What Is a Minimal Activity Business License?

A minimal activity business license in Tennessee is a $15 annual permit for businesses with gross sales between $3,000 and $100,000 within a single county or city. Holders are exempt from Tennessee’s business tax and do not file a business tax return. The license exists under T.C.A. § 67-4-723 so that small operations, side businesses, and part-time ventures can stay legally registered without the paperwork of a full business license.¹

Who Needs One

Eligibility turns on one figure: gross sales within a single jurisdiction during the tax year.

If your sales in a county or city are more than $3,000 but less than $100,000, you are required to get a minimal activity license from the county clerk, and from the city official too if you operate inside the limits of a city that imposes business tax.¹ At this level you are exempt from the standard business tax and do not file a business tax return.²

If your gross sales within the jurisdiction are $3,000 or less, the license is optional. You can apply voluntarily, and some owners do because it helps when opening a business bank account or dealing with vendors, but there is no penalty for skipping it.¹

Once your gross sales in a jurisdiction reach $100,000 during a tax year, you move out of the minimal activity category. From that point you need a standard business license, you must file a business tax return, and you owe Tennessee business tax on gross receipts.¹ The return is due by the 15th day of the fourth month after your fiscal year ends, which for a calendar-year business is April 15.³ If you cross the threshold mid-year, the Department of Revenue may grant a single 30-day extension, and interest runs from the original due date whether or not an extension is granted.

County License, City License, or Both

Every county in Tennessee issues minimal activity licenses. Whether you also need a city license depends on your physical location. If your business operates inside the limits of an incorporated city that imposes business tax, you need a separate license from that city in addition to the county one.⁴

The $3,000 to $100,000 range is measured per jurisdiction, so county sales and city sales are evaluated separately. Each license costs $15.

How to Apply

Applications go through your county clerk’s office and, where it applies, your city recorder or city business tax office. Many counties also accept applications online through Tennessee’s TNTAP portal at tntap.tn.gov.

Before you file, gather the following:

Your federal Employer Identification Number if you operate as a partnership, corporation, or LLC. Sole proprietors without employees can usually use a Social Security Number instead.⁵
Your business’s physical operating address, not a P.O. Box. Home-based businesses may need a home occupation permit from the city before the application will be processed.
Your Tennessee business classification. The state uses categories such as 1A (food and beer for home consumption), 1B (building materials and hardware), and Classification 2 (general retail sales of tangible personal property), among others. Your classification sets the tax rate that would apply if your sales ever cross $100,000.⁶
Your business start date, meaning the date you first made sales in Tennessee.

The fee is $15 per jurisdiction, set by statute.¹ Online submissions usually process faster than paper applications. Once the clerk issues the certificate, Tennessee law requires you to post it prominently at your place of business, and you cannot legally operate until the license is in hand and displayed.⁴

Annual Renewal and Lapse Penalties

The license expires every year. Renewal means confirming that your gross sales still fall within the qualifying range and paying the $15 fee again. Deadlines vary by jurisdiction, so confirm the date with your county clerk well before it arrives.

Operating with a lapsed license is expensive out of proportion to the fee. Tennessee law authorizes a penalty equal to the license fee for each month or partial month you operate without a valid license. The Commissioner of Revenue can also impose an additional penalty of up to $250 per day for each day the violation continues.⁷ On a $15 license, that math goes bad quickly.

Records You Still Need to Keep

Being exempt from filing a business tax return does not mean you can stop tracking revenue. If the county or the state questions whether you really belong in the minimal activity tier, your records are what keep you there instead of being reclassified and billed for back taxes.

Keep documentation of gross receipts: sales slips, invoices, deposit records, and any Forms 1099-MISC you receive. The IRS recommends that business owners maintain records showing gross income, deductions, and credits, along with the supporting documents.⁸ Hold employment records for at least four years, and general business records for at least three years from the date you filed the return or two years from the date you paid the tax, whichever is later.

Federal Taxes Still Apply

The minimal activity license exempts you from Tennessee’s business tax. It does not exempt you from federal income tax or self-employment tax. This is the single most common misunderstanding: the word “exempt” on the state license refers only to the state license.

Sole proprietors report business income and expenses on Schedule C of federal Form 1040.⁹ If your net earnings from self-employment reach $400 or more in a year, you also owe self-employment tax, which covers Social Security and Medicare at a combined rate of 15.3%.¹⁰

File a Schedule C even in a loss year. Reporting a loss can offset other income on your return. The IRS treats an activity as a business when your primary purpose is earning income and you pursue it with regularity, which covers most ventures that qualify for a minimal activity license.

1
Justia. Tennessee Code 67-4-723 – License – Issuance and Renewal – Duty to Exhibit License – Use of Collected Funds
2
Justia. Tennessee Code 67-4-712 – Exemptions
3
Tennessee Department of Revenue. Business Tax Manual – February 2025 Update
4
Tennessee Department of Revenue. Registration and Licensing
5
Internal Revenue Service. Get an Employer Identification Number
6
Tennessee Department of Revenue. Classifications
7
Justia. Tennessee Code 67-4-1015 – Licenses – Penalties
8
Internal Revenue Service. What Kind of Records Should I Keep
9
Internal Revenue Service. About Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship)
10
Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes)