Tennessee franchise and excise tax: who files and when

Start with the company that owes the tax

Tennessee’s franchise tax is a tax on doing business, not permission to sell a branded business. Revenue’s June 2026 manual says corporations, LLCs and other limited-liability entities can owe franchise and excise taxes. Sole proprietors and general partnerships are generally outside these taxes; specified exemptions have their own conditions.

An LLC ignored as a separate taxpayer for federal income tax is not automatically ignored by Tennessee. The manual distinguishes a single-member LLC owned by a corporation: its activity is included with the corporate owner under the stated rules. Other single-member LLCs generally remain separate state taxpayers. A Singapore parent and its U.S. LLC therefore need their actual ownership and federal classification checked, rather than assuming one federal return settles both.

A taxable entity that is inactive but has not properly ended its Tennessee registration can still owe a return and the $100 minimum franchise tax.

Sources: Tennessee Department of Revenue: Selected printed pages 17–18, 45–54, 89–91, 107–109 and 250–251 U.S. Court of Appeals for the Sixth Circuit: Servpro Industries v. Woloski, No. 21-5685, pages 1–5; Sixth Circuit opinion filed March 4, 2022

Royalties can create a Tennessee tax connection

For an out-of-state entity, the manual requires doing business and a substantial state connection. It specifically includes licensing intangible property for use in Tennessee and earning income from that use. A company can have the necessary connection without an office there.

The bright-line tests include Tennessee receipts exceeding the lesser of $500,000 or 25% of worldwide receipts; Tennessee property exceeding the lesser of $50,000 or 25% of total property; or Tennessee compensation exceeding the lesser of $50,000 or 25% of total compensation, calculated under the stated sourcing rules. These are not the only connections that can create liability. Below-threshold customer receipts alone also do not automatically establish it.

For a company treated as a foreign corporation under the Internal Revenue Code, Revenue separately says no income effectively connected with a U.S. trade or business means no substantial Tennessee connection for these taxes. Where that U.S. business income exists, the manual limits the relevant earnings, net worth and allocation factors to the stated U.S.-connected amounts. An applicable U.S. treaty can affect whether such income exists; foreign ownership alone does not answer that question.

Sources: Tennessee Department of Revenue: Selected printed pages 17–18, 45–54, 89–91, 107–109 and 250–251

Register promptly and use the correct tax year

A taxpayer must register with Revenue within 15 days after becoming subject to these taxes. The manual identifies Tennessee Taxpayer Access Point (TNTAP) as an online route. The ordinary combined return is Form FAE170; financial-institution and captive-REIT groups have a different form.

The franchise rate is 0.25% of the applicable net-worth base, with a $100 annual minimum. Excise tax is 6.5% of the applicable net-earnings base. These are state-adjusted amounts, with allocation, deductions and exemptions—not automatically worldwide group assets or gross royalty receipts.

For tax years ending on or after December 31, 2024, the excise standard deduction is the lesser of $50,000 or the stated net earnings. It applies before the share of business earnings assigned to Tennessee is calculated and can offset stated directly allocated nonbusiness earnings with any unused portion. It cannot create or increase a loss or be carried forward; combined returns receive only one deduction.

For a period ending on a month’s final day, the ordinary return is due on the 15th day of the fourth month after that period. A period ending earlier in the month uses the fourth month following that month; a 52–53-week year uses the closest month end. The manual explains separate reorganisation and short-period rules.

Sources: Tennessee Department of Revenue: Selected printed pages 17–18, 45–54, 89–91, 107–109 and 250–251

An extension to file does not postpone payment

Estimated payments are required when combined franchise and excise liability after credits is at least $5,000 for both the prior and current tax years. Annualise a short prior period for that test. The ordinary four due dates are the 15th day of months 4, 6 and 9 of the current tax year and month 1 of the next year. The standard quarterly amount is the lesser of 25% of annualised prior-year liability or 25% of 80% of projected current-year liability; a separate annualised-income method is available.

A seven-month filing extension generally requires a timely request and payment by the original due date of the lesser of 90% of current-year liability or 100% of prior-year liability, annualising a short prior year. Zero prior-year liability requires $100. The manual separately allows an automatic extension where sufficient timely payments mean a credit or refund is expected. An extension does not extend payment time: unpaid tax can accrue interest.

Sources: Tennessee Department of Revenue: Selected printed pages 17–18, 45–54, 89–91, 107–109 and 250–251

A franchise termination statute may cover a particular industry

The word franchise has another meaning in sales and relationship law. In the 2022 Servpro v. Woloski appeal, the Sixth Circuit held the cited Tennessee termination provision inapplicable to a cleaning/restoration operator because that provision covered franchises required to hold the specified Tennessee liquor licence. The opinion was marked not recommended for publication; its contract and California-addendum analysis concerned the actual agreement in that case.

This supplies an actual industry-scope distinction, not a conclusion that every Tennessee brand offer is free of state duties. Current general offer/sale filings, exemptions, advertising and other industry-specific relationship provisions have not been comprehensively established here. Independently applicable federal disclosure remains separate from a tax registration.

Sources: U.S. Court of Appeals for the Sixth Circuit: Servpro Industries v. Woloski, No. 21-5685, pages 1–5; Sixth Circuit opinion filed March 4, 2022