |
| Credits for Taxes Paid to Other States | n.a. | Yes (differs) | Yes (differs) | Yes (differs) | Yes (differs) | Yes (differs) | Yes (differs) | Yes (differs) | Yes (differs) |
| AMT Levied | n.a. | No (differs) | No (differs) | No (differs) | No (differs) | No (differs) | No (differs) | No (differs) | No (differs) |
| Recognition of S Corporation Status | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Section 179 Expensing Limit | $2,560,000 | $2,560,000 | $1,250,000 (differs) | $2,560,000 | $100,000 (differs) | $2,560,000 | $2,560,000 | $25,000 (differs) | $1,250,000 (differs) |
| Tips | n.a. | Taxable (differs) | Taxable (differs) | Partial (differs) | Taxable (differs) | Taxable (differs) | Taxable (differs) | Taxable (differs) | Taxable (differs) |
| Overtime | n.a. | Partial (differs) | Taxable (differs) | Partial (differs) | Taxable (differs) | Taxable (differs) | Taxable (differs) | Taxable (differs) | Taxable (differs) |
| Filing and Withholding Threshold Index | 10 | 5 (differs) | 0 (differs) | 5.659 (differs) | 0 (differs) | 0 (differs) | 0.339 (differs) | 0 (differs) | 0 (differs) |
Individual Income Taxes: Other Individual Income Variables
| Variable | Tennessee | Alabama | Arkansas | Georgia | Kentucky | Mississippi | Missouri | North Carolina | Virginia |
|---|---|---|---|---|---|---|---|---|---|
| Income Recapture | n.a. | No (differs) | Yes (differs) | No (differs) | No (differs) | No (differs) | No (differs) | No (differs) | No (differs) |
Sales Taxes: Sales and Excise Tax Rates
| Variable | Tennessee | Alabama | Arkansas | Georgia | Kentucky | Mississippi | Missouri | North Carolina | Virginia |
|---|---|---|---|---|---|---|---|---|---|
| State Sales Tax Rate | 7.00% | 4.00% (differs) | 6.50% (differs) | 4.00% (differs) | 6.00% (differs) | 7.00% | 4.23% (differs) | 4.75% (differs) | 5.30% (differs) |
| Average Local Sales Tax Rate | 2.61% | 5.46% (differs) | 2.98% (differs) | 3.56% (differs) | 0.00% (differs) | 0.06% (differs) | 4.22% (differs) | 2.35% (differs) | 0.47% (differs) |
| Maximum Local Sales Tax Rate | 2.75% | 11.00% (differs) | 6.125% (differs) | 5.00% (differs) | None (differs) | 1.00% (differs) | 6.25% (differs) | 3.50% (differs) | 2.70% (differs) |
| Gasoline Tax (Cents per Gallon) | 27.40 | 31.00 (differs) | 25.00 (differs) | 34.05 (differs) | 26.40 (differs) | 24.40 (differs) | 29.99 (differs) | 41.25 (differs) | 42.40 (differs) |
| Diesel Tax (Cents per Gallon) | 28.4 | 32.75 (differs) | 28.8 (differs) | 38.05 (differs) | 23.4 (differs) | 24.4 (differs) | 29.99 (differs) | 41.25 (differs) | 43.5 (differs) |
| Cigarette Tax (Dollars per Pack of 20) | $0.62 | $0.675 (differs) | $1.15 (differs) | $0.37 (differs) | $1.103 (differs) | $0.68 (differs) | $0.17 (differs) | $0.45 (differs) | $0.60 (differs) |
| Beer Tax (Dollars per Gallon) | $1.2868 | $0.5333 (differs) | $0.3722 (differs) | $0.48 (differs) | $0.8906 (differs) | $0.4268 (differs) | $0.06 (differs) | $0.6171 (differs) | $0.2565 (differs) |
| Spirits Tax (Dollars per Gallon) | $4.46 | $22.87 (differs) | $9.76 (differs) | $3.79 (differs) | $9.56 (differs) | $9.38 (differs) | $2.00 (differs) | $18.23 (differs) | $23.47 (differs) |
| Vapor Tax Ratio to Cigarette Tax | 26.1667% | n.a. (differs) | n.a. (differs) | 5.00% (differs) | 83.3333% (differs) | n.a. (differs) | n.a. (differs) | 5.00% (differs) | 11.00% (differs) |
Sales Taxes: Business-to-Business Exemptions
