Unemployment compensation tax

2.7% for most new employers to Tennessee.

Exceptions are:

• 5% mining
• 7% construction
• 5.5% manufacturing (sect 33)

Collected by both the federal and state governments, Tennessee's portion is a credit against part of the federal taxes owed. Unemployment Compensation Tax is paid by employers only and cannot be deducted from employee's wages.

The first $9,000 in wages paid to each employee is subject to this tax. Taxable wages include: tips, meals, lodging and other payments in kind. Non-taxable wages include: payments made by employer for insurance, retirement, or annuities.

After 3 years as an employer in the state of Tennessee, an employer’s history can be reviewed and a different lower rate assigned.

Source:  State of Tennessee, Dept. of Labor & Workforce Development