How To File Franchise And Excise Tax In Tennessee (2024)

Struggling with the complexities of filing franchise and excise tax in Tennessee? You’re not alone. Many business owners find this process daunting and time-consuming. Navigating the maze of regulations and calculations can lead to frustration and mistakes. But fear not! This article is here to guide you through the steps, providing clear explanations and actionable tips. Say goodbye to confusion and hello to confidence as we break down the process, simplify the terminology, and offer a step-by-step approach to filing your franchise and excise tax. Get ready to tackle your taxes with ease and accuracy.

Table of content – How to file franchise and excise tax in Tennessee:

What is franchise and excise tax in Tennessee?
Who needs to file franchise and excise tax in Tennessee?
What are the rates for franchise and excise tax in Tennessee?
When is the due date for franchise and excise tax in Tennessee?
How to file franchise and excise tax in Tennessee
Franchise and excise tax exemptions in Tennessee
Penalties for late or incorrect filing franchise and excise tax in Tennessee
How to appeal a franchise and excise tax assessment in Tennessee state

What is franchise and excise tax in Tennessee?

Franchise and Excise Tax in Tennessee is a state tax on businesses. It’s assessed on both corporations and certain types of pass-through entities. The franchise part is based on a company’s net worth, including assets and liabilities. The excise part is determined by a company’s net earnings or income. This tax is important for funding state services like education and infrastructure. Businesses must file annually, with due dates based on their fiscal year. It’s crucial for businesses to understand and comply with these tax requirements to avoid penalties and legal issues.

Who needs to file franchise and excise tax in Tennessee?

The franchise and excise tax in Tennessee applies to certain types of businesses operating within the state. If you have a business in Tennessee, it’s important to understand whether you need to file this tax. Here’s a breakdown of who needs to file:

1. Corporations:

If your business is organized as a corporation, whether it’s a domestic corporation (formed in Tennessee) or a foreign corporation (formed outside of Tennessee) operating in the state, you generally need to file the franchise and excise tax.

2. Limited Liability Companies (LLCs):

LLCs that are classified as corporations for federal tax purposes are also subject to the franchise and excise tax in Tennessee. This includes both domestic and foreign LLCs.

3. Limited Partnerships (LPs) and Limited Liability Partnerships (LLPs):

For LPs and LLPs, the general partners or members are responsible for filing the franchise and excise tax if the partnership is subject to federal income tax.

4. Business Entities Engaged in Certain Activities:

Even if your business isn’t specifically a corporation, LLC, LP, or LLP, you might still need to file if you’re engaged in certain activities, such as:

Holding title to real property in Tennessee for income-producing purposes.
Owning, using, or holding tangible personal property in Tennessee for income-producing purposes.
Owning or using intangible property in Tennessee for income-producing purposes.
Conducting business activities that result in the realization of gross earnings or receipts in Tennessee.

What are the rates for franchise and excise tax in Tennessee?

The franchise and excise tax rates in Tennessee vary based on certain factors. Here’s a breakdown of the rates and how they apply:

1. Franchise Tax Rate:

The franchise tax rate is applied to corporations operating in Tennessee.
The rate is $0.25 for every $100 of taxable capital.
Taxable capital refers to the net worth of the corporation.

2. Excise Tax Rate:

The excise tax rate is imposed on the privilege of doing business in Tennessee.
The standard rate is $1.50 for every $1,000 of the greater net earnings or tangible property in Tennessee.
Net earnings represent the company’s net income allocated to Tennessee.
Tangible property refers to the value of real and personal property owned or used in Tennessee.

3. Special Excise Tax Rates:

Certain industries or businesses might have special excise tax rates, which can vary.
These rates may apply to specific sectors, such as financial institutions or transportation companies.
It’s essential to check with the Tennessee Department of Revenue for specific rates applicable to your business.

4. Minimum Tax Amount:

For both the franchise and excise taxes, there is a minimum tax amount.
The minimum tax is $100, regardless of the size of the business or its income.

When is the due date for franchise and excise tax in Tennessee?

The due date for franchise and excise tax in Tennessee is typically on the 15th day of the fourth month after the end of the taxable year. Businesses must file their tax returns and make payments by this date. Extensions might be available, but they don’t extend the payment deadline. Filing accurately and on time avoids penalties and interest charges. It’s important to check with the Tennessee Department of Revenue for any updates or changes to the due date.

How to file franchise and excise tax in Tennessee

Franchise and Excise Tax filing in Tennessee can be a straightforward process when following these six steps.

1) Register for a Tennessee Taxpayer Account

Before filing your Franchise and Excise Tax, you need a Tennessee taxpayer account. Register online through the Tennessee Department of Revenue’s website. Provide your business information, including name, address, and federal tax identification number. Once registered, you’ll receive essential account details.

2) Obtain the Necessary Forms

Access the required Franchise and Excise Tax forms from the Tennessee Department of Revenue’s website. These forms include the Franchise, Excise Tax Return (Form FAE170), and any applicable schedules or attachments. Ensure you download the current year’s version of the forms to stay compliant.

3) Gather Your Tax Information

Collect the necessary tax information before filling out the forms. This includes details about your business’s gross receipts, property, payroll, and investments. Keep records of any deductions or credits you plan to claim to support accurate reporting.

4) Complete the Forms

Carefully complete the Franchise, Excise Tax Return (Form FAE170), and any required schedules or attachments. Provide accurate financial data, ensuring all numbers are correct and properly aligned with the appropriate categories. Double-check your calculations to prevent errors.

