Manufacturers May Elect Single-Sales Factor Apportionment in Tennessee

HB 0534 was signed by the Governor on April 26, 2017 which allows manufacturers in Tennessee to elect to use a single-sales factor apportionment method. The election provides:

For franchise tax and excise tax purposes, a taxpayer whose principal business in Tennessee is manufacturing may elect to apportion net worth and net earnings to Tennessee by multiplying such values by a fraction, the numerator of which is the total receipts of the taxpayer in Tennessee during the tax year and the denominator of which is the total receipts of the taxpayer from any location within or outside of Tennessee during the tax year. A Tennessee taxpayer’s principal business is manufacturing if more than 50 percent of the revenue derived from its activities in Tennessee is from fabricating or processing tangible personal property for resale and consumption off the premises.

The new election is effective for tax years beginning on or after Jan. 1, 2017.

TN Notice #17-11 - Single Sales Factor for Manufacturers

It has been reported that the election is "worth about $113 million for an estimated 518 Tennessee companies."