Franchise and Excise Taxes in Tennessee
Sole proprietors are not subject to the Tennessee franchise and excise taxes. If you’re doing business in several states, those states might consider your business to have nexus and therefore obligate you to pay taxes.
Tennessee Taxes Overview
The State of Tennessee imposes two taxes: the excise tax and the franchise tax. These are imposed on corporations and most limited liability companies. General partnerships and sole proprietorships are not subject to these taxes. LLCs themselves do not pay federal income taxes, only their members do. Tennessee, however, imposes the taxes on most LLCs. You must register for this through the Department of Revenue.
Taxation Details
The minimum franchise tax payable each year is $100. The excise tax rate is 6.5% of taxable income. General partnerships and sole proprietorships are not subject to the excise tax. Any remaining income that passes through to you personally from LLCs or LLPs will not be subject to further state taxation.
Seventeen types of entities are exempt from the taxes. The intention is that the two taxes are part of one scheme.