5) Sign and Date the Forms

Once the forms are complete, sign and date them. Ensure your signature is legible and matches the name listed on the forms. By signing, you certify the accuracy of the information provided. If your business is a corporation, an authorized officer must sign; for a partnership, a general partner should sign.

6) Mail or E-File the Forms

After signing, you have two options for submitting your Franchise and Excise Tax forms – mail or e-file.

Mailing Option:

Print the completed forms and any attachments. Prepare a cover letter that includes your business name, account number, and a summary of the documents enclosed. Place everything in an envelope and mail it to the address provided on the forms. Ensure you affix sufficient postage and allow ample time for delivery.

E-Filing Option:

For a faster and more convenient option, e-file your Franchise and Excise Tax forms through the Tennessee Department of Revenue’s online portal. Log in using your registered taxpayer account credentials. Follow the prompts to upload your completed forms and any attachments. Review your submission for accuracy before finalizing.

After filing, keep copies of all documents, including the completed forms, attachments, and any communication with the Department of Revenue. These records will serve as proof of your filing in case of any discrepancies or audits.

Franchise and excise tax exemptions in Tennessee

Franchise and excise taxes in Tennessee offer various exemptions that can benefit businesses. These exemptions aim to promote economic growth, attract investment, and encourage job creation within the state. Understanding these exemptions can provide businesses with financial advantages and a competitive edge. Here are some key points to know:

Manufacturing Equipment Exemption:

Businesses engaged in manufacturing are eligible for an exemption on certain machinery and equipment used in the production process.
This exemption reduces the tax burden on manufacturers, allowing them to reinvest in their operations and expand production capabilities.

Agricultural Exemption:

Agricultural entities can avail exemptions for equipment and inputs directly related to farming activities.
This exemption supports the agricultural industry, ensuring that farmers have the necessary resources to enhance their productivity.

Exporting Exemption:

Companies involved in exporting goods outside of Tennessee can benefit from an exemption on sales related to these exports.
This exemption boosts trade and encourages businesses to participate in global markets.

Research and Development Exemption:

Businesses engaged in research and development activities can qualify for an exemption on certain expenses.
This exemption encourages innovation and technological advancement within the state.

Job Creation Tax Credit:

Businesses that create new, full-time jobs in Tennessee may be eligible for tax credits.
This incentive motivates employers to hire locally and contribute to the state’s workforce.

Industrial Machinery Exemption:

Certain industrial machinery and equipment used for manufacturing can be exempt from franchise and excise taxes.
This exemption reduces costs for businesses, facilitating industrial growth.

Renewable Energy Exemption:

Investments in renewable energy projects, such as solar or wind, can lead to tax exemptions.
This exemption supports sustainable practices and the state’s transition towards cleaner energy sources.

Penalties for late or incorrect filing franchise and excise tax in Tennessee

Late or incorrect filing of franchise and excise tax in Tennessee results in penalties. The penalties are imposed on those who fail to file or file inaccurately. If you submit your tax documents late, you will be charged a late filing penalty. This penalty is a percentage of the tax due and increases with the delay in filing. It is crucial to file on time to avoid this extra cost.

Incorrect filing also leads to penalties. If you provide incorrect information or miscalculate your taxes, a penalty will be applied. This penalty aims to encourage accurate reporting and deter mistakes. It’s essential to double-check your tax forms before submitting them.

The penalties for both late and incorrect filing can accumulate over time. These penalties can significantly increase the amount you owe to the state. To prevent these penalties, it’s recommended to file your franchise and excise tax on time and ensure all information is accurate. If you’re uncertain about any aspect of your tax filing, seeking professional advice is a prudent step.

How to appeal a franchise and excise tax assessment in Tennessee state

To appeal a franchise and excise tax assessment in Tennessee state, follow these steps:

Review Assessment: Carefully examine the assessment notice to understand the reasons for the tax determination.
Gather Documentation: Collect all relevant records, financial statements, and documents to support your case.
Contact Department of Revenue: Reach out to the Tennessee Department of Revenue to discuss your concerns and obtain guidance.
File Formal Appeal: Submit a written appeal within 60 days of receiving the assessment. Clearly state your disagreement and provide supporting evidence.
Attend Informal Conference: Attend an informal meeting with the Department’s representative to present your case and negotiate a resolution.
Follow Deadlines: Adhere to any deadlines provided during the appeal process to ensure your case remains valid.
Attend Formal Hearing: If not satisfied with the informal conference, request a formal hearing before the State Board of Equalization.
Present Evidence: During the formal hearing, present your evidence, explain your position, and answer any questions.
Await Decision: The Board will review the evidence and issue a written decision, either upholding or adjusting the assessment.
Pay or Appeal Further: If the decision is not in your favor, you can either pay the assessed tax or pursue further legal action, such as filing a lawsuit.

Remember to keep all communication and documentation organized throughout the process for a smooth and effective appeal of your franchise and excise tax assessment in Tennessee state.

Conclusion

In conclusion, filing franchise and excise tax in Tennessee involves straightforward steps. First, gather the necessary financial records. Next, calculate your net earnings. Then, complete the FAE 170 form accurately. Submit it online or by mail before the due date. Keep copies for your records. Timely filing ensures compliance and avoids penalties. Regular updates on tax regulations are crucial. Seek professional advice if needed. With clear guidelines and proactive measures, handling franchise and excise tax becomes a manageable task for Tennessee businesses. Stay informed, stay organized, and contribute to the state’s growth while fulfilling your tax responsibilities effectively.