Best Tax Lawyers in Tennessee

About Tax Law in Tennessee, United States

Tax law in Tennessee covers a wide range of regulations and statutes that govern how individuals and businesses are taxed within the state. Unlike many other states, Tennessee does not have a broad-based personal income tax. For many years, the state imposed the Hall income tax on certain investment income, but this was fully phased out by 2021. However, Tennessee residents and businesses are subject to a variety of other taxes, including sales and use tax, franchise and excise taxes for businesses, property tax, and specific levies on goods such as gasoline and tobacco. Tax law in Tennessee includes requirements for tax collection, reporting, payment, and compliance, as well as procedures for audits, appeals, and enforcement actions.

Why You May Need a Lawyer

Seeking legal assistance for tax matters in Tennessee can be crucial in several scenarios. Individuals may need help if they are facing an audit by the Tennessee Department of Revenue or the Internal Revenue Service, if they have disputes over property tax assessments, or if they have been accused of tax evasion or underpayment. Business owners often require legal advice when setting up business structures for optimal tax treatment, complying with Tennessee’s franchise and excise taxes, or navigating complex sales and use tax requirements. Inheritance, estate, and gift tax issues can also require specialized legal assistance. Legal professionals help ensure compliance, resolve disputes, negotiate with tax authorities, and provide representation during hearings or court proceedings.

Local Laws Overview

Tennessee’s approach to tax is distinct:

• No general personal income tax, with the exception of phased-out Hall income tax on interest and dividends, which ended in 2021.
• Franchise and excise taxes apply to most business entities. The franchise tax is a minimum tax based on the greater of net worth or tangible property in the state, and the excise tax is based on net earnings.
• Sales and use tax applies to sales of tangible personal property and certain services at a statewide rate of 7 percent, with additional local rates up to 2.75 percent.
• Property tax is administered locally by county governments and is the principal source of funding for public schools and local services.
• Certain goods, such as gasoline, tobacco, and alcoholic beverages, are subject to state excise taxes.
• Tax compliance, reporting, and payment deadlines are set by state law, and failure to comply can result in penalties or interest charges.
• The Tennessee Department of Revenue administers most state taxes, manages audits and appeals, and issues guidance for taxpayers.

Frequently Asked Questions

Does Tennessee have a personal income tax?

No, Tennessee does not have a general personal income tax. The Hall income tax on dividends and interest was fully repealed as of 2021.

What is the sales tax rate in Tennessee?

The state sales tax rate is 7 percent, and local governments can add up to an additional 2.75 percent, making the maximum combined rate up to 9.75 percent in some areas.

Are retirement benefits taxed in Tennessee?

Retirement benefits, including Social Security, pensions, and IRA distributions, are not subject to state income tax in Tennessee.

How are property taxes calculated?

Property taxes in Tennessee are set and assessed by local counties and are based on the appraised value of your property. Assessment ratios and tax rates vary by county.

Do businesses pay income tax in Tennessee?

While there is no traditional corporate income tax, businesses must pay the franchise and excise taxes, which function similarly and are based on net earnings and property values.

What are my rights during a tax audit?

You have the right to be notified, to receive information about the audit process, to respond or provide documentation, and to appeal any audit findings through administrative or judicial review.

How does Tennessee handle tax penalties?

Taxpayers who fail to timely file returns or pay taxes due can face penalties and interest charges. Penalties vary depending on the nature and severity of the infraction.

Are there tax exemptions for nonprofit organizations?

Qualified nonprofit organizations may be eligible for state sales and use tax exemptions, but they must register and apply through the Tennessee Department of Revenue.

How can I appeal a property tax assessment?

You may first appeal to your county board of equalization. If you disagree with their decision, further appeals can be made to the State Board of Equalization and possibly to the courts.

Where can I get forms and guidance for Tennessee taxes?

Most tax forms and official guidance can be obtained directly from the Tennessee Department of Revenue, as well as from your local county assessor for property tax matters.

Additional Resources

If you are seeking help or more information on Tennessee tax law, the following resources can be useful:

• Tennessee Department of Revenue - Responsible for state tax administration, collections, and taxpayer assistance.
• County Assessor’s Office - Manages local property tax assessments.
• Tennessee State Board of Equalization - Handles property tax appeals and exemptions.
• Internal Revenue Service (IRS) - For federal tax questions and compliance.
• Legal Aid of Tennessee - Provides legal counseling and representation for low-income individuals in a variety of areas, including tax disputes.
• The Tennessee Bar Association - Can help connect you with a qualified tax attorney.

Next Steps

If you believe you have a tax issue or require legal advice regarding taxes in Tennessee, consider the following steps:

• Gather all relevant financial records, tax returns, and notices you have received.
• Identify the type of tax issue you are facing, such as audit, unpaid taxes, penalties, or business tax compliance.
• Contact the appropriate agency for clarification if your question is administrative, such as the Tennessee Department of Revenue or your local property assessor.
• If your issue is complex or you are facing enforcement action, consult with a licensed Tennessee tax attorney. Many attorneys offer initial consultations to help determine if legal representation is necessary.
• Prepare questions and documents before meeting with a lawyer for a more efficient and productive discussion.
• Take prompt action-waiting can result in additional fees or loss of rights to appeal.

Legal professionals with experience in Tennessee tax law can offer advice, negotiate with tax authorities on your behalf, and represent you in appeals or court proceedings if needed.