HB 189 – SB 397
FISCAL NOTE
Fiscal Review Committee
Tennessee General Assembly
March 1, 2025
Fiscal Analyst: Elizabeth Bransford | Email: elizabeth.bransford@capitol.tn.gov | Phone: 615-741-2564
HB 189 – SB 397
SUMMARY OF BILL: Eliminates the professional privilege tax beginning in the tax year
ending on May 31, 2027.
FISCAL IMPACT:
STATE GOVERNMENT
REVENUE General Fund
FY25-26 & Subsequent Years NET ($90,379,100)
EXPENDITURES General Fund
FY25-26 & Subsequent Years ($852,800)
LOCAL GOVERNMENT
REVENUE Mandatory
FY25-26 & Subsequent Years $152,300
Assumptions:
• Pursuant to Tenn. Code Ann. § 67-4-1703(a), the occupational privilege tax is a $400 tax on
engaging in specified occupations in Tennessee, due and payable on June 1 of each year.
• Pursuant to Tenn. Code Ann. § 67-4-1701, privilege tax collections are required to be
deposited into the General Fund.
• The proposed legislation requires the occupational privilege tax remain in effect at the
current rate of $400 for the tax year ending on or before May 31, 2026.
• The first year for which the occupational privilege tax will be repealed is the tax year ending
May 31, 2027, for which the tax is currently due on June 1, 2026. As a result, the first year
that collections will be impacted by this legislation will be FY25-26.
• Based on information provided by the Department of Revenue (DOR), the total number of
taxpayers subject to the professional privilege tax for tax year ending May 31, 2026 is
estimated to be 226,881.
• The recurring decrease in state revenue is estimated to be $90,752,400 (226,881 x $400) in
FY25-26 and subsequent years.
• Pursuant to Tenn. Code Ann. § 67-4-1709, any employer, including any governmental
entity, is authorized to remit the occupational privilege tax on behalf of persons subject to
the tax who are employed by such employer.
HB 189 – SB 397 2
• There are approximately 2,132 state employees for which the State of Tennessee will pay
the occupational privilege tax on June 1, 2026. For the purposes of this analysis, this
number is assumed to remain constant into perpetuity.
• The recurring decrease in state expenditures is estimated to be $852,800 (2,132 x $400) in
FY25-26 and subsequent years.
• Based on information provided by DOR, approximately 87.69 percent of taxpayers in these
occupations are estimated to be out-of-state. Therefore, approximately 12.31 percent of
taxpayers live in-state.
• Fifty percent of tax savings, or $5,533,320 [($90,752,400 - $852,800) x 12.31% x 50%], will
be spent in the economy on sales taxable goods and services.
• The current sales tax rate is 7.0 percent; the average local option sales tax rate is estimated
to be 2.5 percent; the effective rate of apportionment to local government pursuant to the
state-shared allocation is estimated to be 3.617 percent.
• The net recurring increase in state sales tax revenue as a result of 50 percent of tax savings
being spent in the economy is estimated to be $373,323 [($5,533,320 x 7.0%) – ($5,533,320
x 7.0% x 3.617%)] in FY25-26 and subsequent years.
• The total recurring increase in local sales tax revenue as a result of 50 percent of tax savings
being spent in the economy is estimated to be $152,343 [($5,533,320 x 2.5%) + ($5,533,320
x 7.0% x 3.617%)].
• The total net recurring decrease in state revenue is estimated to be $90,379,077
($90,752,400 - $373,323) in FY25-26 and subsequent years.
• Occupational privilege tax returns are filed electronically and the department does not have
any staff dedicated to this tax. Therefore, there will be no staff reductions as a result of
eliminating the occupational privilege tax.
CERTIFICATION:
The information contained herein is true and correct to the best of my knowledge.
Bojan Savic, Executive Director