| Variable | Tennessee | Alabama | Arkansas | Georgia | Kentucky | Mississippi | Missouri | North Carolina | Virginia |
|---|---|---|---|---|---|---|---|---|---|
| Business Inputs | Some Taxable | Some Taxable | Some Taxable | Some Taxable | Some Taxable | Some Taxable | Some Taxable | Some Taxable | Some Taxable |
| Farm Equipment | Exempt | Partial (differs) | Exempt | Exempt | Exempt | Partial (differs) | Exempt | Exempt | Exempt |
| Office Equipment | Taxable | Taxable | Taxable | Taxable | Taxable | Taxable | Taxable | Taxable | Taxable |
| Manufacturing Machinery | Exempt | Partial (differs) | Exempt | Exempt | Partial (differs) | Partial (differs) | Exempt | Exempt | Exempt |
| Manufacturing Raw Materials | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt |
| Business Fuel and Utilities | Partial | Exempt (differs) | Partial | Partial | Exempt (differs) | Exempt (differs) | Exempt (differs) | Exempt (differs) | Exempt (differs) |
| Business Leases and Rentals | Taxable | Taxable | Taxable | Taxable | Taxable | Taxable | Taxable | Taxable | Taxable |
| Information Services | Exempt | Taxable (differs) | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt |
| Software as a Service (SaaS) | Taxable | Taxable | Exempt (differs) | Exempt (differs) | Taxable | Taxable | Exempt (differs) | Exempt (differs) | Exempt (differs) |
| Platform as a Service (PaaS) | Exempt | Exempt | Exempt | Exempt | Taxable (differs) | Exempt | Exempt | Exempt | Exempt |
| Digital B2B Products | Taxable | Exempt (differs) | Taxable | Exempt (differs) | Taxable | Taxable | Exempt (differs) | Exempt (differs) | Exempt (differs) |
| Payroll Services | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt |
| Data Center Purchases | Exempt | Partial (differs) | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt |
| Digital Advertising Tax | No | No | No | No | No | No | No | No | No |
Sales Taxes: Consumer Goods and Services in the Base
| Variable | Tennessee | Alabama | Arkansas | Georgia | Kentucky | Mississippi | Missouri | North Carolina | Virginia |
|---|---|---|---|---|---|---|---|---|---|
| Groceries | Alternate Rate | Alternate Rate | Alternate Rate | Exempt (differs) | Exempt (differs) | Alternate Rate | Alternate Rate | Exempt (differs) | Local Tax Only (differs) |
| Clothing | Taxable | Taxable | Taxable | Taxable | Taxable | Taxable | Taxable | Taxable | Taxable |
| Prescription Medication | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt |
| Nonprescription Medication | Taxable | Taxable | Taxable | Taxable | Taxable | Taxable | Taxable | Taxable | Exempt (differs) |
| Gasoline | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt |
| Landscaping | Exempt | Exempt | Taxable (differs) | Exempt | Taxable (differs) | Taxable (differs) | Exempt | Exempt | Exempt |
| Repair Services | Taxable | Exempt (differs) | Taxable | Exempt (differs) | Exempt (differs) | Taxable | Exempt (differs) | Taxable | Exempt (differs) |
| Real Estate Services | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt |
| Parking | Taxable | Exempt (differs) | Taxable | Exempt (differs) | Taxable | Taxable | Exempt (differs) | Exempt (differs) | Exempt (differs) |
| Dry Cleaning | Taxable | Exempt (differs) | Taxable | Exempt (differs) | Taxable | Taxable | Exempt (differs) | Taxable | Exempt (differs) |
