Starting a Business

 

Below you will find some helpful information for starting a business in Marshall County. For a list of useful departments for new and existing business owners click here

Introduction: What it takes to turn your dream into reality

A business is built on a dream. Your dream. You may dream of economic freedom, financial stability, being your own boss or developing an idea that will change the world.

The reality? Starting a business takes hard work, dedication, money, time, and a viable business plan.

How to Get Started

  • Explain Your Idea to Others
    Write down how you will explain your idea to outsiders (employees, lenders, and potential clients) and how you expect your idea/business/service to work.
  • Identify Your Market Niche
    It is important to identify the niche you intend to fill.
  • Analyze the Market and Your Competition
    Your analysis may come from your base of experience or industry contacts. If you are entering a new field in which you have little experience, you may need to conduct formal marketing studies, review trade journals, use friends as a focus group or observe the competition.
  • Prepare a Business Plan
    You will find many guides to business planning at a bookstore or public library. The business plan outlined below is designed to give sufficient detail for outside lenders or investors to judge the feasibility and subsequent risk of your business venture.
  • Read The Small Business Technical Assistance Guide
    This manual is an excellent guide for establishing and building a business in Tennessee. It is filled with the information, details and resources available to help you become a success!

Links:
Small Business Technical Assistance Guide
The Department of Revenue's New Business Information
Instructions for Opening a Business in Tennessee

Sales Tax (Who is liable?)

In Tennessee, the responsibility for sales tax rests solely on the dealer who provides the taxable transaction or service. The statute provides that the dealer may pass the tax on to the customer but failure to do so does not relieve the dealer of his responsibility for timely tax payment to the state.

Sales tax registration applies to any person or company who manufactures, distributes or retails tangible personal property within the state. Sales tax registration also applies to persons who rent or lease tangible personal property. Some examples are grocery stores, mail-order companies and retail computer stores including those that sell software.

The tax is due to be paid on the return for the period in which the taxable event occurs even if the tax is not collected from the customer during that time. For example, a charge sale is made during June, the tax must be paid by the dealer on the June return even though the customer may not pay the account until July.

Use Tax

When the sales tax is not paid to the supplier by a user and consumer of tangible personal property, the user will become personally liable for the tax. This occurs generally when a Tennessee consumer purchases articles from an out-of-state dealer not registered for Tennessee tax. It also arises when a dealer extracts inventory items purchased on a resale certificate for his business or personal use. Use tax is equivalent to the sales tax on both the state and local level. Use tax is due even when a citizen or non-registered entity imports taxable tangible personal property into Tennessee for use.

Tennessee is aggressively involved in an audit-sharing program with several other states. When an auditor in the other state finds that a Tennessee consumer has purchased something without paying tax to the out-of-state supplier, the auditor will provide the name and address of the business or citizen to the Tennessee Department of Revenue and the use tax will be assessed. Penalty and interest will be assessed when applicable. This is a program that will probably grow substantially in the future.

Local Option Tax

Local dealers in a county or city which has adopted the local option tax, making sales of tangible personal property for use and consumption and delivering possession anywhere within the state of Tennessee, are liable for the local sales tax. Vendors located outside the state shipping tangible personal property to a consumer in a local option county on and after the effective date of a local option tax are liable for the collection of any local use tax due on a sale to a consumer in a local option county or city. Local sales and use tax rates vary throughout Tennessee from 1% to 2.75%. However, if an out-of-state dealer has no physical location in Tennessee, he may collect a combined tax rate of 9.25% (7% state rate plus 2.25% local rate). The commissioner of Revenue will collect the local option tax for all counties or cities imposing the tax concurrently with the administration and collection of the state sales and use tax. The return form used in reporting state and use tax is to be used in reporting and paying the local sales tax. Generally no special registration is needed to collect, report and pay the local tax.

