Tennessee is one of the few states where individuals pay no state income tax on wages or salaries. However, tax preparation for Tennessee businesses involves more than the federal return — most Tennessee businesses file a Franchise and Excise Tax return annually with the Tennessee Department of Revenue, and the excise component taxes net business income at 6.5%. Additionally, federal entity returns, quarterly estimated taxes, and year-end W-2 preparation all apply just as they do in every other state. The Bookkeeping Company prepares federal and Tennessee business tax returns for Tennessee clients statewide, entirely remotely, with a free initial consultation.
By Maya Primachenko, Founder · Last updated September 2026
Tax Preparation for Tennessee Businesses: What It Covers
Professional tax preparation for a Tennessee small business covers several distinct filings across federal and state levels:
- Federal income tax returns — Schedule C for sole proprietors, Form 1120-S for S-corporations, Form 1065 for partnerships, and Form 1120 for C-corporations
- Personal Form 1040 — owner’s individual return including K-1 income from the entity, the permanent Section 199A QBI deduction, and any investment income
- Tennessee Franchise and Excise Tax return (Form FAE170) — filed annually with the Tennessee Department of Revenue; covers both the franchise component (net worth or property) and the excise component (net income)
- Prior-year and late returns — federal and Tennessee F&E returns for businesses that have not filed one or more years; amended returns where needed
- Quarterly estimated federal taxes — calculation and scheduling for business owners who expect to owe $1,000 or more in federal tax for the year
Monthly bookkeeping produces the financial statements that make every component faster and more accurate. See how The Bookkeeping Company’s bookkeeping service and tax preparation work from the same reconciled records.
Tennessee Franchise and Excise Tax: What Every Business Needs to Know
The Tennessee Franchise and Excise Tax is the most commonly misunderstood Tennessee business tax obligation — because it consists of two separate components with different bases and different calculation methods.
The Excise Tax Component (6.5% on Net Income)
The excise component taxes Tennessee net income at 6.5%. For most Tennessee businesses, this functions like a state corporate or business income tax — even though Tennessee has no personal income tax. Net income for Tennessee excise purposes starts with federal taxable income and applies certain Tennessee-specific modifications. As a result, a Tennessee LLC or corporation with strong profitability faces a meaningful state tax obligation despite the state’s reputation as a no-income-tax state. (Tennessee Department of Revenue — Franchise and Excise Tax)
The Franchise Tax Component (0.25% on Net Worth or Property)
The franchise component is based on the greater of the entity’s net worth or the value of its Tennessee real and tangible property. The rate is 0.25% with a minimum tax of $100. Consequently, a Tennessee business with significant assets — real estate, equipment, or inventory — may owe franchise tax even in a year when it reports no net income or a net loss. The franchise and excise components are calculated separately and combined on Form FAE170.
Who Must File
Most entities organized in Tennessee or doing business in Tennessee must file the F&E return. This includes corporations, LLCs, partnerships, and limited partnerships. Sole proprietors operating without a separate entity may be exempt depending on their structure. Additionally, businesses from other states that have economic or physical nexus in Tennessee — including remote sellers above the economic nexus threshold — may also have Tennessee F&E filing obligations.
Tennessee Has No Wage Income Tax — But Businesses Still Pay State Tax
This is the question most new Tennessee business owners ask — and the answer is yes, your business likely owes state tax, even though you pay no state income tax on your personal wages.
The Hall Income Tax Is Gone
Tennessee formerly taxed investment income — dividends and interest — through the Hall Income Tax. The Tennessee legislature phased the Hall tax out over several years and fully eliminated it effective January 1, 2021. As a result, Tennessee now has no personal state income tax of any kind. Business owners pay no state income tax on their wages, salary, or pass-through business income on their personal returns.