| Fitness Services | Exempt | Exempt | Taxable (differs) | Exempt | Taxable (differs) | Exempt | Taxable (differs) | Exempt | Exempt |
| Barber Services | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt |
| Veterinary Services | Exempt | Exempt | Exempt | Exempt | Taxable (differs) | Exempt | Exempt | Exempt | Exempt |
| E-Books | Taxable | Taxable | Taxable | Taxable | Taxable | Taxable | Exempt (differs) | Taxable | Exempt (differs) |
| Streaming Video | Taxable | Taxable | Taxable | Taxable | Exempt (differs) | Taxable | Exempt (differs) | Taxable | Exempt (differs) |
| Medical Services | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt |
| Legal Services | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt |
| Financial Services | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt |
| Accounting Services | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt | Exempt |
| Sales Tax Holiday | Yes | Yes | Yes | No (differs) | No (differs) | Yes | Yes | No (differs) | Yes |
Sales Taxes: Sales Tax Structure
| Variable | Tennessee | Alabama | Arkansas | Georgia | Kentucky | Mississippi | Missouri | North Carolina | Virginia |
|---|---|---|---|---|---|---|---|---|---|
| Uniform Base Definitions | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Unified Tax Administration | Yes | Partial (differs) | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Safe Harbor for Remote Sellers | Gross Sales Threshold | Gross Sales Threshold | Sales or Transactions Threshold (differs) | Sales or Transactions Threshold (differs) | Sales or Transactions Threshold (differs) | Gross Sales Threshold | Gross Sales Threshold | Gross Sales Threshold | Sales or Transactions Threshold (differs) |
Property Taxes: Property and Capital Stock Tax Rates
| Variable | Tennessee | Alabama | Arkansas | Georgia | Kentucky | Mississippi | Missouri | North Carolina | Virginia |
|---|---|---|---|---|---|---|---|---|---|
| Property Tax Collections per Capita | $921 | $849 (differs) | $961 (differs) | $1,735 (differs) | $1,118 (differs) | $1,310 (differs) | $1,567 (differs) | $1,203 (differs) | $2,296 (differs) |
| Property Tax as a Percentage of Personal Income | 1.39% | 1.48% (differs) | 1.62% (differs) | 2.76% (differs) | 1.92% (differs) | 2.52% (differs) | 2.41% (differs) | 1.83% (differs) | 2.97% (differs) |
| Assessment Limit | No | Yes (differs) | Yes (differs) | Yes (differs) | No | No | No | No | No |
| Levy Limit | No | No | Yes (differs) | No | No | Yes (differs) | Yes (differs) | No | No |
| Capital Stock Tax Rate | 0.25% | 0.175% (differs) | 0.3% (differs) | Fixed dollar payment schedule (differs) | None (differs) | 0.05% (differs) | None (differs) | 0.15% (differs) | None (differs) |
| Capital Stock Tax Maximum Payment | Unlimited | $15,000 (differs) | Unlimited | $5,000 (differs) | n.a. (differs) | Unlimited | n.a. (differs) | Unlimited | n.a. (differs) |
| Payment Options for Capital Stock and Corporate Income Taxes | Pay both | Pay both | Pay both | Pay both | n.a. (differs) | Pay both | n.a. (differs) | Pay both | n.a. (differs) |
Property Taxes: Property Tax Bases
| Variable | Tennessee | Alabama | Arkansas | Georgia | Kentucky | Mississippi | Missouri | North Carolina | Virginia |
|---|---|---|---|---|---|---|---|---|---|
| Tangible Personal Property Tax | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Tangible Personal Property De Minimis Exemption | None | $100,000 (differs) | None | $20,000 (differs) | $1,000 (differs) | None | None | None | None |
