Forming your business entity in Delaware—specifically, a corporation—gives you a lot of flexibility, but you may still need to follow local laws depending on what state you operate in.
Specifically, if you do business in Tennessee, you need to register with the state. We’ll walk through the process and simplify it. But first, how can you tell whether you’re legally doing business in Tennessee?
When to register as doing business in Tennessee
Delaware C corps—and all other corporations formed outside of Tennessee—are referred to as “foreign” corporations by the State.
Tennessee statutes do not specifically define what is considered doing business in the state. However, Tennessee statutes provide that the following activities would not require you to register with the State:
Defending or settling a lawsuit
Having a bank account in the state
Selling through independent contractors
When To Register To Collect Sales Tax In Tennessee
Every state has rules about when a company is required to pay sales tax. These are called sales tax nexus rules.
You can think of the nexus as a special version of that state’s border; if you perform certain business activities within that border, you fall into the state’s sales tax nexus, and you’re required to register for and collect state sales tax.
Typically, these actions take the form of buying and selling goods and services.
In Tennessee, the sales tax nexus rules only apply to sellers who sell physical goods or services to Tennessee residents.
Until 2018, selling or buying non-physical goods—like subscriptions to streaming services, SaaS memberships, etc.—did not, generally speaking, qualify you for sales tax nexus. After an important court ruling in 2018, that changed. Now, if you buy or sell non-physical goods or services in a state, you may fall within its sales tax nexus.
Tennessee sales tax nexus (physical goods and property)
If you have physical presence in Tennessee, then you will likely need to collect and remit sales tax. You may be physically present in a state if you have warehouses, retail spaces, or employees and/or representatives of the business in the state.
You will need to pay sales tax as long as you have physical presence regardless of any minimum thresholds. You can learn more about physical presence for sales tax purposes through the State’s website.
Tennessee sales tax nexus (non-physical goods and property)
The new state sales tax laws applying to non-physical (ie. internet) sales allow you to qualify for sales tax nexus even without physical presence or goods. In Tennessee, you need to cross a certain threshold to qualify.
You will need to collect and remit sales tax if you collect $100,000 or more in retail sales from Tennessee in the previous 12-month period.
If you would like to take a deep dive, you can check out the State’s website.
As usual, this isn’t legal advice—just a guide. If you’re not 100% clear on whether you fall within Tennessee’s sales tax nexus, it’s best to confer with your legal counsel and/or an accountant that has expertise in Tennessee’s legal code and tax regulations.
How to register to do business in Tennessee
- Select a name under which to do business. This doesn’t have to be the name you registered when incorporating in Delaware, but it can be.
- Fill out an application. You’ll need to file a Application for Certificate of Authority to the Tennessee Secretary of State along with a Delaware Certificate of Good Standing.
- Pay the fee. Now you pay the Tennessee Secretary of State a $600 filing fee.
- Submit your Application for Certificate of Authority.
- Wait. Processing typically takes two to four weeks.
Once you’re approved to operate as a qualified foreign business in Tennessee, you’ll need to comply with certain requirements.
Compliance has a qualified business in Tennessee
To stay in compliance and continue legally doing business in Tennessee, you need to meet two requirements: maintaining a registered agent and filing your annual report. On top of that you will also need to pay your franchise and excise tax.
Registered agent in Tennessee
Your registered agent in Tennessee is your point of contact with local authorities. If you don’t have a physical address for your company in Tennessee, it may be advantageous to find a registered agent to receive state notices on your behalf.
Foreign corporations are required to have a registered office in Tennessee. The office cannot be a P.O. box, rather it must be a physical address of your registered agent or a licensed registered agent service.
Your registered agent will forward any important information, such as business mail, to you. There are a number of firms that contract out registered agents. They typically cost $50 – $100 per year.
Annual reporting in Tennessee
Every two years, you must file a statement with the State, updating any changes to the company address or the composition of the Board and officers. You’ll include info like:
- The legal name of your business
- The name and address of your registered agent
- The names and addresses of board members, managers, and officers
Your annual report has a $20 filing fee.
Paying your franchise and excise tax
Tennessee has a franchise and excise tax. The franchise tax is based on the greater of net worth or the book value of real or tangible personal property owned or used in Tennessee. The excise tax is based on net earnings or income for the tax year. For more information paying your franchise and excise tax, please see the following guidance from Tennessee’s Department of Revenue.
Registering for sales tax in Tennessee
If you meet the requirements to collect sales tax in Tennessee, you will need to register with the Tennessee Department of Revenue. You can register to collect sales tax through the Tennessee Taxpayer Access Point (TNTAP) provided by the Tennessee Department of Revenue.
Hiring and paying employees in Tennessee
When you hire a new employee in Tennessee, federal and state laws require that you report new hires to the state within 20 days of their hire. You can report your new hires online.
Your payroll provider should be able to take care of paycheck withholdings, but it’s up to you to register as an employer with the State and set up an online employer account.
For a comprehensive guide of your responsibilities, Tennessee provides the following information.
The easiest way to register your business in Tennessee
To register your business in Tennessee, you’ve got to keep track of a lot of moving parts. Failing to file the right forms, provide the right information, or stay on top of compliance laws can lead to serious headaches.
Capbase makes it easy. When you incorporate your Delaware corporation on Capbase, we will generate the required information needed to register to do business in Tennessee and keep you up to date on any required filings.
The compliance calendar inside your Capbase account will notify you of upcoming fees, reporting, or other requirements, so you can keep your startup in good standing with Tennessee state officials.
Written by Greg Miaskiewicz
Security expert, product designer & serial entrepreneur. Sold previous startup to Integral Ad Science in 2016, where he led a fraud R&D team leading up to a $850M+ purchase by Vista in 2018.
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