2025 Legislative Summaries

Municipalities with Outstanding Annual Audits

Public Chapter 18 requires the Department to comply with instructions from the Comptroller of the Treasury to withhold up to 15 percent of annual sales tax revenue allocated to municipalities found to have two or more outstanding late annual audits.

Effective Date: July 1, 2025

Department of Revenue Administration Fee Reduction

Public Chapter 355 reduces the Department’s administration fee on the local option sales tax, local occupancy tax on short-term rentals, business tax, coal severance tax, and local tax surcharges from 1.125% to 0.75%.

Effective Date:  July 1, 2025

Annual Population Certification

Public Chapter 501 requires, for purposes of calculating population-based tax allocations, the Department of Economic & Community Development to certify the population of each county and municipality, and the aggregate population of the state, prior to July 1 of each year in which there is not a decennial federal census.

Effective Date: January 1, 2026

Local Government Action Inconsistent with State Law

Public Chapter 514 requires the Department to withhold state-shared tax allocations from a local government if a three-judge panel finds that the local government has violated state law or the Constitution of Tennessee, until the local government has resolved the violation.

Effective Date: July 1, 2025

Net Earnings Calculation

Public Chapter 343 authorizes a taxpayer to add back to net earnings any amounts taken as deductions from federal taxable income and any amounts subtracted from net earnings under state excise tax law, provided such adjustments do not result in a lower excise tax base than would be calculated absent such adjustments.

Effective Date: May 2, 2025

Agricultural Cooperative Association Exemption

Public Chapter 455 exempts a subsidiary of an agricultural cooperative association from franchise and excise tax regardless of whether the taxpayer is organized as a corporation, limited liability company, limited liability partnership, or other legal entity.

Effective Date: May 9, 2025

Community Investment Tax Credit Modification

Public Chapter 496 revises the method for calculating the community investment tax credit for financial institutions making qualified loans to eligible housing entities by basing the credit on the month-end average unpaid principal balance of the loan, rather than a percentage of the unpaid balance of the loan as of December 31.

Effective Date: January 1, 2026

Hemp-Derived Cannabinoid Products Tax and Directory

Public Chapter 526 makes the following changes to the taxation and regulation of hemp-derived cannabinoid products:

• Repeals the additional 6% sales tax on hemp-derived cannabinoid products sold at retail effective January 1, 2026;
• Requires that each brand of hemp-derived cannabinoid product be registered with the Department of Revenue, effective January 1, 2026; and
• Establishes a new tax on hemp-derived cannabinoid products sold at wholesale at the following rates:
  • $0.02 per milligram of hemp-derived cannabinoid in each hemp-derived cannabinoid product
  • $50.00 per ounce of weight for hemp-derived cannabinoid products sold in the form of hemp plant parts or hemp flower
  • $4.40 per gallon of liquid hemp-derived cannabinoid product, or at a proportional rate if the liquid hemp-derived cannabinoid product is in a container that is not measured by gallonage

Learn more in the Department’s important notice here.

Effective Date: January 1, 2026

Exemption for Wine Sold on Winery Premises

Public Chapter 477 exempts from liquor-by-the-drink tax the sale of wine for consumption on the premises of a winery, a farm wine producer, or satellite facility, including sales of wine by the glass, samples for tasting, and wine sold at retail in sealed containers.

Learn more in the Department’s important notice here.

Effective Date: July 1, 2025

Occupancy Tax Application to First 30 Days of Stay

Public Chapter 364 subjects the first 30 days of occupancy in a hotel or short-term rental unit to the local occupancy tax, regardless of the overall length of stay.

This public chapter applies to rental agreements entered, renewed, or amended on or after July 1, 2025.

Learn more in the Department’s important notice here.

Effective Date: May 5, 2025

Maximum Local Occupancy Tax Rate for Municipalities

Public Chapter 372 authorizes a municipality to levy a hotel occupancy tax at a maximum rate of 4%, and prohibits a municipality from increasing the tax rate by an amount that would result in a cumulative tax in the municipality in excess of 8%.

Effective Date: May 5, 2025

Maximum Local Mineral Severance Tax Rates

Public Chapter 285 establishes new maximum mineral severance tax rates for county legislative bodies to consider adopting:

• Tax periods beginning prior to July 1, 2025: $0.15/ton
• Tax periods beginning between July 1, 2025 – June 30, 2030: $0.20/ton
• Tax periods beginning between July 1, 2030 – June 30, 2035: $0.25/ton
• Tax periods beginning on or after July 1, 2035: $0.30/ton

Effective Date: April 24, 2025

Quarterly Reporting Requirements for Bondsmen and Court Clerks

Public Chapter 396 requires licensed professional bondsmen to file quarterly reports with the Department stating the total number of bail bonds issued and total amount of liability in each county for the preceding quarter, beginning October 25, 2025.

This public chapter also requires court clerks to file quarterly reports with the Department stating the total number and total amount of bail bonds accepted for the preceding quarter, beginning October 25, 2025.

Learn more in the Department’s important notice here.

Effective Date: July 1, 2025

Municipal Court Case Litigation Fee Increase

Public Chapter 459 increases, from $1.00 to $2.00, the fee collected in municipal court cases that is used to defray the costs of training and continuing education courses for municipal court judges and clerks.

Effective Date: July 1, 2025

Privilege Tax on Litigation

Public Chapter 486 establishes a $2.00 privilege tax on ligation in all civil and criminal cases in the county, other than those instituted in juvenile or municipal courts, to be allocated to the court clerk continuing education account.