| Intangible Property Tax | Yes | Yes | No (differs) | No (differs) | Yes | Yes | No (differs) | No (differs) | No (differs) |
| Inventory Tax | No | No | Yes (differs) | Partial (differs) | Yes (differs) | Yes (differs) | No | No | Partial (differs) |
| Real Estate Transfer Tax | Yes | Yes | Yes | Yes | Yes | No (differs) | No (differs) | Yes | Yes |
| Split Roll | Yes | Yes | No (differs) | No (differs) | No (differs) | Yes | Yes | No (differs) | No (differs) |
| Split Roll Ratio | 1.60 | 2.00 (differs) | 1.00 (differs) | 1.00 (differs) | 1.00 (differs) | 1.50 (differs) | 1.68 (differs) | 1.00 (differs) | 1.00 (differs) |
| Estate Tax | No | No | No | No | No | No | No | No | No |
| Inheritance Tax | No | No | No | No | 16% (differs) | No | No | No | No |
| Gift Tax | No | No | No | No | No | No | No | No | No |
Unemployment Insurance Taxes: UI Tax Rates
| Variable | Tennessee | Alabama | Arkansas | Georgia | Kentucky | Mississippi | Missouri | North Carolina | Virginia |
|---|---|---|---|---|---|---|---|---|---|
| Minimum Rate | 0.01% | 0.20% (differs) | 0.20% (differs) | 0.04% (differs) | 0.30% (differs) | 0.20% (differs) | 0.00% (differs) | 0.06% (differs) | 0.10% (differs) |
| Maximum Rate | 10.00% | 5.40% (differs) | 10.10% (differs) | 8.10% (differs) | 9.00% (differs) | 5.60% (differs) | 6.00% (differs) | 5.76% (differs) | 6.20% (differs) |
| Taxable Wage Base | $7,000 | $8,000 (differs) | $7,000 | $9,500 (differs) | $12,000 (differs) | $14,000 (differs) | $9,000 (differs) | $34,200 (differs) | $8,000 (differs) |
| Most Favorable Schedule: Minimum Rate | 0.01% | 0.14% (differs) | 0.10% (differs) | 0.01% | 0.00% (differs) | 0.00% (differs) | 0.00% (differs) | 0.06% (differs) | 0.00% (differs) |
| Most Favorable Schedule: Maximum Rate | 10.00% | 5.40% (differs) | 6.00% (differs) | 5.40% (differs) | 9.00% (differs) | 5.40% (differs) | 5.40% (differs) | 5.76% (differs) | 5.40% (differs) |
| Least Favorable Schedule: Minimum Rate | 0.50% | 0.65% (differs) | 0.08% (differs) | 0.04% (differs) | 1.00% (differs) | 0.00% (differs) | 0.00% (differs) | 0.06% (differs) | 0.10% (differs) |
| Least Favorable Schedule: Maximum Rate | 10.00% | 6.80% (differs) | 6.00% (differs) | 8.10% (differs) | 10.00% | 5.40% (differs) | 7.80% (differs) | 5.76% (differs) | 6.20% (differs) |
| Employer Contributions as a Share of Total Wages | 0.15% | 0.09% (differs) | 0.14% (differs) | 0.19% (differs) | 0.37% (differs) | 0.13% (differs) | 0.21% (differs) | 0.28% (differs) | 0.08% (differs) |
| Employer Contributions as a Share of Taxable Wages | 0.96% | 0.51% (differs) | 0.88% (differs) | 1.07% (differs) | 1.62% (differs) | 0.41% (differs) | 1.08% (differs) | 0.64% (differs) | 0.56% (differs) |
| Trust Fund Solvency Ratio | 0.77 | 1.15 (differs) | 1.06 (differs) | 0.54 (differs) | 0.7 (differs) | 1.24 (differs) | 0.7 (differs) | 1.29 (differs) | 0.71 (differs) |
| New Employer Rate | 2.70% | 2.70% | 2.00% (differs) | 2.64% (differs) | 2.70% | 1.00% (differs) | 2.70% | 1.00% (differs) | 2.73% (differs) |
Unemployment Insurance Taxes: Experience Formulas and Charging Methods
| Variable | Tennessee | Alabama | Arkansas | Georgia | Kentucky | Mississippi | Missouri | North Carolina | Virginia |
|---|---|---|---|---|---|---|---|---|---|
| Experience Formula Based On | Reserve Ratio | Benefits Ratio (differs) | Reserve Ratio | Reserve Ratio | Reserve Ratio | Benefits Ratio (differs) | Reserve Ratio | Reserve Ratio | Benefits Ratio (differs) |
