TN Franchise & Excise Tax: A Plain-English Guide
The property measure catches more Nashville businesses than any other line on the return. Here is how the two taxes actually work, who owes them, and the dates that matter.
Tennessee has no personal income tax on wages, which is a big part of why so many companies relocate here. What surprises new owners is that the state makes some of that revenue back from businesses — through two taxes that arrive on one return: the franchise tax and the excise tax.
Who owes it
If your business is an LLC, corporation, or limited partnership registered in Tennessee — or doing business here — you almost certainly file a franchise and excise (F&E) return. Sole proprietorships and general partnerships are exempt, and there is a narrow family-owned entity exemption (the FONCE) that mostly applies to passive real-estate holdings.
The two taxes, in one sentence each
- Excise tax is 6.5% of your Tennessee net earnings — think of it as a state corporate income tax.
- Franchise tax is $0.25 per $100 (0.25%) of the greater of your net worth or the book value of the property you own or use in Tennessee — with a $100 minimum.
That second one is the trap. Even a company with zero profit owes franchise tax on the property measure — equipment, leasehold improvements, and (for many Nashville businesses) the value of rented space factored at 8× annual rent. If you lease a $6,000/month office, that alone is a $576,000 measure and a $1,440 franchise tax bill, profit or not.
The dates that matter
For calendar-year filers, the F&E return (form FAE 170) is due April 15, with quarterly estimates due April 15, June 15, September 15, and December 15 once your combined liability tops $5,000. Returns are filed through TNTAP, the state’s online portal — paper filing is effectively gone.
What we see go wrong
- Missed first-year registration. Registering with the Secretary of State does not register you with the Department of Revenue — that is a separate TNTAP registration.
- The rent multiplier. Owners calculate net worth, see a small number, and stop. The property measure with the 8× rent factor is usually larger.
- Estimated payments. The $5,000 threshold sneaks up in a growth year, and the underpayment penalty is avoidable with a five-minute quarterly payment.
Keep your balance sheet clean and reconciled monthly and the F&E return becomes a fill-in exercise instead of a forensic project — which is precisely the argument for a reliable monthly close.
Want us to look at this in your own books?
Compass East publishes this reference and does this work for Middle Tennessee companies. Thirty minutes, free, and you keep the findings whatever you decide.