Tennessee Taxes
Tennessee does not tax wages but does tax construction materials. This chapter covers the state income-tax position and sales or use tax on materials.
No income tax on wages
Tennessee does not tax wage income, and the Hall tax on certain investment income was fully repealed effective 2021. There is no state income-tax withholding on payroll, though federal income-tax withholding still applies, so a Tennessee employer completes federal Form W-4 but no state withholding form.
Sales and use tax on materials
A lump-sum real-property contractor is treated as the consumer of the materials it permanently installs and owes Tennessee sales or use tax on the cost of those materials, rather than collecting tax from the owner like a retailer. The tax is a cost the contractor must build into the bid.
State-specific details
State exam facts
- State regulator
- Tennessee Board for Licensing Contractors (TBLC), Department of Commerce and Insurance
- Passing score
- 73%
- Scored questions
- 50
- Time limit
- 140 minutes
Does Tennessee require a state contractor license?
Yes. The Tennessee Board for Licensing Contractors (TBLC) licenses contractors under T.C.A. Title 62, Chapter 6. A license is required before bidding at $25,000 or more for general building work, $3,000 for masonry, and any dollar amount for electrical/plumbing/mechanical.
What is on the Tennessee Business and Law exam?
The Business and Law exam is 50 questions, 140 minutes, and requires 73% to pass. The monetary limit is the lesser of ten times net worth or ten times working capital; a reviewed or audited CPA financial statement is required for a limit above $1,500,000.
What are Tennessee's bid-law and lien rules?
Bidders must disclose license information under §62-6-119. Tennessee lien law (T.C.A. §66-11) gives the prime contractor a one-year enforcement period, and there is a 5% retainage-escrow rule (§66-34-104). Tennessee has no state income tax on wages.
Sources: https://www.tn.gov/commerce/regboards/contractor.html