Small businesses in Nashville and other parts of the state are ready to feel the relief provided by the modified Tennessee Works Tax Act. Announced in early 2023, some of the legislative changes start to apply this year. They’re said to be part of the biggest tax cut in the history of the state.
If you need a last-minute guide to the updated law, this accounting firm explainer discusses the most relevant points for small business owners.
Filing Exemptions
The business tax filing threshold has been increased from $10,000 to $100,000 per jurisdiction. This means that businesses with annual gross sales of less than $100,000 are now exempt from filing an annual return. The Department of Revenue estimates that over 100,000 businesses are affected and are encouraging owners to take advantage of this major change.
“Deemed Location” Contractor Threshold
The gross sales threshold for taxpayers who perform contracts in counties or municipalities outside of their domiciles or the business’ physical location has also increased. From $50,000, the filing threshold has been doubled to $100,000. A “deemed location” is now only established when the contractor has annual gross receipts of more than $100,000 for that jurisdiction.
Per Jurisdiction Calculation
Threshold calculations are done on a per jurisdiction basis. Businesses with multiple locations under one jurisdiction must add together the gross sales of each location. If the total exceeds $100,000, the owner will have to file an annual business tax return.
Required Licenses
Being exempt from business tax filing doesn’t exempt you from license requirements. In fact, the need to acquire the proper license is even more important if you are part of the exemption, so you won’t be penalized for not filing your return.
The two types of licenses are:
- Minimal Activity License – This applies to businesses with annual gross sales of more than $3,000 but less than $100,000 within a given jurisdiction. The minimal activity license is awarded by the local county or incorporated municipality, and must be renewed annually for a fee. If there are multiple locations in one jurisdiction, a separate license must be obtained for each location.
- Standard Business License – This applies to businesses with annual gross sales of $100,000 or more, and must be secured for each location within a given jurisdiction. Upon filing the return and paying the due tax, the local county or incorporated municipality will automatically renew the standard business license for free.
Missing out on tax cut benefits is a mistake you don’t want to make. Seeking advice from a professional accounting firm ensures that you are always up-to-date with the latest in tax regulations.
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