Tax Overview and Rates
Tennessee franchise and excise taxes apply to corporations, LLCs, limited partnerships, and business trusts registered in or operating in Tennessee. The franchise tax rate is 0.25% times the greater of a business’s net worth or real and tangible property. The minimum tax is $100. There is no maximum. The excise tax is like an income tax. The excise tax rate is 6.5% of a business’s Tennessee taxable income.
Tax Exemptions
There are some exemptions. For example, certain LLCs, limited partnerships and limited liability partnerships whose activities are at least 66% farming or holding personal residences where one or more of its partners or members reside are exempt. Non-corporate entities that are at least 95% family owned and at least 66.67% of the entity’s income is derived from activities that produce passive investment income or a combination of farming and passive investment income are also exempt.
By default, LLCs themselves do not pay federal income taxes, only their members do. Tennessee, however, imposes a franchise tax and an excise tax on most LLCs. You must register for this tax through the Department of Revenue (DOR).
Businesses with less than $10,000 in taxable sales sourced to a county are exempt from the state business tax in that county, and businesses with less than $10,000 in taxable sales sourced to a municipality are exempt from the municipality business tax.
Who Must File?
Who must file a Tennessee franchise tax return?
Tennessee imposes a franchise tax and an excise tax on most LLCs. Register through the Department of Revenue.
Who is exempt from business tax in Tennessee?
Businesses with less than $10,000 in taxable sales sourced to a county or municipality are exempt from business tax.