Bartenders & Servers in Memphis, TN: taxes and retirement for 2026

For bartenders, servers, baristas and other workers paid largely in tips in Memphis, TN. Tennessee has no state income tax on wages or self-employment income. Here are the 2026 rules, a worked example and the official sources.

What's different in Memphis

Local income tax: No city income tax in Memphis.
Tennessee business tax: state business tax and City of Memphis business tax: A gross-receipts tax with rates set by business classification, filed with the Tennessee Department of Revenue; a business with $100,000 or more in gross receipts in a county or city must register for and pay it (minimum tax $22), while a location with more than $3,000 but under $100,000 needs only a minimal activity license.
City business license: Businesses inside Memphis city limits need a combined City of Memphis ($15) and Shelby County ($15) business license through the Shelby County Clerk. Under state rules, a location with gross receipts above $3,000 and under $100,000 needs a minimal activity license, and $100,000 or more needs a standard business license.
Also worth knowing: Tennessee has no personal income tax on wages or self-employment income; its Hall income tax on interest and dividends was repealed for tax periods beginning January 1, 2021 (https://www.tn.gov/revenue/taxes/hall-income-tax.html). The $3,000 / $100,000 license thresholds come from the Tennessee Department of Revenue (https://www.tn.gov/revenue/taxes/business-tax/registration-and-licensing.html); classification rates and the $22 minimum tax are at https://www.tn.gov/revenue/taxes/business-tax/due-dates-and-tax-rates.html. We found no Memphis ordinance for gig, app-based, or freelance workers.

Tennessee rules for bartenders & servers

State income tax (2026): Tennessee has no state income tax on wages or self-employment income. Tennessee does not tax wages or self-employment income. Its only individual income tax, the Hall tax on interest and dividends, was repealed for tax periods beginning on or after January 1, 2021.
Tennessee business tax (gross receipts): A tax on gross receipts, owed per county and city where you have $100,000 or more in sales; you then need a standard business license and must file returns. Between $3,000 and $100,000 you only need a $15 minimal activity license and do not pay the tax. The rate depends on the business classification and is a fraction of 1%: for example, 0.1875% for Classification 3 retailers (which includes many service businesses), 0.1% for Classification 4 contractors, and lower rates for wholesalers. The minimum is $22 per location ($44 inside a city that also levies the tax).
Tennessee franchise and excise tax: Applies to corporations, LLCs, LPs and business trusts, not to unincorporated sole proprietors. A single-member LLC owned by an individual is taxed as its own entity, because Tennessee only disregards SMLLCs owned by a corporation. Excise tax is 6.5% of net earnings and franchise tax is 0.25% of net worth, with a $100 minimum franchise tax for registered entities.
Tennessee professional privilege tax: A flat $400 a year, due June 1, for people licensed in Tennessee as attorneys, securities agents, broker-dealers, investment advisers or lobbyists. You pay it only once even if you hold more than one of these licenses.
Minimum wage (2026): Federal $7.25 an hour; tipped cash wage $2.13 an hour. Tennessee has no state minimum wage law, so the federal $7.25 applies to FLSA-covered employers. Tipped employees (more than $30 a month in tips) can be paid a $2.13 cash wage if tips bring them to $7.25 (U.S. DOL table, last updated July 1, 2026).
Marketplace contractor law (Public Chapter 648, 2018): Effective July 1, 2018, people who find work through an app or online marketplace are independent contractors, not employees, if the platform meets set conditions. The conditions include a written contractor agreement, no required hours, freedom to use other platforms and take other work, no required supplies or equipment, and no control over how the work is done. It does not cover rideshare (TNC) drivers or construction services.
IRS 20-factor worker classification test (Public Chapter 337, 2019): Since January 1, 2020, Tennessee uses the 20 factors in IRS Revenue Ruling 87-41 to decide whether a worker is an employee or a contractor. This applies to state wage and hour law, unemployment insurance, workplace safety (OSHA) and drug-free workplace programs. Workers' compensation keeps its own existing factors.
Voluntary Portable Benefit Plan Act (Public Chapter 131, 2025): Lets companies, including app-based companies, voluntarily pay into portable benefit accounts for independent contractors without that counting toward employee status. The accounts can fund health insurance, income replacement insurance, life insurance and retirement benefits. Any withholding from the worker's pay must be in a clear written agreement, and the worker must opt in and can opt out at any time.

