Most manufacturing equipment is tax exempt. Energy fuels and water used by manufacturers are taxed at 1.5 percent. The state levies no property tax. Counties and cities levy property tax on real and personal property. Tax rates of industrial and commercial real property vary with locality.
Property is assessed by county assessors.
The franchise tax is based on issued and outstanding stock, surplus and undivided profits apportioned to Tennessee at the end of the fiscal year. The franchise tax applies to corporations, foreign or domestic, doing business in Tennessee. For companies doing business within and without Tennessee, the capital stock, surplus and undivided profits are to be apportioned using the three-factor formula to determine liability. Property taken from inventory to be used in demonstration is exempt from a sales and use tax if returned to inventory within 120 days. All inventories of finished goods held by manufacturers and merchants are exempt from sales and use taxation provided they are sold to a business for resale.