Tennessee taxes

Tennessee has no personal income tax. Its business taxes follow limited liability rather than federal tax treatment. LLCs, partnerships and corporations pay the franchise and excise tax: 6.5% of net earnings plus a franchise tax on net worth of at least $100, even when inactive. A sole proprietor is outside that tax but can still owe business tax on receipts.

Personal income tax

Tennessee has no individual income tax, so there is no Tennessee return to file. It has never taxed wages.

The Hall tax on interest and dividends, filed on Form INC-250, was fully repealed from 2021, so there is nothing left to file for it. Businesses still pay franchise and excise tax on a separate return.

Sole proprietor

A sole proprietor is outside Tennessee's franchise and excise tax, because a sole proprietorship gives its owner no limited liability. There is no $100 minimum and no Form FAE 170.

Tennessee's business tax is different. It follows receipts, county by county, once your gross receipts in a county reach $100,000, and its rate depends on your business classification. A local business license is also needed once gross receipts pass $3,000.

Single-member LLC

An LLC files Form FAE 170, the franchise and excise tax return, even when the IRS ignores it and treats it as part of you. Tennessee looks at the limited liability, not the federal treatment. Every LLC registered in Tennessee owes at least the $100 minimum franchise tax, active or inactive.

The excise tax of 6.5% on net earnings reaches LLCs too, and the franchise tax is 0.25% of net worth when that is more than the minimum. The LLC also owes business tax once its gross receipts in a county reach $100,000.

Partnership

Tennessee is one of the few states that taxes a partnership on its own earnings. A partnership files Form FAE 170 and pays 6.5% excise tax on net earnings, plus the franchise tax on net worth, never less than $100.

The tax follows limited liability. Tennessee's own manual puts general partnerships outside the franchise and excise tax, because they give their owners no limited liability.

S corporation

An S corporation files Form FAE 170 and pays 6.5% excise tax on net earnings. It also pays the franchise tax: 0.25% of net worth, never less than $100, active or inactive.

A corporation working in several states counts only its Tennessee share, measured by Tennessee sales over total sales for tax years ending on or after 31 December 2025.

C corporation

A C corporation files Form FAE 170 and pays 6.5% excise tax on its net earnings. It also pays the franchise tax on net worth, 0.25%, never less than $100. The franchise tax is charged on what the company is worth, so it does not go away in a loss year.

For tax years ending on or after 31 December 2025, a corporation working in several states counts only its Tennessee share, measured by sales alone. That is the last step of a phase-in, so older years used a different formula.

Return

Form FAE 170

Excise tax

6.5% of net earnings

Franchise tax

0.25% of net worth, minimum $100

Multi-state profit

Tennessee sales over total sales

Estimate your state tax

Pick your business type and enter this year's numbers to see the state business tax Tennessee charges. It assumes all your sales are in Tennessee.

An estimate for planning, not tax advice.

Sources

• Tenn. Code Ann. s. 67-2-102, Hall income tax, repealed for tax years beginning on or after January 1, 2021
• tn.gov Franchise & Excise Tax
• tn.gov Franchise and Excise Tax Manual, June 2025
• revenue.support.tn.gov F&E-4, filing requirement for an LLC
• tn.gov Franchise and Excise Tax Manual, June 2025: standard apportionment, Schedule N
• tn.gov Franchise & Excise Tax, due dates and tax rates

Last reviewed August 2026.