Tennessee Franchise and Excise Tax: Complete 2025 Guide for Businesses
Tennessee is one of a handful of states with no individual income tax, yet every Tennessee business faces a mandatory combined franchise and excise tax reported on Form FAE 170. Understanding how this tax is calculated and when it is due is the core of Tennessee state tax compliance. BusAcTa Advisors compiled this guide from official Tennessee Department of Revenue and Secretary of State sources to give you accurate 2025 filing information.
This guide is for general information only and does not constitute tax or legal advice. Consult a qualified tax professional for your specific situation.
Tennessee Has No Individual Income Tax
Tennessee eliminated its Hall Income Tax on dividends and interest income effective January 1, 2021. As a result, Tennessee now imposes no individual income tax of any kind on wages, salaries, self-employment income, dividends, interest, or capital gains. Tennessee is one of nine states with no personal income tax as of 2025.
Tennessee Franchise Tax
The franchise tax is one of two components reported on Form FAE 170. It is calculated on the entity's net worth or the book value of real and tangible personal property owned or used in Tennessee, whichever is greater.
Rate: $0.25 per $100 of the applicable tax base (0.25%)
Minimum franchise tax: $100 per year, regardless of net worth or whether the entity had a loss
Entities with net worth at or below $10,000 pay only the $100 minimum
Sample franchise tax calculation:
Tennessee net worth: $1,200,000; Tennessee property: $800,000
Tax base (greater of the two): $1,200,000
Franchise tax: ($1,200,000 / 100) x $0.25 = $3,000
Tennessee Excise Tax
The excise tax is the second component of Form FAE 170. It is calculated on net earnings derived from Tennessee, similar conceptually to an income tax but officially classified as an excise tax under Tennessee law.
Rate: 6.5% of net earnings attributable to Tennessee
No minimum excise tax; if net earnings are zero or a loss, excise tax is $0
Tennessee uses a single-sales-factor apportionment formula for most businesses
Sample excise tax calculation:
Net earnings attributable to Tennessee: $180,000
Excise tax at 6.5%: $180,000 x 0.065 = $11,700
Both taxes are reported on a single Form FAE 170. In this example: $3,000 franchise tax + $11,700 excise tax = $14,700 total Tennessee business tax. A loss year eliminates the excise tax but the $100 minimum franchise tax still applies.
Who Must File Form FAE 170 and When
The following entities doing business in Tennessee or registered to do business in Tennessee must file Form FAE 170:
C-corporations and S-corporations
LLCs, including single-member LLCs (unless specifically disregarded)
Limited partnerships and limited liability partnerships
Business trusts
Form FAE 170 is due on the 15th day of the fourth month after the end of the taxable year. For a December 31 fiscal year, the due date is April 15. A six-month extension is available, but estimated tax must be paid by the original due date to avoid interest and penalties.
Tennessee Secretary of State Annual Report
Every Tennessee for-profit corporation and LLC must file an annual report with the Tennessee Secretary of State each year. The annual report confirms registered agent, principal office, and officer or member information.
Annual report fee: $20 for most entities
Due date: the first day of the fourth month after the fiscal year ends; for calendar-year entities, April 1
Filing: online through the Tennessee Secretary of State Business Services portal at tnsos.gov
Tennessee Sales and Use Tax
Tennessee imposes one of the highest combined sales tax rates in the United States. The state rate is 7% on most tangible personal property and taxable services. A reduced state rate of 4% applies to most food and food ingredients. Local jurisdictions may add up to 2.75%, bringing the maximum combined rate to 9.75% in some localities.
Tennessee vs. Federal Tax: Key Differences
Tax Item | Federal | Tennessee |
|---|---|---|
Individual income tax | 10%–37% graduated | None since 2021 |
Business tax concept | Net income under IRC | Excise: net earnings; Franchise: net worth or property |
Loss year business obligation | No income tax if net loss | $100 minimum franchise tax still applies |
S-Corp pass-through treatment | Pass-through to shareholders federally | TN excise and franchise tax applies at entity level |
LLC treatment | Disregarded or pass-through | FAE 170 required at entity level regardless |
2025 Tennessee Compliance Deadlines
Date | Obligation |
|---|---|
April 1 | Annual report with Tennessee Secretary of State ($20 fee) |
April 15 | Form FAE 170 (Franchise and Excise Tax), calendar-year entities |
October 15 | FAE 170 extended due date; tax must be paid by April 15 |
Monthly or Quarterly | Sales and use tax returns |
Tennessee Compliance Hinges on Form FAE 170
Tennessee's no-income-tax status is real for individuals, but businesses cannot opt out of the franchise and excise tax. Both components must be calculated and reported on Form FAE 170 by April 15, even in a loss year where the excise tax is zero. The $100 minimum franchise tax means no entity is completely off the hook, and S-Corp federal pass-through status does not eliminate the Tennessee obligation.
If your business needs help preparing Tennessee Form FAE 170, annual report filings, or navigating the franchise and excise tax calculation, contact BusAcTa Advisors today.
FAQ
Frequently Asked Questions
Verified
Sources
- Tennessee Hall Income Tax on dividends and interest was eliminated effective January 1, 2021. Franchise and Excise Tax – Franchise Tax (TN DOR) (Tennessee Department of Revenue · 2025)
- Tennessee franchise tax rate is $0.25 per $100 (0.25%) of the greater of Tennessee net worth or property; minimum franchise tax is $100. Franchise and Excise Tax – Franchise Tax (TN DOR) (Tennessee Department of Revenue · 2025)
- Tennessee excise tax rate is 6.5% of net earnings attributable to Tennessee; Form FAE 170 due the 15th day of the 4th month after fiscal year end (April 15 for calendar-year entities). Franchise and Excise Tax – Excise Tax (TN DOR) (Tennessee Department of Revenue · 2025)
- Tennessee state sales tax rate is 7% on most goods and 4% on most food; local rates add up to 2.75% for a maximum combined rate of 9.75%. SUT-13: Sales and Use Tax Rates – Overview (TN DOR) (Tennessee Department of Revenue · 2025)
- Tennessee annual report for corporations and LLCs is due the first day of the fourth month after fiscal year end (April 1 for calendar-year entities) with a $20 filing fee. Tennessee Secretary of State Business Services (Tennessee Secretary of State · 2025)
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Written by
Viral Patel, CPAViral Patel, CPA, CA, is co-founder of BusAcTa, where he leads operations and quality assurance. With 10+ years in U.S. individual, corporate, and partnership tax, he built BusAcTa's delivery model around one standard: offshore work that holds up to the same review a domestic senior would apply. He holds credentials in both the U.S. (CPA) and India (CA).
