Chapter 14 of 1710% of exam
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Tennessee does not tax wage income, and the Hall tax on certain investment income was fully repealed effective 2021.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.