TN
Tennessee Small Business Tax Guide
What Tennessee's Department of Revenue and the IRS say about sales, franchise, excise and business taxes, as background reading rather than tax advice.
Disclaimer: This page is educational content only. Tax laws change, and your situation may differ. It is not legal, tax, or financial advice. Consult a qualified professional licensed in Tennessee before making filing or planning decisions.
Tax landscape for small businesses
Every Tennessee number here comes verbatim from the Tennessee Department of Revenue's help articles (Tennessee, as retrieved on October 31, 2026); federal numbers are IRS quotes, dated by the IRS page they come from.
On sales tax, the Department of Revenue's article SUT-13 (Tennessee, as retrieved on October 31, 2026) states: "The state sales tax rate for most taxable items and services is 7%." It also states that "sales of food and food ingredients are taxed at a state rate of 4%" and "Local tax rates are set by local county and some incorporated city governments and cannot exceed 2.75%."
On business taxes, the Department of Revenue (Tennessee, as retrieved on October 31, 2026) states "The franchise tax is a privilege tax imposed on entities for the privilege of doing business in Tennessee." Its article FT-1 states "In general, the franchise tax is based on a taxpayer’s net worth (assets less liabilities) apportioned to Tennessee." and "The tax rate is $0.25 per $100 (0.25%) of the tax base. There is a $100 minimum tax." Its article ET-1 states that excise tax starts from "the net income before loss carryover and special deductions as reported on the federal income tax return" and that "any prior year loss carryover is deducted before the tax rate of 6.5% is applied." Its article BUS-2 states "Business tax consists of two separate taxes: the state-level business tax and the municipal-level business tax."
On the Hall income tax, the Department of Revenue's article HIT-3 (Tennessee, as retrieved on October 31, 2026) states: "The tax is fully repealed beginning January 1, 2021."
Worked example (sample figures): with Tennessee's figures as retrieved on October 31, 2026, take a business that sells ten taxable items at $100.00 each, $1,000.00 in all, each priced below the $1,600 single article threshold. At the quoted 7% state rate, the state portion comes to $1,000.00 × 7% = $70.00. If the local rate sits at the quoted 2.75% cap, local tax adds $1,000.00 × 2.75% = $27.50, so tax totals $97.50 and the invoice $1,097.50. To apply those rates for you, Billed's invoice software page (checked October 31, 2026) says: "Save your tax rates and settings once, and Billed calculates taxes automatically when you create invoices and estimates."
Tax overview
Each row lists a tax area and its notes. Confirm current figures with your state's tax agency or the IRS.
| Tax type | Rate or basis | Notes |
|---|---|---|
| State sales and use tax | "7%" | The Tennessee Department of Revenue's article SUT-13 (Tennessee, as retrieved on October 31, 2026): "The state sales tax rate for most taxable items and services is 7%." |
| Food and food ingredients | "4%" | The Tennessee Department of Revenue's article SUT-13 (Tennessee, as retrieved on October 31, 2026): "sales of food and food ingredients are taxed at a state rate of 4%." |
| Local sales tax | "cannot exceed 2.75%" | The Tennessee Department of Revenue's article SUT-13 (Tennessee, as retrieved on October 31, 2026): "Local tax rates are set by local county and some incorporated city governments and cannot exceed 2.75%." |
| Franchise tax | "$0.25 per $100 (0.25%)" | The Tennessee Department of Revenue's article FT-1 (Tennessee, as retrieved on October 31, 2026): "The tax rate is $0.25 per $100 (0.25%) of the tax base. There is a $100 minimum tax." |
| Excise tax | "6.5%" | The Tennessee Department of Revenue's article ET-1 (Tennessee, as retrieved on October 31, 2026): "any prior year loss carryover is deducted before the tax rate of 6.5% is applied." |
| Business tax | "a minimum tax of $22" | The Tennessee Department of Revenue's article BUS-8 (Tennessee, as retrieved on October 31, 2026): "The business tax rates vary depending on a business’s classification and whether it is a retailer or a wholesaler." It adds "every taxpayer must pay at least a minimum tax of $22." |
| Federal self-employment tax | "15.3%" | In the US (federal), the IRS self-employment tax page (last reviewed or updated October 30, 2026): "The self-employment tax rate is 15.3%." |
Filing requirements
This list isn't a complete checklist for your business.
Sales and use tax registration
The Tennessee Department of Revenue's article SUT-10 (Tennessee, as retrieved on October 31, 2026) states "Any person who sells, leases, or rents tangible personal property or provides a taxable service is required to register for sales and use tax purposes, even if the product sold is exempt from tax." It adds "There is no charge for registering a business for a sales and use tax account." The same article (dated March 27, 2025) states "Retailers, wholesalers, and manufacturers will also receive a Tennessee Certificate of Resale."
Remote sellers
The Department of Revenue's article MS-5 (Tennessee, dated October 20, 2021, as retrieved on November 1, 2026) states "Remote sellers with no physical presence in this state who sell directly to Tennessee customers and have Tennessee sales in excess of $100,000 are required to register with the Department and collect tax under Tenn. Code Ann. § 67-6-524(b)." MS-5 doesn't say over what period the $100,000 is counted.
Sales and use tax returns
The Tennessee Department of Revenue's article SUT-9 (Tennessee, as retrieved on October 31, 2026) states "Monthly filers must file by the 20th day of the month following the end of the reporting period. Quarterly filers must file by the 20th day of the month following the end of the quarter. Annual filers must file by January 20th yearly." It adds that "if a due date falls on a weekend or holiday, the date is extended through the next business day."
