by John Steadman
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In April, the Tennessee General Assembly passed the Tennessee Works Tax Act. The Tennessee Works Tax Act is estimated to cut roughly $400 million in taxes for Tennessee families and small businesses through a series of tax breaks. One of the most significant of these tax cuts is the changes made to the Business Tax.
Beginning Dec. 31, 2023, the threshold of annual gross receipts that require a business to file a business tax return in each jurisdiction is increasing from $10,000 to $100,000. This means that many small businesses that were previously required to file a business tax return with the state this year will now no longer be required to do so next year. Only businesses whose annual gross receipts in a given jurisdiction exceed $100,000 will need to file a business tax return next year. The Tennessee Works Tax Act also increases the gross receipts threshold for contractors who perform contract work in Tennessee from $50,000 to $100,000 per jurisdiction.
One thing to note about this change is that this increases the filing threshold on a per jurisdiction basis not necessarily per location basis. If your business has multiple locations in the same jurisdiction, that business would be required to file if the total receipts from these locations exceeds the new $100,000 threshold. For instance, if a business owner had three locations in Johnson City where all three locations had gross receipts of $40,000, because the total receipts in the same jurisdiction of Johnson City exceed the new $100,000 threshold, this business would be required to file a business tax return.
These changes to the filing requirements for business taxes also affect how to obtain a business license from each county and/or city. If your gross receipts per jurisdiction exceed $100,000, then you will need to file a business tax return with the state of Tennessee. Once your business tax return is filed and the taxes are paid, the jurisdiction, i.e. the local county and/or incorporated municipality, will issue you a business license for that jurisdiction. If your gross receipts per jurisdiction are between $3,000 and $100,000, now all you need to do is obtain a Minimal Activity License from that jurisdiction. You do not need to file a business tax return with the state. The Minimal Activity License is granted by each jurisdiction for a fee of $15. Just like a normal business license, you will need to get a new Minimal Activity License each year. Unfortunately, at this time, it’s not clear how the Minimal Activity License will be obtained from each jurisdiction. While they will most likely be obtained at the courthouse, but we cannot say for certain. Be sure to check in with us as we get closer to Dec. 31, 2023, to find out for sure! Finally, if your gross receipts per jurisdiction are below $3,000, then you are not required to obtain a business license.
These changes are an enormous benefit to small businesses in Tennessee! If you have any questions about how these changes affect you or your business, don’t hesitate to reach out to us at Blackburn, Childers, and Steagall for assistance.