Entrepreneurs in Nashville, TN: taxes and retirement for 2026

For solo founders and small-business owners in Nashville, 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 Nashville

Local income tax: No city income tax in Nashville.
Tennessee business tax / Nashville-Davidson County business tax license: Every Tennessee business with more than $3,000 in taxable receipts needs a business license from the county clerk (and city, where the city levies business tax). Businesses with more than $3,000 but less than $100,000 in gross receipts need only a minimal activity license, renewed yearly, and do not register for or pay business tax. Businesses with $100,000 or more need a standard license and must register, file a return and pay at least the $22 minimum business tax to the Tennessee Department of Revenue.
Davidson County business tangible personal property (Tax Schedule B): Businesses in Davidson County must file Tax Schedule B with the Assessor of Property by March 1 each year (March 2 in 2026), reporting equipment such as computers, hand and power tools, furniture and vehicles registered to the business or to an individual operating as a business. Not filing leads to a forced assessment and a penalty.
City business license: Yes, if taxable receipts are over $3,000 a year (Tennessee DOR). The Davidson County Clerk issues the business tax license or minimal activity license; the fee is $30 inside Nashville city limits (Urban Services District) or $15 elsewhere in Davidson County (General Services District).
Also worth knowing: No city or county income tax (Tennessee is listed among states with no individual income tax; Tax Foundation 2026, secondary). The $3,000 license threshold comes from Tennessee DOR article BUS-13 (https://revenue.support.tn.gov/hc/en-us/articles/360057134532-BUS-13-Business-Licenses-Overview); the Davidson County Clerk page lists only the fees. No local gig-worker or freelancer pay ordinances were found.

Tennessee rules for entrepreneurs

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 Its only individual income tax, the Hall tax on interest and dividends, was repealed for tax periods beginning on or after January 1, 2021.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.
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

Entity choice changes your taxes

A single-member LLC is taxed like a sole proprietorship unless it elects S-corp status. The S-corp can lower payroll tax but adds payroll, a separate return and a reasonable-salary requirement.

Retirement as a tax lever

With no employees, a Solo 401(k) allows up to $72,000 in 2026. With employees, a SEP IRA or a 401(k) must generally cover eligible staff too.

Quarterly estimated taxes

No one withholds tax from self-employment income, so you generally pay estimates four times a year if you expect to owe $1,000 or more. For 2026 income the federal dates are April 15, June 15 and September 15, 2026, and January 15, 2027. Paying 100% of last year's tax (110% if your AGI was over $150,000) in four equal installments avoids the underpayment penalty.

Self-employment tax

On top of income tax, self-employed people pay 15.3% on 92.35% of net profit: 12.4% Social Security up to the 2026 wage base of $184,500, plus 2.9% Medicare with no cap. Half of it is deductible.

A worked example

A solo founder with $200,000 of profit in 2026
Self-employment tax as a sole proprietor	$28,234
Solo 401(k) maximum as a sole proprietor	$61,677
Payroll tax saved as an S-corp on a $100,000 salary	$12,934
Solo 401(k) maximum as that S-corp	$49,500

Federal figures only. S-corps add running costs (payroll, an 1120-S return, state fees) not shown here. Computed from 2026 IRS limits (Notice 2025-67, Rev. Proc. 2025-32) and the SSA wage base.

Free tools

S-corp vs Solo 401(k) calculator Solo 401(k) vs SEP IRA calculator Quarterly tax calculator

Guides by job and platform

Solo founders Small business owners Online sellers Food truck owners Self-Employed Workers

Amazon (Selling on Amazon) eBay Gumroad Kajabi

Questions

Is there a local income tax in Nashville?

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

What local business taxes apply to self-employed entrepreneurs in Nashville?

Tennessee business tax / Nashville-Davidson County business tax license: Every Tennessee business with more than $3,000 in taxable receipts needs a business license from the county clerk (and city, where the city levies business tax). Businesses with more than $3,000 but less than $100,000 in gross receipts need only a minimal activity license, renewed yearly, and do not register for or pay business tax. Businesses with $100,000 or more need a standard license and must register, file a return and pay at least the $22 minimum business tax to the Tennessee Department of Revenue. Davidson County business tangible personal property (Tax Schedule B): Businesses in Davidson County must file Tax Schedule B with the Assessor of Property by March 1 each year (March 2 in 2026), reporting equipment such as computers, hand and power tools, furniture and vehicles registered to the business or to an individual operating as a business. Not filing leads to a forced assessment and a penalty.

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

Yes, if taxable receipts are over $3,000 a year (Tennessee DOR). The Davidson County Clerk issues the business tax license or minimal activity license; the fee is $30 inside Nashville city limits (Urban Services District) or $15 elsewhere in Davidson County (General Services District).

Do entrepreneurs 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 entrepreneurs?

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.

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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.