Federal rules for 2026

No tax on tips (2025 to 2028)

Eligible workers in occupations that customarily receive tips can deduct up to $25,000 of qualified tips a year from federal taxable income, whether or not they itemize. The deduction shrinks for modified AGI over $150,000 ($300,000 joint). It is income tax only: Social Security and Medicare still apply to tips.

Tips must be reported

Employees must report cash tips of $20 or more in a month to their employer by the 10th of the next month. Tips you did not report go on Form 4137. Only reported tips count toward the deduction.

Overtime deduction

W-2 workers who are owed overtime under federal law can also deduct the overtime premium, up to $12,500 a year ($25,000 joint), with the same income phase-out.

Roth IRA

Without a workplace plan, a Roth IRA lets you save up to $7,500 in 2026 ($8,600 at 50 or older) and withdraw qualified money tax-free in retirement, subject to income limits.

A worked example

A bartender with $30,000 in wages and $15,000 in reported tips
Tips deduction	$15,000
Federal income tax without the deduction	$3,220
Federal income tax with it	$1,420
Federal income tax saved	$1,800

Single filer, standard deduction, 2026 brackets. Payroll taxes on tips are unchanged. Computed from 2026 IRS limits (Notice 2025-67, Rev. Proc. 2025-32) and the SSA wage base.

Free tools

Roth IRA growth calculator Quarterly tax calculator (for 1099 event work)

Guides by job and platform

Bartenders Servers Baristas Event staff and catering servers Hotel tipped staffs

Instawork Qwick Gigpro (now part of Qwick)

Questions

Is there a local income tax in Memphis?

No city income tax applies in Memphis. Tennessee has no state income tax on wages or self-employment income.

What local business taxes apply to self-employed bartenders & servers in Memphis?

Tennessee business tax: state business tax and City of Memphis business tax: A gross-receipts tax with rates set by business classification, filed with the Tennessee Department of Revenue; a business with $100,000 or more in gross receipts in a county or city must register for and pay it (minimum tax $22), while a location with more than $3,000 but under $100,000 needs only a minimal activity license.

Do I need a business license to freelance from home in Memphis?

Businesses inside Memphis city limits need a combined City of Memphis ($15) and Shelby County ($15) business license through the Shelby County Clerk. Under state rules, a location with gross receipts above $3,000 and under $100,000 needs a minimal activity license, and $100,000 or more needs a standard business license.

Do bartenders & servers in Tennessee pay state income tax?

Tennessee has no state income tax on wages or self-employment income. Tennessee does not tax wages or self-employment income. Its only individual income tax, the Hall tax on interest and dividends, was repealed for tax periods beginning on or after January 1, 2021.

Are there other Tennessee taxes for self-employed bartenders & servers?

Tennessee business tax (gross receipts): A tax on gross receipts, owed per county and city where you have $100,000 or more in sales; you then need a standard business license and must file returns. Between $3,000 and $100,000 you only need a $15 minimal activity license and do not pay the tax. The rate depends on the business classification and is a fraction of 1%: for example, 0.1875% for Classification 3 retailers (which includes many service businesses), 0.1% for Classification 4 contractors, and lower rates for wholesalers. The minimum is $22 per location ($44 inside a city that also levies the tax). Tennessee franchise and excise tax: Applies to corporations, LLCs, LPs and business trusts, not to unincorporated sole proprietors. A single-member LLC owned by an individual is taxed as its own entity, because Tennessee only disregards SMLLCs owned by a corporation. Excise tax is 6.5% of net earnings and franchise tax is 0.25% of net worth, with a $100 minimum franchise tax for registered entities. Tennessee professional privilege tax: A flat $400 a year, due June 1, for people licensed in Tennessee as attorneys, securities agents, broker-dealers, investment advisers or lobbyists. You pay it only once even if you hold more than one of these licenses.

What is the tipped minimum wage in Tennessee in 2026?

Tennessee uses the federal minimum wage of $7.25 an hour. Employers may pay tipped workers a cash wage of $2.13 an hour as long as tips bring them to the full minimum. Tennessee has no state minimum wage law, so the federal $7.25 applies to FLSA-covered employers. Tipped employees (more than $30 a month in tips) can be paid a $2.13 cash wage if tips bring them to $7.25 (U.S. DOL table, last updated July 1, 2026).

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Sources

State and local facts researched from official sources and independently re-checked; last verified October 2026, next scheduled review 2027-01-02. Educational information for 2026, not tax, legal or investment advice. Rules change; check the official sources listed and a tax professional for your situation. Gigaverse AI, Inc. is a financial technology company, not a bank, and not itself a registered investment adviser or broker-dealer.