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Last reviewed: October 25, 2026
Tennessee's franchise and excise tax is a pair of annual state taxes on LLCs, corporations, limited partnerships, and other limited-liability entities doing business in Tennessee: a franchise tax of 0.25% of net worth with a $100 minimum, and an excise tax of 6.5% of net earnings after a standard deduction of up to $50,000. Both are reported on one return, Form FAE170, due the 15th day of the fourth month after the tax year ends, which is April 15, 2027 for a calendar-year 2026 business, with a seven-month extension available. A single-member LLC owned by an individual owes at least the $100 minimum every year unless it qualifies for an exemption, even though Tennessee has no personal income tax on wages.
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Every for-profit entity that gives its owners limited liability and is formed, registered, or doing business in Tennessee pays franchise and excise tax, according to the Department of Revenue's Franchise and Excise Tax Manual (June 2026). That covers corporations and S corporations, LLCs and professional LLCs, limited partnerships, registered limited liability partnerships, business trusts, and several others. Out-of-state entities owe it too once they have substantial nexus in Tennessee.
Two kinds of business are outside the tax because they give no liability protection: sole proprietorships and general partnerships whose partners are fully liable. Not-for-profits are generally outside it as well, except on unrelated business income.
The minimum applies whether or not the business does anything. The Department's franchise and excise tax overview says the $100 minimum franchise tax is payable by any entity registered through the Secretary of State, "regardless of whether the company is active or inactive." An LLC whose charter was revoked but never formally dissolved still owes it.
Yes. Tennessee does not follow the federal "disregarded entity" treatment, with one exception: an LLC whose single member is a corporation is disregarded into that corporation's return. A single-member LLC owned by an individual files its own FAE170, starting from the owner's Schedule C (FAE170 Schedule J2). In practice, many such LLCs owe little more than the franchise tax, because of the self-employment deduction explained below.
New entities register with the Department within 15 days of becoming subject to the tax, on the same application used for sales and business tax, and there is no registration fee.
The Tennessee franchise tax is 25 cents per $100, or 0.25%, of the entity's net worth at the close of the tax year, under Tenn. Code Ann. § 67-4-2105, with a $100 minimum. Net worth means total assets minus total liabilities from the entity's books, which must follow GAAP when GAAP statements exist (for example, statements prepared for a bank loan); otherwise the federal tax-basis books can be used. A multistate business apportions net worth to Tennessee.
| Net worth at year end | Franchise tax |
|---|---|
| Negative or $0 to $40,000 | $100 minimum |
| $100,000 | $250 |
| $240,000 | $600 |
| $1,000,000 | $2,500 |
The old alternative base is gone. Public Chapter 950 (2024) eliminated the property measure (Schedule G, the "minimum measure" based on Tennessee real and tangible property) for tax years ending on or after January 1, 2024. Before that, an entity paid on the greater of net worth or property, so a business with a lot of property and little equity paid on the property. The refund window for prior years closed on November 30, 2024. One remnant survives: an entity can elect, year by year, to compute franchise tax on the old property measure when that produces higher tax, which only makes sense for a company holding credits it wants to absorb.
The Tennessee excise tax is 6.5% of net earnings, under Tenn. Code Ann. § 67-4-2007. Net earnings start from federal taxable income and pass through Tennessee additions and subtractions on FAE170 Schedule J, but where they start depends on how the entity files federally:
| Federal treatment | FAE170 schedule | Starting point | Self-employment deduction? |
|---|---|---|---|
| Partnership (multi-member LLC, LP, LLP) | J1 | Form 1065 ordinary income plus separately stated items | Yes: earnings subject to self-employment tax paid or distributable to partners |
| Single-member LLC owned by an individual | J2 | Schedule C, D, E, F and Form 4797 amounts attributable to the LLC | Yes: earnings subject to self-employment tax |
| S corporation | J3 | Form 1120-S income computed as if no S election | No |
| C corporation and other entities | J4 | Form 1120 taxable income before NOL and special deductions | No |
The self-employment deduction decides whether a small LLC owes any excise tax at all. Under the FAE170 instructions, an LLC or partnership deducts the amount subject to federal self-employment tax that is paid or distributable to its members; for a single-member LLC that is generally all of the Schedule C profit. Rents, interest, dividends, and capital gains are not self-employment income, so they stay in the excise base. The deduction cannot create or increase a loss.
