Unemployment Insurance Tax

Every employer in Tennessee is required to fill out a Report to Determine Status, Application for Employer Number (LB-0441). Submitting this form will determine the status of your liability for unemployment insurance. If you are liable for unemployment insurance premiums in Tennessee, you will be assigned an eight-digit employer account number (e.g., 0000-000 0).

Professional Employer Organizations (PEO) must also file an Application for Client Number (LB-0910) for each client in Tennessee.

Who is Liable to Pay Unemployment Taxes?

Liability depends on the type and nature of the business, the number of workers employed, and the amount of wages paid.

Employers who are liable to pay unemployment taxes include the following:

• An employing unit that is liable under the Federal Unemployment Tax Act (FUTA) and has at least one employee in Tennessee regardless of the number of weeks employed or amount of payroll.
• An employing unit that pays $1,500 or more in total gross wages in a calendar quarter, or has at least one employee during twenty different weeks in the current or preceding calendar year regardless of the wages. The employee does not have to be the same person for twenty weeks. It is not relevant if the employee is full-time or part-time.
• An employer who has acquired all or part of the business of another employer who was already liable. 
• An employing unit that is a non-profit organization as described under section 501(c) (3) of the IRS code and has four or more employees during each of 20 weeks in the current or preceding calendar year. Officers of a nonprofit corporation are counted even if such officers do not receive remuneration for their services from the nonprofit corporation.
• All state and local government units and political subdivisions.
  
• An employing unit that paid cash wages of $1,000 or more in any calendar quarter of the current or preceding calendar year for domestic services.

An employing unit engaged in agricultural labor if:

• It employs 10 or more employees for 20 weeks or more in the current or preceding calendar year.
• It pays $20,000 or more in gross wages in a calendar quarter

Employees Paid Through a Professional Employer Organization (PEO)

Each Professional Employer Organization (PEO) which co-employs one (1) or more individuals with a client in Tennessee must complete and file the Report to Determine Status, Application for Employer Number (LB-0441). The PEO will then be assigned an Aggregate State Number. In addition, the PEO must file an Application for Client Number (LB-0910) for each Tennessee client and must notify the Department of Labor and Workforce Development in writing of any client additions or deletions during the quarter in which the change occurs.

The PEO must keep separate records and must file separate quarterly Premium and Wage Reports (LB-0456/LB-0851) for each client under their Client Number. The client’s premium rate each quarter will be the premium rate for the PEO’s Aggregate State Number. Detailed information on how the premium rate for the Aggregate State Number is calculated is provided in the Handbook for Employers. 

New employer premium rates apply to PEOs that do not qualify for rates based on their own experience. The new employer premium rate will be assigned based on the reserve ratio of the PEO’s 2-digit NAICS classification.

A client is jointly and severally liable with the PEO for premiums on all applicable employee wages covered under the professional employer agreement unless the PEO has posted a $100,000 corporate surety bond with the Administrator of the Division of Employment Security.

Seasonal Employers

Employers meeting certain requirements in the law may be designated as Seasonal Employers. Wages paid by Seasonal Employers are potentially excludable from being used in the determination of unemployment benefits. Seasonal Employers carry on all work operations and employ workers during a regularly recurring period of twenty-six consecutive weeks or less within a calendar year.

Employers may apply for Seasonal Employer designation by submitting form LB-3304, Election to be designated a Seasonal Employer, between September 1 and October 31. If approved by the department, the employer’s seasonal designation will be effective January 1 to December 31 of the following calendar year. Employers must reapply for Seasonal Employer designation on an annual basis.

To be eligible for Seasonal Employer designation, an employer must:

1.  Have an experience-rated premium rate.
2.  Have no unpaid liability to the department.
3.  Have not been delinquent in filing or paying quarterly reports in the four quarters preceding the application.

Seasonal Employers are required to post notices of the department’s seasonal employer designation, notify its seasonal workers in writing that seasonal wages are potentially excludable from unemployment coverage, and provide reasonable assurance of re-employment in the following active seasonal period.