Tennessee Business Taxes for LLCs
Learn what taxes Tennessee LLCs need to pay — franchise and excise tax, sales tax, gross receipts tax, federal self-employment tax, and payroll taxes. Rates, forms, and deadlines covered.
Bizee Editorial Staff
Editorial Team
Tennessee LLC tax snapshot
Filing fee: $0 + state fee
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State agency: Tennessee Department of Revenue; Tennessee Secretary of State
Annual report due: April 1 (calendar-year LLCs); minimum fee $300 for up to 6 members
State tax rate: Franchise tax: 0.25% of net worth (min. $100/yr); Excise tax: 6.5% of net earnings; Sales tax: 7% state + up to 2.75% local
Tennessee LLC tax overview
Tennessee LLCs can owe several types of taxes: a state franchise and excise tax, a gross receipts business tax, sales and use tax if you sell taxable goods or services, federal income and self-employment tax, and payroll taxes if you have employees. Tennessee has no personal income tax on wages, which changes the picture compared to most states.
- Franchise tax: 0.25% of Tennessee net worth, minimum $100 per year
- Excise tax: 6.5% of Tennessee taxable net earnings
- Business tax: gross receipts tax owed if your LLC has $100,000 or more in receipts in a Tennessee jurisdiction
- Sales and use tax: 7% state rate plus up to 2.75% local, if you sell taxable goods or services
- Federal self-employment tax and income tax: pass-through to owners' personal returns
- Payroll taxes: federal withholding, Social Security, Medicare, and Tennessee unemployment insurance if you have employees
- Annual report: due April 1 each year, minimum $300 filing fee
Franchise and excise tax
Most Tennessee LLCs owe both a franchise tax and an excise tax, filed together on a single return with the Tennessee Department of Revenue. These two taxes catch many new business owners off guard because they apply even if your LLC had no profit in a given year.
The franchise tax is 0.25% of your LLC's Tennessee net worth, with a minimum of $100 per year. For tax years ending on or after January 1, 2024, the calculation is based on net worth only — the prior rule that used the greater of net worth or property value no longer applies. The excise tax is 6.5% of your LLC's Tennessee taxable net earnings, starting from federal taxable income and adjusted under Tennessee rules.
Single-member LLCs that are disregarded for federal tax purposes are generally also disregarded for Tennessee excise tax and do not file a separate excise tax return. They still owe the franchise tax minimum. Multi-member LLCs taxed as partnerships and LLCs taxed as corporations are subject to both taxes. A tax professional can help you figure out which rules apply to your LLC's classification.
Business tax (gross receipts)
Tennessee also imposes a separate Business Tax — a gross receipts privilege tax — on LLCs that do business in a Tennessee county or city and have $100,000 or more in gross receipts in that jurisdiction. This is distinct from the franchise and excise tax and is easy to overlook.
The rate depends on your business classification — retailer, wholesaler, or service provider — and the type of activity. Many local governments also levy their own business tax on top of the state rate, so your LLC may owe both. Check the Tennessee Department of Revenue's business tax rate schedule to find your classification and applicable rate.
Sales and use tax
If your Tennessee LLC sells taxable goods or certain taxable services at retail, you need to register for a sales and use tax account with the Tennessee Department of Revenue and collect sales tax on those transactions. The state rate is 7%. Local jurisdictions add up to 2.75% on top of that, so the combined rate varies by city and county.
Use tax applies when you buy taxable items without paying sales tax — for example, purchasing supplies from an out-of-state vendor — and then use them in Tennessee. Your LLC is responsible for remitting use tax on those purchases. Not every LLC owes sales tax. If you only provide non-taxable services, you may not need to register. A tax professional can help you figure out whether your products or services are taxable under Tennessee law.
Federal income and self-employment tax
Tennessee LLCs are pass-through entities by default, meaning the business itself doesn't pay federal income tax. Instead, profits flow through to the owners' personal federal returns. How you report that income depends on how your LLC is classified.
Single-member LLC owners report business income and expenses on Schedule C with Form 1040. Members of a multi-member LLC taxed as a partnership receive a Schedule K-1 and report their share of income on their personal returns using Form 1065 as the partnership return. If your LLC elected S Corporation or C Corporation status, different rules apply.
Self-employment tax covers Social Security and Medicare for LLC owners who work in the business. It's separate from income tax and is calculated on your net self-employment earnings. Most LLC owners also need to pay estimated taxes quarterly to avoid an underpayment penalty at year end.
Payroll and employer taxes
If your Tennessee LLC has employees, you'll take on payroll tax responsibilities at both the federal and state levels. Tennessee has no state income tax on wages, so there's no state income tax withholding — but that doesn't mean payroll is simple.
At the federal level, you need to withhold federal income tax, Social Security, and Medicare from employee wages, and pay the employer's matching share of Social Security and Medicare. You'll also owe federal unemployment tax (FUTA) on the first $7,000 of each employee's wages. At the state level, Tennessee requires employers to pay unemployment insurance tax, administered by the Tennessee Department of Labor and Workforce Development.
Annual report and state fees
Tennessee LLCs must file an annual report with the Tennessee Secretary of State each year to stay in good standing. For LLCs on a calendar year, the deadline is April 1. The minimum filing fee is $300, which covers LLCs with up to 6 members. If your LLC has more than 6 members, add $50 for each additional member.
Missing the annual report deadline doesn't just mean a late fee — the state can administratively dissolve your LLC, which means your business loses its legal standing in Tennessee. File on time every year, regardless of whether your LLC had any income or activity.
FAQ
It depends on which taxes apply to your LLC. The franchise tax is 0.25% of Tennessee net worth, with a $100 annual minimum. The excise tax is 6.5% of Tennessee taxable net earnings. The gross receipts business tax rate varies by business classification. Sales tax is 7% state plus up to 2.75% local.
Yes. Tennessee's state sales tax rate is 7% on taxable sales of tangible personal property and certain services. Local jurisdictions add up to 2.75%, so the combined rate varies by city and county. LLCs that sell taxable goods or services at retail need to register with the Tennessee Department of Revenue and collect and remit sales tax.
No. Tennessee does not tax wages or pass-through business income at the personal level. The Hall Income Tax, which previously taxed dividend and interest income, was fully repealed as of January 1, 2021. Tennessee LLC owners still owe federal income tax on their share of business profits, reported on their personal federal returns.
Yes. Tennessee imposes a franchise tax on most LLCs doing business in the state. The rate is 0.25% of Tennessee net worth, with a minimum of $100 per year. The franchise tax is filed together with the excise tax on a combined return. It's owed even if your LLC had no income, as long as it's registered in Tennessee.
Yes. Self-employment tax is a federal tax — not a Tennessee tax — that covers Social Security and Medicare for LLC owners who work in their business. It's calculated on your net self-employment earnings and reported on your federal return. Tennessee's lack of a state income tax on wages doesn't reduce or eliminate your federal self-employment tax obligation.
Yes, in most cases. If you expect to owe $1,000 or more in federal taxes for the year, you need to pay estimated taxes quarterly to the IRS. Most LLC owners make 4 estimated payments per year. Tennessee doesn't have a state income tax on wages, so there's no state estimated income tax payment — but you may owe estimated franchise and excise tax payments at the state level. A tax professional can help you figure out your specific schedule.
The minimum annual report fee for a Tennessee LLC is $300, which covers LLCs with up to 6 members. If your LLC has more than 6 members, the fee increases by $50 per additional member. The annual report is due April 1 for LLCs on a calendar year. Filing late can put your LLC's good standing at risk.