| Benefits Charged in Proportion to Base-Period Wages | Yes | Yes | Yes | No (most recent or principal employer) (differs) | No (most recent or principal employer) (differs) | Yes | Yes | Yes | No (most recent or principal employer) (differs) |
| Charged If Employee's Benefit Award Is Reversed | No | No | No | No | No | Yes (differs) | No | Yes (differs) | Yes (differs) |
| Charged for Reimbursements on Combined Wage Claims | No | Yes (differs) | Yes (differs) | No | No | Yes (differs) | Yes (differs) | Yes (differs) | No |
| Charged If Employee Left Voluntarily | No | No | No | No | No | No | No | No | Yes (differs) |
| Charged If Employee Was Discharged for Misconduct | No | No | No | No | No | No | No | No | Yes (differs) |
| Charged If Employee Refused Suitable Work | Yes | Yes | Yes | No (differs) | No (differs) | No (differs) | No (differs) | Yes | Yes |
| Charged If Employee Continues to Work Part-Time | No | No | No | Yes (differs) | No | No | No | No | Yes (differs) |
Unemployment Insurance Taxes: Other UI Base Variables
| Variable | Tennessee | Alabama | Arkansas | Georgia | Kentucky | Mississippi | Missouri | North Carolina | Virginia |
|---|---|---|---|---|---|---|---|---|---|
| Solvency Tax | No | No | Yes (differs) | No | No | No | Yes (differs) | No | Yes (differs) |
| Taxes for Socialized Costs or Negative Balance Employers | No | Yes (differs) | No | No | No | No | No | No | Yes (differs) |
| Loan and Interest Repayment Surtaxes | Yes | Yes | Yes | No (differs) | Yes | No (differs) | Yes | No (differs) | No (differs) |
| Reserve Taxes | No | No | No | No | No | No | No | Yes (differs) | No |
| Surtaxes for UI Administration or Non-UI Purposes | No | Yes (differs) | Yes (differs) | Yes (differs) | Yes (differs) | Yes (differs) | Yes (differs) | No | No |
| Temporary Disability Insurance | No | No | No | No | No | No | No | No | No |
| Voluntary Contributions | No | No | Yes (differs) | Yes (differs) | Yes (differs) | No | Yes (differs) | Yes (differs) | No |
| Years to Qualify for Experience Rating | 3 | 3 | 3 | 3 | 3 | 3 | 2 (differs) | 2 (differs) | 1 (differs) |
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About the Authors
Janelle Fritts is a Senior Policy Analyst with the Tax Foundation’s Center for State Tax Policy. She is the lead researcher on the annual State Tax Competitiveness Index and serves as a resource to policymakers in their efforts to modernize and improve the structures of their state tax codes. Her work has been cited in The New York Times, the Associated Press, Bloomberg, and numerous state media outlets across the country.
Jared Walczak is a Senior Fellow at the Tax Foundation, where he spent five years as Vice President of State Projects, and president of Walczak Policy Consulting.
Nicole Fox is a Policy Analyst with the Center for State Tax Policy at the Tax Foundation, where she serves as a resource to policymakers in their efforts to modernize and improve the structure of their state tax codes.
Katherine Loughead is the Vice President of State Tax Policy at the Tax Foundation, where she oversees the state tax policy team’s research agenda and serves as a resource to policymakers in their efforts to modernize and improve the structure of their state tax codes.
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