The Franchise and Excise Tax Still Applies to Business Entities
However, the entity itself — the LLC, S-corp, or corporation — still files a Tennessee Franchise and Excise Tax return. The excise component is 6.5% of the entity’s net income in Tennessee. For a Tennessee LLC taxed as a partnership, the entity files the F&E return and pays the excise tax before income passes through to the owners. Furthermore, a Tennessee S-corp may owe both franchise and excise tax at the entity level and federal income tax on the K-1 income at the owner level — with no Tennessee personal income offset for the owner.
Tennessee Business Tax Filing Deadlines
Tennessee businesses manage filing deadlines across federal and state agencies, each with independent penalty structures for late filing.
Annual Return Deadlines
Federal S-corp and partnership returns are due March 15, with extensions to September 15. Federal individual and C-corp returns are due April 15, with extensions to October 15 and October 15 respectively. Tennessee Franchise and Excise Tax returns are due April 15 for calendar-year filers — the same date as the federal individual return. However, the Tennessee Department of Revenue allows a six-month extension when a federal extension is filed, provided estimated tax is paid by the original April 15 deadline. (IRS — Small Business and Self-Employed Tax Center)
Quarterly Estimated Taxes
Tennessee business owners who operate as sole proprietors, S-corp shareholders, or partners must pay federal quarterly estimated taxes — April 15, June 15, September 15, and January 15 — whenever they expect to owe $1,000 or more for the year. Tennessee does not require separate quarterly estimated payments for the Franchise and Excise Tax for most small businesses; the entire amount is reconciled and paid with the annual F&E return. (IRS — Prior Year Forms and Instructions)
How Much Does Business Tax Preparation Cost?
Tax preparation costs for Tennessee businesses depend on entity type and the scope of both federal and Tennessee state filings. According to the National Society of Accountants Income and Fees Survey (2025):
- Schedule C (sole proprietor, with Form 1040): approximately $482 or more
- S-corp Form 1120-S: approximately $903 or more, plus the owner’s personal Form 1040
- Partnership Form 1065: approximately $873 or more, plus partner personal returns
- Tennessee Franchise and Excise Tax return (Form FAE170): additional fee per filing, typically bundled with the federal return at a combined rate
- Prior-year and late returns: priced individually by year; typically higher than current-year returns due to records reconstruction and penalty calculation work
A free initial consultation produces a specific cost estimate for all required filings before any engagement begins. Most Tennessee small businesses pay a combined federal-plus-Tennessee rate that is lower than equivalent services at large regional CPA firms.
Remote Tax Preparation for Tennessee Businesses Statewide
Tax preparation from The Bookkeeping Company reaches Tennessee businesses entirely remotely — Nashville, Memphis, Knoxville, Chattanooga, and all Tennessee communities:
- Nashville and Middle Tennessee — music, entertainment, healthcare, technology, and professional services businesses; federal entity returns and Tennessee F&E preparation
- Memphis and West Tennessee — logistics, distribution, healthcare, and retail businesses; prior-year F&E returns and current-year coordination
- Knoxville and East Tennessee — manufacturing, education, and technology businesses; S-corp and partnership returns with multi-owner K-1 coordination
- Chattanooga and Southeast Tennessee — manufacturing, automotive supply chain, and technology businesses; combined federal and Tennessee F&E filing
The Bookkeeping Company offers a free initial consultation for all Tennessee clients. Call 360-524-9889 or use the contact form at thebookkeepingcomp.org to discuss your federal and Tennessee Franchise and Excise Tax preparation needs.
Frequently Asked Questions About Tax Preparation for Tennessee
How much does business tax preparation cost?
Federal business tax return fees depend on entity type (Source: National Society of Accountants, 2025). A Schedule C with Form 1040 averages $482 or more; an S-corp Form 1120-S averages $903 or more; a partnership Form 1065 averages $873 or more. Tennessee Franchise and Excise Tax return preparation is an additional fee, typically bundled with the federal return. Prior-year and late federal and Tennessee F&E returns are priced individually. A free consultation produces a complete cost estimate before any engagement begins.
