Tennessee Business Tax Problems and Solutions

Running a business in Tennessee can be complicated. You must register with the state, county, and city, and potentially file multiple business tax returns. Mistakes are common, but unfortunately, not understanding the rules can put your business at risk. 

To help you out, this guide looks at business taxes in TN. Then, it outlines common challenges for business owners and explains what happens if you don't file or pay your taxes. To get help now, use TaxCure to search for a TN-based tax professional. 

Key takeaways

• Registration – Most businesses need to register with the state. 
• Business taxes – Your business may need to pay business tax, franchise tax, and excise tax.
• Professional privilege tax – Certain types of professionals must pay a professional privilege tax to the state. 
• Common problems – Unregistered businesses, unfiled returns, late returns, and unpaid taxes. 
• How to get help – Use TaxCure to search for a licensed tax professional based in Tennessee.

Tennessee Business Taxes

Here are the taxes your business may need to deal with if you're located in Tennessee or have nexus in the state:

• Business tax – applies to any business with gross revenue of $100,000 or more that sells goods or services in the state or out-of-state businesses with economic nexus in the state. 
• Franchise tax – applies to corporations, limited partnerships (LPs), limited liability companies (LLCs), or business trusts based in Tennessee. Based on the net worth or book value of the business's real and tangible personal property. 
• Excise tax – also applies to corporations, LPs, LLCs, and business trusts based in Tennessee. Based on the business's net earnings (profit) for the tax year.
• Professional privilege tax – Applies to attorneys, securities agents, broker-dealers, investment advisers, and lobbyists. Tax is $400 per year, even if you're licensed in multiple professions.
• Sales tax – Not paid by businesses, but businesses must collect this tax from customers and remit it to the state if they sell taxable goods or services in Tennessee or have economic nexus in the state.

What is Nexus in Tennessee?

You have nexus in Tennessee if you're located in the state, have a substantial presence in the state, or are located out of state but have more than $100,000 in sales in the state.

What is the Tennessee business tax?

The TN business tax is an annual gross-receipts tax that applies to businesses that have over $100,000 in revenue in any county in the state or in any city that has enacted a business tax. You only have to pay this tax if you have over $100,000 in gross receipts in a certain county or over that threshold in a city with that tax. 

The county business tax rate ranges from 0.0002 to 0.001875, and the applicable rate depends on whether you're a wholesaler or a retailer and the category your business falls into. Municipalities have different tax rates – the DOR has an interactive map with the rates in various locations.

For example, if you have $200,000 in gross receipts and your rate is 0.0015, your business tax is $300. The minimum tax for most businesses is $22, but businesses in category 5A must pay at least $450 per location. 

The tax is based on your gross receipts (revenue), but you can claim a deduction for bad debts, amounts paid to subcontractors if you're a contractor, and sales of services to out-of-state customers. For example, if you're a contractor with $200,000 in gross receipts but you paid $50,000 to a subcontractor, you only need to pay tax on the difference ($150,000). You can also claim a credit for personal property tax paid if you're located in the state – the credit can get up to 50% of your tax due. 

TN business tax returns are due on the 15th of the fourth month following your fiscal year. For example, if you use a calendar year, your returns are due on April 15. However, if you end the year on June 30, your return is due October 15th. To file, use Form BUS-428 or file online.

What is the Tennessee franchise tax?

The franchise tax applies to all corporations, limited partnerships, LLCs, and business trusts registered in Tennessee. The tax is 0.25% of the net worth of your business's real estate and personal property in the state. For example, a business with $1 million in net worth assets must pay $2500 in franchise tax. 

Returns are due annually on the 15th day of the fourth month following the end of your business year. If your tax liability for the current and prior year exceeds $5000, you should make quarterly estimated payments on the fourth, sixth, and ninth months of the current year, and then on the 15th of the first month following the end of your fiscal year. Use Form FAE-170 to report both excise and franchise tax, or file online.

What is the Tennessee excise tax?

The excise tax applies to all corporations, limited partnerships, LLCs, and business trusts registered in Tennessee or with a substantial presence in the state. It is 6.5% of the business's Tennessee taxable income. For example, if your taxable business income is $100,000, you owe $6500 in business tax.

To report excise tax, use the same form as you use for franchise tax – Form FAE-170 or file online. The due dates are the same as listed above.

What's the TN professional privilege tax?

Attorneys, securities agents, broker-dealers, investment advisers, and lobbyists based in TN must pay a $400 tax every year on June 1st. You must pay this tax online through your TN Taxpayer Access Point (TAP), but you can get an exemption if you're over 65, don't have a computer, or have a religious objection to filing online.

