How Do I Avoid Excise Tax in Tennessee?

Tennessee Tax Overview

Tennessee has franchise, excise, and sales taxes. Some entities can claim exemption from certain taxes by filing with the Tennessee Taxpayer Access Point (TNTAP).

Franchise and Excise Tax Structure

The franchise and excise tax has two levels:

  • 6.5% excise tax on net earnings
  • $0.25 per $100 based on fixed assets or entity equity

Taxation and Penalties

Late or incorrect filing of Tennessee returns can result in penalties. The Tennessee Department of Revenue may impose penalties on small businesses that do not file their tax returns on time or correctly, including failure-to-file and failure-to-pay penalties, interest charges, and audits.

Specifics of Tennessee Excise Tax

What income is subject to TN excise tax? The excise tax applies to net earnings of corporations, foreign and domestic, arising from business done within Tennessee. All capital losses are claimed in the year incurred. Generally speaking, only general partnerships and sole proprietorships are exempt from the excise tax.

Exemptions and Procedures

You can file for an exemption using the Tennessee Taxpayer Access Point (TNTAP), without creating a logon. Visit TNTAP for more information. Seventeen different types of entities are exempt from the franchise and excise taxes, including family-owned noncorporate entities and LLCs.

Compliance and Taxation Guidelines

Regardless, before starting a business, buyers should hire competent professionals to determine the impact of excise and franchise taxes.

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