Tennessee Payroll Guide

 

Tennessee Payroll Tax Guide (2026)

Tennessee sets unemployment premium rates twice a year rather than once, and the chart in force from 1 July 2026 is Table 6, the cheapest of six, so experienced employers pay between 0.01 and 10.00% on a 7,000 dollar wage base while new employers pay 2.70%.[1]

10 min read • Reviewed by Rajanikant Patel CPA • Verified • Sources: TDLWD, IRS
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Quick Facts

Tennessee payroll at a glance

Tennessee runs a single state payroll tax. There is no income tax withholding on wages, so employers fund unemployment premiums alone on the first $7,000 each worker earns, and employees pay nothing to the state.[1]

State income tax withholding
None on wages [5]
UI taxable wage base
$7,000 per employee [1]
New employer UI rate
2.70% [1]
Experienced UI rate range
0.01%–10.00% [1]
Employee-paid state payroll tax
None [1]
Social Security wage base
$184,500 [2]
FUTA net rate
0.6% = $42 per employee [10]
State minimum wage
$7.25 per hour (federal floor) [7]
Local minimum wage ordinances
None [7]
UI registration trigger
Every employing unit must complete an online registration so the… [1]
Exempt salary threshold
$35,568 per year [9]
Additional Medicare threshold
Over $200,000, employee only [3]
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What changed for Tennessee payroll in 2026

Six items moved for Tennessee employers this year. Anything below is what have changed since the 2025 tables, so a rate card carried over from last year will be wrong in at least one place.

Premium Table 6 renewed 1 July 2026 Wage base holds at 7,000 jobs4TN replaces TNPAWS Still no state tax on wages Federal salary test back to 684 No FUTA credit reduction expected
Assuming a Tennessee premium rate lasts all year: Almost every other state assigns one unemployment rate per calendar year. Tennessee assigns two, one effective 1 January and one effective 1 July, driven by the trust fund balance on the preceding 31 December and 30 June. Payroll software loaded with a January rate will happily keep using it through December unless somebody opens the July notice in Employer e-Services and updates it.
Estimate

2026 Tennessee payroll tax calculator

Enter one employee’s annual gross wages to see what the employer owes, what comes out of the paycheque, and the true cost of employment.

Tennessee · 2026 rates · per employee, per calendar year
Cash wages subject to payroll tax, before any withholding.
Your exact rate comes from Tennessee Department of Labor and Workforce Development each year.
FUTA is 6.0% less a 5.4% credit where the state has no outstanding federal loan.

Employer pays

UI, on first $7,000–
FUTA, on first $7,000–
Social Security, 6.2%–
Medicare, 1.45%–
Employer payroll tax–

Withheld from the employee

Social Security, 6.2%–
Medicare, 1.45%–
Additional Medicare, 0.9% over $200,000–
Withheld from employee–
True cost of employment–
Employer tax as % of wages–
Total payroll tax, both sides–

Tennessee does not withhold state income tax from wages, so there is nothing to add here.

Rates & Nexus

Payroll tax rates & the nexus question

Tennessee runs one state payroll tax. The table below is the whole state layer for 2026.[1]

The state payroll taxes

TaxPaid by2026 rateWage base
UIEmployer0.01%–10.00%; 2.70% new$7,000

Premium Rate Table 6 applies from 1 July 2026. Table 6 is the chart the department uses when the Unemployment Insurance Trust Fund holds 850 million dollars or more, and it is the most favorable of the six charts. The balance measured on 30 June and on 31 December decides which chart runs for the following six months, so Tennessee is one of the few states where an employer can carry two different rates inside one calendar year. Tennessee has been on Table 6 continuously since January 2016. Premium Rate Table 6 applies from 1 July 2026, the most favourable of the six charts, used when the trust fund holds $850 million or more.[1]

Who has to register

Every employing unit must complete an online registration so the department can decide liability. Liability attaches to an employing unit that is liable under the Federal Unemployment Tax Act and has at least one Tennessee employee, that pays $1,500 or more in total gross wages in a calendar quarter, or that has at least one employee during twenty different weeks. A domestic employer is liable once it pays cash wages of $1,000 or more in any calendar quarter. A 501(c)(3) organization is liable with four or more employees during twenty weeks, and agricultural employers have their own thresholds. Liable employers receive an eight digit employer account number.[1]

Multistate and remote employees

When an employee works in more than one state, the four-part test below decides which state the wages are reported to. The tests run in order: you stop at the first one that gives an answer.

  • 1. Localisation of service→
  • 2. Base of operations→
  • 3. Place of direction & control→
  • 4. Employee’s residence

One remote employee is usually enough. A single person working from home in Tennessee generally creates an obligation to register and report wages here, even if the business has no office, property or customers in the state.

