Tennessee

Tennessee is known for die-hard resistance to a state income tax. The major source of general state revenue is a sales and use tax (close to 60% of total state tax revenue), first levied in 1947. In 2002, the general rate was raised to 7%, with local add-ons allowed up to 2.5%. Food is taxed at lower rates. Other state taxes include a 6% levy on dividend and interest income, a 6% corporate income tax, and levies on inheritances (1.3% of state revenues in 2002), alcoholic beverages, tobacco, gross receipts, motor vehicle registration, and other items. There is no state property tax. Instead property taxes are collected by counties and municipalities, and are their major source of income. Almost half (47% in 2000) of total state and local revenues are collected by local governments and taxing units.

The state collected $7.798 billion in taxes in 2002 (down almost $250 million from 2001), of which 59.9% came from the general sales tax, 17.6% from selective sales taxes, 10.7% from license fees, and 6.4% from corporate income taxes. In 2003, Tennessee ranked 47th among the states in terms of combined state and local tax burden, which amounted to about 7.7% of income.

The following table from the US Census Bureau provides a summary of taxes collected by the state in 2002.