The Tennessee General Assembly has approved roughly $400 million in tax cuts for Tennessee families and businesses through Senate Bill 275/House Bill 323, the Tennessee Works Tax Act.
The legislation includes a three-month grocery tax holiday and a paid family leave tax credit for companies to support Tennessee families. It also provides tax relief for Tennessee businesses and increases the state’s economic competitiveness through several changes to Tennessee’s tax laws.
Supporting Families: Grocery Tax Holiday
- No sales tax on food and food ingredients sold in grocery stores from August 1, 2023 through October 31, 2023.
- Food and food ingredients are defined as liquid, concentrated, solid, frozen, dried, or dehydrated substances that are sold to be ingested or chewed by humans and are consumed for their taste or nutritional value. Food and food ingredients do not include alcoholic beverages, tobacco, candy, or dietary supplements.
- Local governments will be reimbursed by the state for any sales tax revenue lost during the period.
Supporting Families: Paid Family Leave Credit
- For the next two years, companies offering paid family leave may be eligible for a tax credit against their franchise and excise tax liability.
- Eligible companies can receive a credit based on the amount of wages reimbursed to employees.
Boosting Small Businesses: $150 Million in Tax Cuts
- Allows companies to deduct the first $50,000 in net earnings from the excise tax.
- Exempts $500,000 of business property from the franchise tax minimum measure.
- Increases the business tax filing threshold to $100,000 per jurisdiction.
- All businesses with more than $3,000 in gross receipts will continue to be required to obtain a local business license.
- Local jurisdictions will be held harmless for the decrease in local business tax revenue through an adjustment to the amount of state business tax revenue that is shared with local governments.
- Reduces the business tax rate on Classification 5A taxpayers from 0.3% to 0.1%.
Ensuring Future Economic Growth
- Aligns Tennessee with over 30 states by adopting "single sales factor" apportionment for franchise and excise tax, and establishes a three-year transition period.
- Conforms with the federal bonus depreciation provisions of the 2017 Tax Cuts & Jobs Act.
- Extends the carryforward period for franchise and excise tax credits to 25 years, an increase from the previous period of 15 years.
- Expands the business tax manufacturing exemption to include storage facilities within a 10-mile radius.
- Adopts changes to sales tax law to provide taxpayers that sell across state lines with clear rules on which state gets to tax the sale.