Business license
The Tennessee Department of Revenue's article BUS-13 (Tennessee, as retrieved on October 31, 2026) states "Every business in Tennessee with business taxable receipts of over $3,000 must obtain a business license." and "Businesses with taxable receipts of $100,000 or more must obtain a standard business license. Standard license holders must register, file a return, and pay at least the minimum $22 business tax to the department of revenue."
Business tax return
The Tennessee Department of Revenue's article BUS-22 (Tennessee, as retrieved on October 31, 2026) states "Business tax is due on the 15th day of the fourth month following the end of a taxpayer's fiscal year. For example, if a taxpayer's fiscal year coincides with the calendar year, then the business tax return will be due on April 15."
Franchise and excise tax return
The Tennessee Department of Revenue's article F&E-5 (Tennessee, as retrieved on October 31, 2026) states "The franchise and excise tax return is due on the 15th day of the fourth month following the closing of the taxpayer’s books and records. For example, a calendar year taxpayer’s return is due on April 15." It also states "all franchise and excise tax return filings and payments related to form FAE170 must be made electronically."
Single-owner LLCs and franchise and excise tax
The Department of Revenue's article F&E-4 (Tennessee, dated March 12, 2021, as retrieved on November 1, 2026) states "A limited liability company must file a franchise and excise tax return even if it chooses to be ignored as an entity for federal tax purposes and is treated as an individual taxpayer". It adds that "unless a particular limited liability company falls within an exemption contained in the law (see Tenn. Code Ann. Section 67-4-2008), it is taxable."
Federal estimated tax
In the US (federal), the IRS estimated taxes page (last reviewed or updated September 25, 2026) states "Individuals, including sole proprietors, partners, and S corporation shareholders, generally have to make estimated tax payments if they expect to owe tax of $1,000 or more when their return is filed."
Deductions and write-offs
Confirm with your state how it treats each item.
- An adjustment for SE tax: in the US (federal), the IRS self-employment tax page (last reviewed or updated October 30, 2026) states "You can deduct the employer-equivalent portion of your self-employment tax in figuring your adjusted gross income."
- Choosing a record system: in the US (federal), the IRS recordkeeping page (last reviewed or updated May 1, 2026) states "You may choose any recordkeeping system suited to your business that clearly shows your income and expenses."
- For deductions on your own return, a tax professional is the person to ask.
Practical tips
- Watch the single article rate on higher-priced items. The Department of Revenue's article SUT-13 (Tennessee, as retrieved on October 31, 2026) states "The state single article rate is 2.75% on any single item sold for a price in excess of $1,600 but not more than $3,200."
- Find out whether your city has a business tax. The Department of Revenue's article BUS-2 (Tennessee, as retrieved on October 31, 2026) states "Businesses that have a physical business location in a city that has enacted a business tax must pay the municipal-level business tax as well." The same article (dated August 23, 2023) states "All businesses that are not statutorily exempt must pay the state business tax. This includes businesses with a physical location in the state as well as out-of-state businesses performing certain activities in the state."
- File the franchise and excise return in quiet years too. The Department of Revenue's article F&E-15 (Tennessee, as retrieved on October 31, 2026) states "The minimum franchise tax of $100 is payable if you are incorporated, domesticated, qualified, or otherwise registered through the Secretary of State to do business in Tennessee, regardless of whether the company is active or inactive."
- Track unpaid invoices ahead of each return. Billed's invoice software page (checked October 31, 2026) says "Invoice reports show which invoices are paid, partially paid or past due, and you can see who owes you money and send them a payment reminder."
- Before you file, compare these figures with current Department of Revenue and IRS pages, or bring them to a tax professional.
Frequently asked questions
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At a glance
| Topic | Department of Revenue or IRS wording |
|---|---|
| State sales and use tax | Department of Revenue, SUT-13: "The state sales tax rate for most taxable items and services is 7%." (Tennessee, as retrieved on October 31, 2026) |
| Local sales tax | Department of Revenue, SUT-13: "Local tax rates are set by local county and some incorporated city governments and cannot exceed 2.75%." (Tennessee, as retrieved on October 31, 2026) |
| Franchise tax | Department of Revenue, FT-1: "The tax rate is $0.25 per $100 (0.25%) of the tax base. There is a $100 minimum tax." (Tennessee, as retrieved on October 31, 2026) |
| Excise tax | Department of Revenue, ET-1: "any prior year loss carryover is deducted before the tax rate of 6.5% is applied." (Tennessee, as retrieved on October 31, 2026) |
| Business tax | Department of Revenue, BUS-8: "every taxpayer must pay at least a minimum tax of $22." (Tennessee, as retrieved on October 31, 2026) |
| Hall income tax | Department of Revenue, HIT-3: "The tax is fully repealed beginning January 1, 2021." (Tennessee, as retrieved on October 31, 2026) |
| Self-employment tax | IRS, In the US (federal): "The self-employment tax rate is 15.3%." (last reviewed or updated October 30, 2026) |
When this isn't for you
Meant for sole proprietors and small firms that sell in Tennessee. Whether a sole proprietorship that isn't an LLC owes franchise and excise tax, and income taxes other than the repealed Hall tax, aren't covered on this page; for those, ask the Tennessee Department of Revenue or consult a tax professional.