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Taxpayers will have until the end of June to pay Professional Privilege tax with no penalty or interest. Click here to file.

IMPROVE Act

Improving Manufacturing, Public Roads, and Opportunities for a Vibrant Economy
 

How does the IMPROVE Act affect taxpayers?
 

Tax Decreases

Sales Tax on Food

Sales tax on food will be cut from five percent to four percent beginning July 1, 2017. Read more here. 

Franchise and Excise Tax

For tax years beginning on or after January 1, 2017, a qualifying Tennessee manufacturer doing business both in-state and out-of-state may elect to apportion its net earnings and net worth to Tennessee based on a single sales factor.

In order to qualify for the single sales factor option, 50% of a taxpayer’s revenue from its activities in Tennessee must be from fabricating or processing tangible personal property for resale and consumption off the premises. Once made, the election will remain in effect for a minimum of five years.  Learn more here. 

Hall Income Tax

The IMPROVE Act includes a plan to phase out the Hall income tax over the next five years.  The applicable tax rate for each year is as follows:

  • 4%  for tax years beginning January 1, 2017
  • 3%  for tax years beginning January 1, 2018
  • 2% for tax years beginning January 1, 2019
  • 1% for tax years beginning January 1, 2020
  • Repeal beginning January 1, 2021

Read more about the Hall income tax phase out here. 

 

Other Tax and Fee Changes

Vehicle Registration Fee

The cost to register a vehicle in Tennessee will increase beginning July 1, 2017.

  • The registration fee for passenger motor vehicles will be increased by $5
  • The registration fee for commercial motor vehicles for transporting passengers for hire (buses, taxis) will be increased by $10
  • The registration fee for commercial and freight motor vehicles (semis, tractor trailers) will be increased by $20

Learn more here. 

Electric Vehicle Registration Fee

There will be a new registration fee of $100 for electric vehicles beginning July 1, 2017.  This fee will be in addition to the standard registration fee.

Learn more here.

Gas Tax

The state’s tax on gasoline will increase by six cents over the next three years.  Gasoline includes gasoline, ethanol, methanol, E-85, M-85 and A-55.

  • From $0.20 to $0.24 from July 1, 2017 to June 30, 2018
  • From $0.24 to $0.25 from July 1, 2018 to June 30, 2019
  • From $0.25 to $0.26 from July 1, 2019 and after

Local governments will receive a portion of the gas and diesel tax increases over the next three years to fund roads. For a breakdown of the estimated additional amounts that will go to cities and counties for road funding over the next three years, click here (for cities) and click here (for counties).

Diesel Tax

The state’s tax on diesel fuel will increase by 10 cents over the next three years.  Diesel includes special diesel and biodiesel.

  • From $0.17 to $0.21 from July 1, 2017 to June 30, 2018
  • From $0.21 to $0.24 from July 1, 2018 to June 30, 2019
  • From $0.24 to $0.27 from July 1, 2019 and after

Local governments will receive a portion of the gas and diesel tax increases over the next three years to fund roads. For a breakdown of the estimated additional amounts that will go to cities and counties for road funding over the next three years, click here (for cities) and click here (for counties).

Learn more about these changes to the motor fuel tax rates here. 

Compressed Natural Gas and Liquified Gas

Compressed natural gas tax will increase by eight cents over the next three years.

  • From $0.13 to $0.16 from July 1, 2017 to June 30, 2018
  • From $0.16 to $0.18 from July 1, 2018 to June 30, 2019
  • From $0.18 to $0.21 from July 1, 2019 and after

Liquified gas tax will increase by eight cents over the next three years.

  • From $0.14 to $0.17 from July 1, 2017 to June 30, 2018
  • From $0.17 to $0.19 from July 1, 2018 to June 30, 2019
  • From $0.19 to $0.22 from July 1, 2019 and after

Learn more here.