Registration

All dealers engaged in the business of selling tangible personal property and taxable services, businesses using tangible personal property upon which the appropriate sales or use tax has not been paid, are required to submit an Application for Sales and Use Tax Certificate of Registration and obtain a certificate of registration from the department. After a proper application has been submitted for a Certificate of Registration, an account is established by the department for the individual or other legal entity for the address indicated on the application. Monthly, quarterly or annual sales and use tax returns will then be sent to the registered dealer for reporting and paying any tax due to the department.

Also, after a dealer in Tennessee is properly registered with the Department of Revenue for sales tax purposes, he may execute a Certificate of Resale for the tangible personal property which he will resell and furnish it to his supplier in lieu of the sales and use tax due thereon.

For taxpayers who must register for taxes, a new registration form has been designed. It is a single form that will allow the taxpayer to register for the various required taxes at one time. After use of this application, if needed, the form will be revised to make it even more efficient. This generic form should make it easier to register a new business for required permits, licenses, certificates, etc., for doing business in Tennessee.

Links:
Registration Application and Instructions
General Revenue Provisions

 

Mailing Date

If a due date falls on a Saturday, Sunday or legal holiday, the due date is extended until the next business day. Returns mailed through the U.S. mail shall be deemed filed and received by the department on the date shown by the post office cancellation mark on the envelope. If the post office cancellation mark is illegible, erroneous or omitted, the date received stamped by the department will be used to determine if the return was timely filed. (Note: Those taxpayers required to make payment in immediately available funds must do so in a manner that makes the funds immediately available to the state no later than the due date.)

Penalties and Penalty Waivers

Penalty is imposed for the late filing of a tax return and/or late payment of taxes owed the state. Penalty is computed at the rate of 5% per month, or any fractional part thereof, from the due date to the date the taxes are paid. The maximum penalty is 25% of the taxes due, and the minimum is $15. Penalties may be waived in delinquency or deficiency cases if the taxpayer had one of several reasonable causes listed in the statute. Waivers can also be issued in delinquency cases if the taxpayer has a good two-year filing record with the department and no willful disregard of the law or gross negligence is involved. Petitions for waiver of penalties must be submitted in writing by the taxpayer and will be reviewed by the commissioner or her delegate. Waiver of penalty exceeding $15,000 must be approved by the attorney general.

Interest

Interest is imposed on any taxes not paid by the statutory due date even if an extension of time has been granted. The interest rate is announced on July 1 each year by the commissioner. The current interest rate is computed from the due date to the date the taxes are paid. Interest cannot be waived.

Refunds

Taxpayers may claim a refund for any taxes overpaid provided that a claim with proper proof is filed within three years from December 31 of the year in which the payment was made. Overpayments reflected on a franchise and excise tax return as a result of pre-payments and claimed for refund by the taxpayer will be construed as a valid claim for refund by the department. Corporate taxpayers have the option to apply franchise and excise taxes overpayments as a credit to next year's estimated tax liability. Corporate taxpayers should allow four to six weeks processing for a refund check to be issued. Interest at the same rate of assessments will be paid on any refund not made within 45 days from the date received by the department. Claims over $15,000 must be approved by the attorney general.

Audits and Assessments

Generally, all tax returns filed with the Department of Revenue are subjected to some type of office audit or examination to ensure that the appropriate taxes have been paid. An office audit consists of a computer math audit and/or a manual examination of the return by a trained auditor or technician. If additional information is needed to complete an audit, the taxpayer will be contacted by the department. The taxpayer will be notified in writing of any adjustment(s) made to the return.

If a taxpayer is selected for a field audit, he or she will be contacted by the department to set up a time for the audit which will be convenient to the taxpayer. The taxpayer will be advised in advance of the records needed for the field audit. A field audit usually involves tax returns filed for the previous three years. When the audit is completed, the auditor will leave a copy of the report with the taxpayer who will be given time to review it. The auditor will make any necessary changes to the report before issuing a notice of assessment involving a tax deficiency.

Links:
Business Tax Registration
Small Business Administration
Tennessee Small Business Development Center
NAM Small & Medium Manufacturers

 
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