Effective Date: January 1, 2026

Retail Accountability Program 2 Sunset Removal

Public Chapter 335 makes permanent the Department’s Retail Accountability Program reporting requirement for certain wholesalers of food, candy, and nonalcoholic beverages.

Effective Date: May 2, 2025

Extension of Broadband Infrastructure Sales and Use Tax Exemption

Public Chapter 449 extends until June 30, 2027, the sales and use tax exemption for purchases and leases of equipment, machinery, software, ancillary components, appurtenances, accessories, or other infrastructure that is used in whole or in part by broadband communications service providers or internet access service providers to produce broadband communications services and provide internet access.

Learn more in the Department’s important notice here.

Effective Date: May 9, 2025

Temporary Sales Periods for Bonda Fide Religious Institutions

Public Chapter 493 increases, from two to four, the number of temporary sales periods that a bona fide religious institution may participate in and be exempt from registering to collect sales tax on sales directly to consumers made during such temporary sales periods.

Effective Date: May 21, 2025

Allocation of Sales Tax Collected on Sales of Tires

Public Chapter 508 directs the Department to allocate 5.5% of the 7% state sales and use tax collected on the sale of new or used tires to the state highway fund on sales occurring on or after July 1, 2025.

Effective Date:  May 21, 2025

Uranium Enrichment and Nuclear Energy Production Facilities

Public Chapter 517 makes the following changes to sales and use tax:

• Authorizes a nuclear energy production facility to qualify for the pollution control credit as a certified green energy production facility,
  
• Deletes the statutory provision stating the enrichment of uranium materials on a cost-plus or “toll enrichment basis” is a taxable service, and
• Exempts the purchase of industrial machinery primarily used for enriching, converting, or reconverting uranium materials if performed pursuant to a contract.

Learn more in the Department’s important notice here.

Effective Date: July 1, 2025

Disabled Veteran Placard

Public Chapter 73 authorizes the Department to issue a disabled veteran placard free of charge to eligible disabled veterans in lieu of a disabled veteran license plate or upon payment to eligible disabled veterans that already have a disabled veteran license plate.

Effective Date: July 1, 2026

Certificate for Compliance with Tennessee Financial Responsibly Law

Public Chapter 83 requires the Commissioner of the Department of Revenue, instead of the Commissioner of the Department of Safety, to issue a certificate evidencing that a vehicle owner has satisfied the financial responsibility requirements by making cash deposit or posting a bond with the Department of Revenue.

Effective Date: January 1, 2026

Manufactured Home Definition

Public Chapter 112 aligns Tennessee’s definition of “manufactured home” with the federal definition established in 42 U.S.C. § 5402(6).

Effective Date: July 1, 2025

Antique Emergency Vehicles in Community and Educational Events

Public Chapter 143 authorizes an antique emergency vehicle registered as an antique motor vehicle to be used for participation in, or transportation to and from, community or educational events, including displays at fairs, festivals, and schools.

Effective Date: July 1, 2025

County Clerk Assistance During Closures           

Public Chapter 193 authorizes a county clerk to request a county clerk in a contiguous county provide assistance with processing vehicle registrations and renewals during a public health emergency, temporary office closure, or natural disaster.

Effective Date: April 11, 2025

Mail Order Vehicle Registration Renewal and Decal Fee Increase

Public Chapter 326 increases the service fee county clerks may charge for mailing license plates to vehicle registrants from $5 to $7, and increases the service fee for mailing vehicle registration renewal decals from $2 to $3.

Effective Date: July 1, 2025

Unclaimed or Abandoned Motor Vehicle Portal

Public Chapter 457 extends until October 1, 2026, the deadline by which the Department must establish an electronic database for law enforcement and other entities to report towed vehicles if the owner is not present at the time the motor vehicle is towed.

The public chapter also changes the notification requirement from law enforcement agencies, garagekeepers, and tow companies to owners and lienholders of abandoned, immobile, or unattended vehicles prior to the creation of the portal, to be sent using a national delivery carrier with electronic tracking within three business days.

Effective Date: May 9, 2025

New License Plates

Public Chapter 479 designates various new specialty license plates including:

This public chapter clarifies that the plate proceeds from the Historic Jonesborough new specialty earmarked license plate may be used to support the Chester Inn State Historic Site.

This public chapter designates a new Paratrooper motorcycle license plate.

In addition, this public chapter extends until July 1, 2026, the timeframe for meeting the issuance requirement of 1,000 plates for the following license plates:

Vapor Product Wholesale Tax and Directory

Public Chapter 324 establishes a wholesale tax on vapor products at the rate of 10% of the wholesale cost price, beginning July 1, 2025.

This public chapter also establishes a vapor product directory. By August 1, 2025, and annually each year thereafter, manufacturers of vapor products sold for retail sale in Tennessee must register each vapor product with the Department. The Department will publish the vapor product registry on its website on January 1, 2026, and products not included in the vapor product directory cannot be sold for retail sale in the state.

This public chapter also requires that retailers purchase vapor products only from licensed distributors or wholesalers of tobacco products beginning August 1, 2025.

This public chapter also requires the Department of Revenue to conduct inspections at the retail locations where such products are sold, and the wholesale locations where such products are distributed, and confiscate non-compliant vapor products that are available for sale.

Learn more in the Department’s important notice here.

Effective Date(s): July 1, 2025, for tax provisions; August 1, 2025, for licensure and vapor product registration