Payroll tax in Tennessee: What employers need to know [Updated 2026]
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As certain as cowboy boots and country music in Nashville, payroll taxes cannot be avoided by business owners in Tennessee. Apart from FICA taxes like Medicare taxes and Social Security tax, companies must also pay state payroll taxes. However, these rules vary from one state to another, so it's crucial to be knowledgeable about tax laws in all the states where your employees work.
Tennessee has one of the most straightforward payroll tax structures in the country: no state income tax (making it one of only nine such states) and a single employer-side payroll obligation—unemployment insurance. While that sounds simple, companies must clearly understand their UI obligations, filing deadlines, and payment methods to avoid penalties from the Tennessee Department of Labor and Workforce Development.
About Tennessee payroll taxes
As an employer in Tennessee, it's important to know that the Tennessee Department of Revenue oversees the collection and administration of state payroll taxes. When you hire a new employee, you must start paying payroll taxes on their first day of employment, including Social Security tax, Medicare taxes, and unemployment insurance tax. Tennessee has no local payroll taxes, nor is there a state income tax, meaning employers are not required to withhold state income tax from employee paychecks.
It's your responsibility to withhold federal income tax from your employee's wages based on their W-4 forms before they receive their take-home pay. Tennessee employers pay state unemployment insurance taxes on the first $7,000 of pre-tax wages paid to each employee annually.
Unemployment insurance tax
If an employer has even just one employee in Tennessee, they must pay state unemployment taxes, regardless of the length of employment or payroll amount. If you are responsible for paying these taxes, the Department of Labor and Workforce Development will assign you a Tennessee unemployment eight-digit employer account number. In 2026, new employers pay a flat rate of 2.7% on the first $7,000 of each employee's wages—the same taxable wage base that has been in place for several years.
Tennessee employers must pay state and federal unemployment taxes under the Federal Unemployment Tax Act (FUTA) per pay period. Experienced employers receive an annual rate notice based on their reserve ratio—the balance in their UI account relative to their average taxable payroll. A higher reserve ratio results in a lower premium rate.
Who pays | Employer |
|---|---|
Tax rate | 0.01%-10.00% |
Taxable wage limit | First $7,000 per employee, per year |
Maximum tax | $700 per employee, per year |
Payroll tax due dates in Tennessee
The Tennessee Department of Labor and Workforce Development requires that wage and premium reports be submitted to the Department quarterly and are due within one month after the end of each calendar quarter. The Premium Report includes fields to report the number of employees on an employer's payroll in each month of the quarter.
First quarter (January-March): Due April 30
Second quarter (April-June): Due July 31
Third quarter (July-September): Due October 31
Fourth quarter (October-December): Due January 31
The penalty for late payment of employer taxes is calculated at a monthly rate of 5% or any fraction thereof, starting from the due date until the taxes are paid. The maximum penalty is 25% of the taxes owed, while the minimum is $15.
How to submit payroll taxes in Tennessee
Whether you're a small business owner or a corporation in Tennessee, it's crucial to understand the tax deductions and payment deadlines to comply with local laws. Here's how to submit payroll taxes.
File electronically
Tennessee employers must submit their quarterly premium and wage reports electronically per state law. Filing can be done through TNPAWS, the TN Premium and Wage Reporting System.
Failure to comply with this law can result in penalty charges. After submitting the report, employers can choose to pay their premiums directly or send an email request to the account holder. You can make payments in ACH Debit or ACH Credit.
Rippling's full-service payroll software
Tennessee may only have one state payroll tax—unemployment insurance—but that doesn't mean payroll is effortless, especially as you add more employees or hire across multiple states. Rippling's payroll software makes payroll processing a breeze: it calculates the correct taxes for every employee every pay period—including correctly handling moves across state lines—and files your federal and Tennessee state payroll taxes on time, automatically. With Rippling, all compliance work is automated, and you're always in sync with the latest tax regulations without lifting a finger.
Frequently Asked Questions
Are there local payroll tax laws in Tennessee?
No. Tennessee has no local payroll taxes, no county income taxes, and no city-level income taxes. Combined with Tennessee's complete absence of a state income tax, this means Tennessee employers have no income tax withholding obligations whatsoever—at either the state or local level. The only state payroll obligation for Tennessee employers is unemployment insurance (UI), paid quarterly to the Department of Labor and Workforce Development. Employers still need to handle all federal withholding requirements (income tax, Social Security, Medicare), but Tennessee's own payroll tax footprint is as minimal as it gets.
Is there a Tennessee income tax?
No, there’s no income tax withholding from your taxable wages in Tennessee.
What is Tennessee's UI new employer rate and taxable wage base in 2026?
In 2026, new Tennessee employers pay a flat unemployment insurance (UI) rate of 2.7% on the first $7,000 of each employee's wages. The $7,000 taxable wage base has remained consistent for several years, making Tennessee one of the lower wage-base states. After the initial new employer period, experienced employers receive an annual rate notice from the Department of Labor and Workforce Development based on their reserve ratio—the balance in their UI reserve account relative to their average taxable payroll. A higher reserve ratio results in a lower premium rate. All Tennessee UI taxes must be filed and paid quarterly through TNPAWS (the TN Premium and Wage Reporting System) by electronic submission, as required by state law.
Are nonprofit organizations subject to payroll taxes in Tennessee?
Yes, with some nuance. Nonprofit organizations in Tennessee are liable for state unemployment insurance (UI) taxes if they have had four or more employees for 20 weeks in the current or preceding calendar year. However, 501(c)(3) organizations have a choice: they can either pay quarterly UI contributions at the standard rate (like other employers), or they can elect "reimbursement" status—where they reimburse the state dollar-for-dollar for any UI benefits paid to their former employees, rather than paying premiums upfront. The reimbursement option can save money for nonprofits with stable workforces and few layoffs, but carries higher risk during periods of significant workforce reductions. Nonprofits must file a written election with the Tennessee Department of Labor and Workforce Development to opt into the reimbursement method.
Do employers need workers’ compensation in Tennessee?
Tennessee employers do not need workers’ compensation unless they work in construction or have more than five employees.
Disclaimer
Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.
Author
Vanessa Kahkesh
Content Marketing Manager, HR
Vanessa Kahkesh is a content marketer for HR passionate about shaping conversations at the intersection of people, strategy, and workplace culture. At Rippling, she leads the creation of HR-focused content. Vanessa honed her marketing, storytelling, and growth skills through roles in product marketing, community-building, and startup ventures. She worked on the product marketing team at Replit and was the founder of STUDENTpreneurs, a global community platform for student founders. Her multidisciplinary experience — combining narrative, brand, and operations — gives her a unique lens into HR content: she effectively bridges the technical side of HR with the human stories behind them.
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