Then comes the standard deduction. For tax years ending on or after December 31, 2024, the Tennessee Works Tax Act (Public Chapter 377 of 2023) lets every excise taxpayer deduct the lesser of its net earnings or $50,000, before apportionment, per the manual and FAE170 Schedule J, line 32. Any unused part does not carry forward. Two other Works Tax Act changes matter for 2026 returns: multistate businesses apportion with a single sales factor for tax years ending on or after December 31, 2025, and Tennessee follows federal bonus depreciation only as written under the 2017 Tax Cuts and Jobs Act. The manual states that Tennessee stays coupled to that TCJA version unless the legislature acts, so the 100% bonus depreciation restored federally in 2025 does not flow straight into the excise base.
Interactive
What will your Tennessee franchise and excise tax be?
Pick how the entity is taxed federally, then enter its net earnings and its net worth (total assets minus total liabilities) at year end.
Federal taxable income with Tennessee adjustments.
Book assets minus liabilities; enter 0 if negative.
Franchise and excise tax for the year
$9,050
Excise tax on earnings above the deductions, plus franchise tax on net worth.
Tennessee Franchise and Excise Tax Manual (June 2026) and FAE170 instructions. Excise: 6.5% of net earnings after the $50,000 standard deduction; LLCs and partnerships first deduct earnings subject to federal self-employment tax. Franchise: 0.25% of net worth, minimum $100. Assumes all activity is in Tennessee (no apportionment), no credits, and no exemption such as FONCE or OME. The Secretary of State annual report fee is separate.
See Tennessee LLC feesDelphine's design firm. Delphine owns a Nashville interior design firm organized as an LLC that elected S corporation status. All of its work is in Tennessee. For 2026, after her W-2 salary, the firm expects $180,000 of net earnings, and its year-end balance sheet shows $240,000 of assets in excess of liabilities.
| Step | Amount |
|---|---|
| Net earnings (Schedule J3, computed as if no S election) | $180,000 |
| Self-employment deduction | Not allowed for S corporations |
| Excise standard deduction | −$50,000 |
| Excise base | $130,000 |
| Excise tax at 6.5% | $8,450 |
| Franchise tax: 0.25% × $240,000 | $600 |
| 2026 franchise and excise tax | $9,050 |
Thandiwe's web studio. Thandiwe runs a Knoxville web development studio through a single-member LLC she owns personally. Her 2026 Schedule C profit is $120,000, all of it subject to self-employment tax, and the LLC's net worth is $35,000.
| Step | Amount |
|---|---|
| Net earnings (Schedule J2) | $120,000 |
| Earnings subject to self-employment tax | −$120,000 |
| Excise base before the standard deduction | $0 |
| Excise tax | $0 |
| Franchise tax: 0.25% × $35,000 = $87.50, raised to the minimum | $100 |
| 2026 franchise and excise tax | $100 |
If Thandiwe's LLC also collected $20,000 of rent from a residential unit it owns, that rent would not be self-employment income, but the $50,000 standard deduction would still cover it, so the excise tax would stay at zero.
The two examples show a Tennessee-specific cost of an S corporation election. An S corporation election lowers federal self-employment tax by splitting profit into salary and distributions, but in Tennessee it also removes the self-employment deduction from the excise calculation. Delphine's $8,450 of excise tax is the Tennessee cost of her election; the same profit run through an LLC taxed as a sole proprietorship or partnership would deduct the earnings subject to self-employment tax first. Run both numbers before electing.
Form FAE170 is due on the 15th day of the fourth month after the tax year ends, matching the federal tax year, per the Department's due dates and tax rates page. For calendar-year entities:
| Tax year | FAE170 due | Extended due date |
|---|---|---|
| Calendar year 2026 | Thursday, April 15, 2027 | Monday, November 15, 2027 |
The seven-month extension is not automatic for everyone. Under chapter 5 of the manual, the extension holds only if, by the original due date, the entity requests it (Form FAE173 through TNTAP) and has paid at least the lesser of 90% of the current year's liability or 100% of the prior year's liability, or $100 if the prior year's liability was zero. An entity expecting a refund needs no request at all. An extension never extends the time to pay: tax unpaid on April 15 accrues interest.
Delphine's firm owed $7,600 for 2025. Its four 2026 estimates of $1,810 total $7,240, so it must pay $360 more by April 15, 2027 to secure the extension (the lesser of 90% × $9,050 = $8,145 or 100% × $7,600). The last $1,450 can follow with the return in November, with interest from April 15.
Franchise and excise returns and payments must be filed electronically through the Tennessee Taxpayer Access Point (TNTAP) or approved software, including IRS Modernized e-File, unless the Department grants a hardship exemption.