How to Register Your Business in Tennessee

You must register most businesses in Tennessee. Registration takes about 10 days to process, and you must display a registration certificate to do business in this state. 

Register online through the TNTAP or by filing Form RV-F1300501. When you register, you'll note which taxes you need to pay – that includes sales tax, business tax, franchise and excise tax, but it also includes taxes that only apply to select industries, such as bail bonds, mineral severance, wine direct shipper, and so on. 

The application requires your business name, contact details, and business structure (for instance, sole proprietorship, LLC, corporation, etc). You also must note the taxes that you must pay, whether or not your gross sales are going to exceed $4800, if you're going to collect more than $1200 per year for taxable services, and the nature of your business. Finally, you must list all business owners, and an owner, officer, member, or partner must sign the form to verify its accuracy.

If you're liable for the business tax and located in Tennessee, you must pay a $15 registration fee to the county or municipality where you'll be doing business – you may need to pay multiple fees if you have multiple locations. If your gross receipts are going to be less than $100,000 but more than $3000, you don't have to register for the business tax, but you need to get a minimal activity license from your county clerk or municipality. 

Common Business Tax Problems and Challenges

Staying on top of so many different rules and dealing with multiple types of taxes can be extremely complicated. And unfortunately, errors can lead to penalties, tax assessments, or even loss of your business license. 

Here are some of the most common problems you may face as a business owner in Tennessee:

• Failure to register with the DOR – You must register if you have a physical presence in the state or substantial nexus in the state.
• Confusion with out-of-state businesses – Businesses that sell products to TN customers or provide services in TN generally need to register for the business tax if they have over $100,000 in sales in a certain county or a municipality that has the business tax. 
• Misunderstandings about taxable services – Most services are taxable in TN. There are only about 16 services that are not taxable. If you offer services, it's critical to understand whether they're subject to sales tax or any of the TN business taxes.
• Late or missed annual filings – If you fail to file a return, you will be subject to penalties and potentially even lose your business license. Note that some returns (for example, professional privilege tax) are due on the same date every year, while other return due dates are based on your fiscal year.
• Misreporting gross receipts – The business tax return requires you to note your gross receipts based on the county where they were registered and the municipality where you do business. Putting in the wrong numbers or not tracking locations correctly can lead to incorrect tax liabilities. Additionally, you need to be sure to claim deductions and credits properly.
• Incorrect business classification – The business tax is based on your classification, and if you're not sure, you may calculate the tax incorrectly. Businesses that provide both retail and wholesale products should file in the category that accounts for at least 50% of their sales.
• Failure to pay after filing – Once you file a return, you must make a payment to the state. If you don't pay your taxes, you'll incur penalties and put your business assets at risk.

If you're dealing with business tax problems in Tennessee, you need a tax pro who has experience dealing with the Department of Revenue, and ideally, you should look for a pro who has dedicated experience with your specific tax problem. 

Consequences of Noncompliance

Failure to pay or file taxes in Tennessee may lead to the following:

• Penalties – the penalty for paying late is 5% of the tax due. That gets assessed monthly and can get up to 25% of your bill. 
• Interest – as of 2025, the DOR charges interest at a rate of 12.5%.
• Business license suspension or revocation – the county or municipality where you operate your business may revoke or suspend your license. 
• Tax liens – the DOR may file a lien if you have unpaid taxes. The lien attaches to all of your business assets, and depending on your business structure and the type of tax that wasn't paid may also apply to your business assets.
• Levies and asset seizures – the Department may seize your business bank accounts, levy payments due to you from other parties, or even seize your physical assets to sell at auction. 

The best way to avoid collection actions is to deal with tax problems proactively. If you know that you're going to owe tax, contact the DOR to request an installment agreement or even an offer in compromise, where you settle taxes for less than owed. To minimize the impact of collection actions such as liens and levies, work with a tax pro who's experienced in Tennessee.

How Tax Professionals Can Help

A tax professional can help you understand your tax obligations, whether you're getting ready to launch, are shifting industries, or have been running a business for years. They can help you deal with unfiled returns and unpaid taxes. They can also help you negotiate with the state and provide representation if you're selected for an audit. 

To get help now, use Taxcure to search for a TN tax pro. Start your search now and narrow down the results to find pros who have experience with the TN DOR – you can also select the IRS if you're also having federal tax problems. Then, narrow down the results even further by selecting the exact problem you're having or the solution you want.

Don't wait – get high-quality, trustworthy help today and put your tax problems behind you.