Do you prepare Tennessee franchise and excise returns?
Yes. The Bookkeeping Company prepares Tennessee Franchise and Excise Tax returns (Form FAE170) for Tennessee business clients. Preparation includes calculating the excise component (6.5% of Tennessee net income) and the franchise component (0.25% of the greater of net worth or Tennessee real and tangible property, minimum $100). The return is e-filed by the April 15 deadline with the Tennessee Department of Revenue. Extensions are available provided estimated tax is paid by the original deadline.
Tennessee has no wage income tax — does my business still owe state tax?
Yes. Tennessee eliminated the Hall Income Tax on investment income in 2021, creating a true no-personal-income-tax state. However, most Tennessee businesses still file the Franchise and Excise Tax annually. The excise component is 6.5% of business net income — functionally similar to a business income tax even though Tennessee labels it differently. The franchise component is 0.25% of net worth or Tennessee property. A Tennessee LLC with strong profitability will owe significant F&E tax even though the owner pays no Tennessee personal income tax on wages.
Can you work entirely remotely with a Tennessee business?
Yes. The Bookkeeping Company works entirely remotely with Tennessee clients statewide. Clients upload tax documents through a secure document portal — prior year return, profit and loss statement, balance sheet, payroll records, and any relevant statements. The firm prepares draft federal and Tennessee F&E returns and delivers them for digital review. After any questions are resolved, the client signs electronically and the firm e-files with the IRS and Tennessee Department of Revenue. No in-person appointment is required.
Can you file prior-year or late returns?
Yes. The Bookkeeping Company prepares prior-year federal and Tennessee Franchise and Excise Tax returns for clients who have not filed one or more years. Unfiled Tennessee F&E returns accumulate penalties with the Tennessee Department of Revenue; filing the missing returns stops penalty accrual. At the federal level, the IRS has no statute of limitations on unfiled returns and may file a Substitute for Return that overstates the tax owed. Filing your own prior-year return typically reduces the assessment and stops collection action faster.
Do you prepare federal returns for Tennessee S-corps and partnerships?
Yes. The Bookkeeping Company prepares Form 1120-S for Tennessee S-corporations and Form 1065 for Tennessee partnerships, coordinated with each owner’s personal Form 1040. Entity returns include K-1 preparation for all owners, the permanent Section 199A QBI deduction calculation, and reasonable salary documentation for S-corp owner-employees. Tennessee S-corps and partnerships also file Tennessee Franchise and Excise Tax returns at the entity level — the F&E return is prepared and filed as part of the same coordinated annual engagement.
What documents does a Tennessee business need for tax preparation?
For federal returns: prior year return, full-year profit and loss statement and balance sheet, payroll W-2s for owner-employees, and K-1s from any investments. For the Tennessee F&E return: net income from the federal return, net worth from the balance sheet, and the value of Tennessee real and tangible property for the franchise component calculation. S-corp and partnership entity returns must be completed before owner personal returns can be finalized, since K-1 income flows from the entity return to the personal return.
How does remote tax preparation work for a Tennessee client?
Tennessee clients upload tax documents through a secure document portal. The Bookkeeping Company prepares draft federal and Tennessee F&E returns from those documents and delivers them digitally for review. The team answers any questions about specific line items or calculations before the client approves. After approval, the client signs electronically and the firm e-files with both the IRS and the Tennessee Department of Revenue. Additionally, year-end W-2 preparation and 1099-NEC filing for contractors are handled as part of the same annual engagement.
About The Bookkeeping Company
The Bookkeeping Company: Tax Strategies & Planning
18523 NE 65th St
Vancouver, WA 98682
Phone: 360-524-9889
Email: thebookkeepingcomp@gmail.com
Service Area: Serving Tennessee businesses statewide — Nashville, Memphis, Knoxville, Chattanooga, and all Tennessee communities. All tax preparation delivered remotely via secure document portal. Free consultations offered to all new clients.