An entity must make quarterly estimated franchise and excise tax payments when its combined liability, after credits, is $5,000 or more for both the prior tax year and the current tax year, per the manual and Form FAE172. A business that crosses $5,000 for the first time in 2026 owes no 2026 estimates; it starts in 2027 if it stays above the line.
For a calendar-year entity, the 2026 installments fall on the 15th day of the fourth, sixth, and ninth months and the first month of the next year:
| Installment | Due date |
|---|---|
| 1 | April 15, 2026 |
| 2 | June 15, 2026 |
| 3 | September 15, 2026 |
| 4 | January 15, 2027 |
Under the standard method, each installment must be at least the lesser of 25% of the prior year's total liability or 25% of 80% of the current year's liability. Delphine's firm compares 25% × $7,600 = $1,900 with 25% × 80% × $9,050 = $1,810 and pays $1,810 each quarter. An annualized income method, elected on the return, suits businesses with seasonal profit. The manual requires estimates to be remitted electronically, through TNTAP, your bank, or tax software, by ACH debit, ACH credit, or credit card (with a 2.35% fee).
A short or late installment costs a penalty of 2% per month, up to 24%, plus interest, from the due date until paid or until the return due date. Had Delphine's firm skipped its September 15, 2026 installment and paid it on December 15, the penalty would be 6% of $1,810, or $108.60, before interest.
Tenn. Code Ann. § 67-4-2008 lists 17 franchise and excise tax exemptions. Two cover most small owners:
Both exemptions require Form FAE183, the Application for Exemption/Annual Exemption Renewal, every year by the 15th day of the fourth month after year end, with a $200 penalty per late filing. The exemption is lost for the whole year if the entity fails the test at any point in it.
| Charge | Rate | Notes |
|---|---|---|
| Late filing or payment (delinquency) | 5% per month or part of a month | Maximum 25%, minimum $15 |
| Short or late estimated payment | 2% per month | Maximum 24%, plus interest |
| Negligence | 10% of the underpayment | When the Department finds negligence |
| Interest | 10.75% a year (July 1, 2026 to June 30, 2027) | Was 11.50% for the year before; cannot be waived |
The interest rate comes from the Department's June 15, 2026 announcement, and Tennessee resets it every July 1. The Commissioner can waive penalties for reasonable cause but has no authority to waive interest.
The Tennessee business tax is a different tax. It is a gross receipts tax, with a state portion and a city portion, owed by businesses that gross $100,000 or more in a Tennessee county or city, according to the Department's business tax page. Sole proprietors can owe business tax even though they never owe franchise and excise tax. An LLC with $300,000 of sales from a location in a city that levies the city business tax may owe all three: business tax on gross receipts, excise tax on earnings, and franchise tax on net worth.
Texas offers the closest comparison. Its franchise tax is a margin tax with a $2,650,000 no-tax-due threshold, so most small Texas LLCs owe nothing but a report, while every Tennessee LLC owes at least $100.
Federal law disregards it; Tennessee does not, unless the owner is a corporation. No FAE170 means a delinquency penalty on the $100 minimum and eventually a revoked charter.
The property measure ended for tax years ending on or after January 1, 2024. Unless the entity deliberately elects the old measure to use credits, Schedule G does not belong on the return.
Returns for tax years ending on or after December 31, 2024 subtract up to $50,000 from net earnings before the 6.5% applies. For a business earning $70,000, that is the difference between $4,550 and $1,300 of excise tax.
Schedules J3 and J4 have no such line, so an LLC that elected S corporation status loses the deduction. The manual's own example of an improper return is a corporation, registered with the Department as an LLC, that claimed it on Schedule J1.
Paying the lesser of 90% of this year's tax or 100% of last year's secures the seven-month extension to file. It does not extend the time to pay: interest runs on everything still unpaid after April 15.
Tennessee taxes two numbers: what the business earned and what it is worth on the balance sheet. Jupid connects to your business bank accounts and categorizes every transaction with 95.9% accuracy, so year-to-date earnings and the cash side of the balance sheet stay current instead of waiting for a year-end cleanup. Ask the AI accountant in WhatsApp or iMessage how much the business has earned so far this year, and you get the figure behind your excise estimate in the chat. Try Jupid.
This guide is for general educational purposes and does not constitute tax, legal, or accounting advice. It reflects the June 2026 Franchise and Excise Tax Manual, the 2025 FAE170 instructions, and Tennessee Department of Revenue guidance as reviewed on October 6, 2026; multistate businesses apportion both taxes, and credits, exemptions, and the bonus depreciation rules can change the numbers. For advice specific to your situation, consult a qualified tax professional or the Tennessee Department of Revenue at tn.gov/revenue.
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