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Compliance

Registration & return filing

Registration is online and free. The unemployment account and, where one exists, the withholding account are opened separately and carry different numbers.[1]

How to register

  • Cross the wage threshold→
  • Employer e-Services inside jobs4TN.gov→
  • Receive account number→
  • File & deposit online

Every employing unit must complete an online registration so the department can decide liability. Liability attaches to an employing unit that is liable under the Federal Unemployment Tax Act and has at least one Tennessee employee, that pays $1,500 or more in total gross wages in a calendar quarter, or that has at least one employee during twenty different weeks. A domestic employer is liable once it pays cash wages of $1,000 or more in any calendar quarter. A 501(c)(3) organization is liable with four or more employees during twenty weeks, and agricultural employers have their own thresholds. Liable employers receive an eight digit employer account number.[1]

Returns, reports & due dates

FormWhat it isDue
Quarterly wage reporting and premium payment through Employer e-Services on jobs4TN.gov; the department no longer publishes a paper filing route for routine quarterly reports.Quarterly unemployment returnQuarterly
Form 941Federal quarterly returnLast day of the month after quarter end
Form 940Federal unemployment, annualJanuary 31
New hire reportReport of newly hired employeesWithin 20 days of start date

Quarterly unemployment returns are due the last day of the month following each quarter. A return filed one day late is delinquent, and in most states the penalty attaches to the return, not the payment.[1]

Pricing

Payroll Pricing

Simple, transparent pricing, no setup fees, no year-end surprises. One flat charge per pay run.

Your Biweekly Payroll Statement
Line items the big providers quietly bill for
NO HIDDEN FEES
CROWNGLOBE
Setup fee
one-time onboarding
billed
extra
$0
Every payroll run
each pay cycle
billed
extra
$0
Off-cycle payroll
corrections & bonuses
billed
extra
$0
Year-end filings
W-2s, 1099s & more
billed
extra
$0
All you actually pay
Per employee, per pay run
$6 /emp
Plus a flat $40 minimum per pay run. That’s the whole bill.
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Wage Base

Subject wages vs. exempt payments

Not every dollar an employee receives is a taxable wage. The split below governs what goes into the unemployment wage base and what is reported at year end.[1]

Subject wages

  • Salaries, hourly pay, overtime and piece rates
  • Commissions, bonuses and incentive pay
  • Most cash tips reported by the employee
  • Vacation, holiday and paid sick leave when taken as wages
  • Severance and payments in lieu of notice
  • The cash value of meals and lodging provided as compensation
  • Employer contributions to a non-qualified deferred compensation plan

Not subject

  • Reimbursements of genuine business expenses under an accountable plan
  • Employer contributions to a qualified retirement plan
  • Employer-paid premiums for accident and health insurance
  • Most third-party sick pay after the sixth calendar month
  • Payments to a genuine independent contractor
  • Workers compensation benefits

The wage base is per employer, per year, not per job. If you hire someone in August who already earned $7,000 elsewhere, your unemployment clock still starts at zero. The one exception is a successor employer taking over an existing payroll, who inherits the wages already paid.

Reference

Glossary of key terms

Taxable wage base
The slice of each employee’s annual pay that unemployment tax is calculated on. In Tennessee that is $7,000 for 2026. Earnings above it are still wages, they are simply no longer taxed for unemployment.
Experience rating
The method Tennessee Department of Labor and Workforce Development uses to set each employer’s own unemployment rate from its history of claims. Employers with fewer charged claims move down the schedule; those with more move up.
New employer rate
The rate assigned before an employer has enough history to be experience rated. It normally applies for two to three years, then the account moves onto the experience schedule.
Reserve account
The running balance of contributions an employer has paid in, less the benefits charged against it. The ratio of that balance to taxable payroll is what drives the assigned rate.
Successor employer
A business that acquires another’s payroll may inherit both its experience rate and the wages already paid toward the wage base for the year. Getting this wrong is a common acquisition error.
Localisation of service
The first of four tests deciding which state a multistate employee’s wages are reported to. If substantially all the work is in one state, that state wins and the remaining tests are never reached.
FUTA credit reduction
A reduction in the 5.4% federal unemployment credit applied to states that have carried an outstanding federal loan for two or more consecutive Januaries. It raises the effective FUTA rate and is settled each November.
Supplemental wages
Bonuses, commissions, awards and similar payments made outside the regular payroll cycle. Many states set a separate flat withholding rate for them.
Federal, State & Local

Tennessee payroll tax, layer by layer

Federal tax applies everywhere and is the larger number. The state layer is what changes when you cross a border.

