How-To: Calculate TN F&E Taxes
When it comes to business taxes, there are several that have to be taken into account (pun semi-intended). Still, we often get the question: “How do I calculate my Tennessee franchise and excise taxes?”. So, very quickly, let’s break down the details and calculations surrounding franchise and excise tax in Tennessee.
Who Pays F&E Taxes
The first thing you need to know is that they may not even apply to you. If you’re a sole-proprietor or part of a general partnership, you don’t have to worry about them.
However, if you’re operating a corporation, limited partnership, LLC, and/or business trust that is chartered, qualified, or registered in TN/doing business in the state, you’ll have to deal with franchise and excise taxes.
Luckily, the rates are (mostly) straightforward.
Calculations
Franchise tax is applied to the net worth/book value of real property (building, land, house, etc.) OR tangible personal property used or owned in the state–whichever has the greater value/amount. A rate of 0.25% is taxed on the higher amount–with a minimum tax of $100–whether your business is active or not.
Excise tax is simply based on the net income for the current tax year with the rate being 6.5% of the TN taxable income.
Generally, we advise clients to save 7% of their net income for these taxes if they do not own any real property, and 10% if they do.
Conclusion
As always, if taxes feel overwhelming to you, reach out to us at Genovations Accounting; we’ll handle everything for you!
Don’t stress your success.
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