Layer 1: Federal

TaxRate2026 base
Social Security6.2% each side$184,500
Medicare1.45% each sideNo limit
Additional Medicare0.9% employee onlyOver $200,000
FUTA, standard0.6% net$7,000
Federal income taxPer Form W-4No limit

Tennessee has no FUTA credit reduction for 2026, so the standard 0.6% net rate applies, $42 per employee. The final list is not published until 10 November 2026.[10]

Layer 2: State

TaxRate2026 base
UI, new employer2.70%$7,000
UI, experienced0.01%–10.00%$7,000
Income taxNone on wagesn/a

Layer 3, county & city: no payroll tax, but a wage floor

No county or city in Tennessee levies its own payroll or income tax withheld by employers. The local layer shows up as minimum wage, not as tax.[7]

The state minimum wage is $7.25 an hour, which is the federal floor, effective 2009-07-24. The tipped cash wage is $2.13. No local ordinance sets a higher floor. The United States Department of Labor records that Tennessee has no state minimum wage law and that employers subject to the Fair Labor Standards Act must pay the federal rate of $7.25 an hour. No Tennessee city or county rate appears in the federal listing.[7]

Overtime exemption is a separate test. A salaried employee is exempt from overtime only above $35,568 a year ($684.00 a week) federal FLSA standard salary level, and only if the duties test is also met. Paying a salary is not by itself enough.[9]

FAQ

Tennessee payroll FAQs

No. Tennessee does not tax wage income at all, so a Tennessee paycheck shows federal income tax, Social Security and Medicare and nothing for the state. The Hall income tax, which applied to interest and dividends rather than wages, was repealed for tax periods that begin on 1 January 2021 or later. There is no Tennessee equivalent of Form W-4 for employees to complete.

Twice a year. The balance of the Unemployment Insurance Trust Fund is measured on 30 June and on 31 December, and that balance decides which of six premium rate charts applies for the following six month period. A rate assigned in January can be replaced on 1 July, so employers should look for a mid year notice rather than assuming one rate covers the whole year.

Table 6, which the department uses when the trust fund holds 850 million dollars or more. It is the most favorable of the six charts. Rates on Table 6 start at 0.01% for an employer with a reserve ratio of 20.0 or better and reach 10.00% for an employer at negative 20.0 or worse.

New employers are assigned 2.70% until they have enough history for the reserve ratio formula to produce a rate of their own. The reserve ratio is the balance in the employer’s account divided by average taxable payroll for the three most recent years. At 2.70% on a 7,000 dollar base, the most a new employer pays for one full time worker in 2026 is $189.

Every employing unit registers online so the department can determine liability. Liability follows from being liable under the Federal Unemployment Tax Act with at least one Tennessee employee, from paying $1,500 or more in gross wages in a calendar quarter, or from having at least one employee during twenty different weeks. Domestic employers become liable at $1,000 of cash wages in a quarter, and a 501(c)(3) organization becomes liable with four or more employees during twenty weeks.

It was retired. TNPAWS and the Third Party Upload system became non-operational on 2 May 2025, and everything now runs through Employer e-Services inside jobs4TN.gov. The same portal handles unemployment tax and unemployment benefits work and supports paperless account registration, so an employer that never migrated needs to establish access before its next quarterly filing.

$7,000 per employee per calendar year. Once an employee reaches that in wages from you, no further unemployment tax is due on that employee for the rest of the year. The count restarts on 1 January and does not carry over from a previous employer.

$7.25 an hour, which matches the federal floor. No local ordinance sets a higher rate. The tipped cash wage is $2.13.

Verification

Sources & methodology

  1. Tennessee Department of Labor and Workforce Development – Unemployment Insurance Tax Rates
  2. Tennessee Department of Labor and Workforce Development – Premium Rate Chart
  3. Tennessee Department of Labor and Workforce Development – Unemployment Insurance Tax
  4. Tennessee Department of Labor and Workforce Development – Unemployment Tax System Modernization Project
  5. Tennessee Department of Revenue – Hall Income Tax
  6. United States Department of Labor, Employment and Training Administration – Significant Provisions of State Unemployment Insurance Laws, January 2026
  7. United States Department of Labor, Wage and Hour Division – State Minimum Wage Laws
  8. United States Department of Labor, Wage and Hour Division – Minimum Wages for Tipped Employees
  9. United States Department of Labor, Wage and Hour Division – Salary Levels for the Executive, Administrative and Professional Exemption
  10. Internal Revenue Service – Topic no. 759, Form 940 and Federal Unemployment Tax
  11. United States Department of Labor, Employment and Training Administration – FUTA Credit Reductions
  12. Social Security Administration – Contribution and Benefit Base
  13. Tennessee Department of Labor and Workforce Development – UI Tax Employer Accounts Offices
  14. Tennessee Department of Labor and Workforce Development – Department Forms
Methodology: every rate, threshold and due date on this page was taken from the administering agency’s own published material for the 2026 tax year, checked on Oct 1, 2026. Where a federal figure applies it comes from the IRS, SSA or US Department of Labor. 5 data points on this page could not be confirmed against a primary source and are either omitted or marked as not published, rather than estimated. Rates change, and some change mid-year, so confirm against your own rate notice before running a payroll.
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