Tennessee LLC Taxes: The Complete Filing Guide (2025)

Tennessee LLC Tax Basics

Navigating your Tennessee LLC tax obligations doesn’t have to be complicated. We’ll walk you through the essentials of pass-through taxation, explain Tennessee’s specific requirements, and highlight strategies to stay compliant and organized. This guide covers everything from federal income taxes to city-specific requirements and filing deadlines.

Use the links below to jump directly to the section you need:

• Tennessee LLC Taxes at a Glance
• Understanding LLC Taxation Basics
• Federal Tax Obligations
• Tennessee State Taxes
• Local Tax Considerations
• Tax Calendar and Filing Tips
• Tax Strategies for Tennessee LLCs
• Forms and Resources

Tennessee LLC Taxes at a Glance

Tax Type	Rate	Filing Deadline	Forms Required
Federal Income Tax	10-37% (personal brackets)	April 15, 2025	Form 1040 + Schedule C or Schedule E/K-1
Self-Employment Tax	15.3%	April 15, 2025	Schedule SE
Tennessee Franchise and Excise Tax	0.25% of net worth + 6.5% of net income	April 15, 2025	Form FAE 170
Tennessee Business Tax	0.001%-0.1875%	April 15, 2025	Form BUS 428
Federal Payroll Taxes (If Employees)	7.65% employer + 7.65% employee (FICA)	Quarterly (April 30, July 31, October 31, January 31)	Form 941
Tennessee Unemployment Tax (If Employees)	0.01%–10% (new employees: 2.7%)	Quarterly	File online
Federal Unemployment (FUTA)	6% on first $7,000 per employee (0.6% after credits)	January 31, 2026 (annual)	Form 940
Sales & Use Tax	7% (+ up to 2.75% local tax)	Monthly, quarterly, or annually based on sales volume	Form SLS 450
Annual Report	$50 per LLC member	Varies by LLC’s fiscal year	Filed online

Understanding LLC Taxation Basics

How Tennessee LLCs Are Taxed By Default

Your Tennessee LLC doesn’t pay taxes itself. Instead, profits flow through to you and your members, who report them on personal tax returns. This is called pass-through taxation.

Here’s how it works:

1. Your LLC earns income from business activities
2. The LLC itself files no tax return (unless you elect otherwise)
3. Profits “pass through” to members based on ownership percentage
4. Each member reports their share on their personal tax return
5. Members pay tax at their individual income tax rates

What this means for you: Unlike corporations, your business profits are only taxed once, which typically saves money.

Tax Classification Options

While pass-through taxation is the default, your Tennessee LLC can choose alternative tax treatments:

Default LLC Tax Status:

• Single-member LLC: Taxed as a sole proprietorship
• Multi-member LLC: Taxed as a partnership

Optional Tax Classifications:

• S Corporation: Can reduce self-employment taxes by paying “reasonable salaries”
• C Corporation: LLC pays corporate tax on profits, members pay personal tax on distributions (creates double taxation)

Not sure which tax classification is right for your business? Schedule a free consultation with 1-800Accountant.

Federal Tax Obligations

Income Tax

As a Tennessee LLC owner, you’ll report your share of business profits on your personal tax return using:

• Form 1040 + Schedule C (single-member LLCs)
• Form 1040 + Schedule E + Schedule K-1 (multi-member LLCs)

Federal income tax rates range from 10% to 37% based on your tax bracket (actual brackets will depend on inflation adjustments and any tax law changes).

Simply Put: Whatever money your business makes (after expenses) gets added to your personal tax return, just like income from a job.

Self-Employment Tax

LLC members actively involved in the business must pay self-employment tax of 15.3% (covering Social Security and Medicare) on their share of LLC profits.

Key points:

• Applies to net earnings of $400 or more
• Calculated on Schedule SE
• You can deduct 50% of the self-employment tax as an “above-the-line” deduction, which lowers your adjusted gross income

What happens if I miss this payment? The IRS charges penalties of 0.5% per month plus interest. However, first-time mistakes can often qualify for penalty abatement if you have a clean compliance history.

Employment Taxes

If your LLC has employees, you must:

• Withhold federal income tax
• Pay and withhold FICA taxes (7.65% each for employer and employee)
• Pay federal unemployment tax (FUTA)
• File quarterly employment tax returns (Form 941)
• Provide W-2 forms annually

Estimated completion time: 2-3 hours per quarter (significantly less with payroll software or professional help)

Estimated Tax Payments

Because no tax is withheld from your LLC profits, you’ll likely need to make quarterly estimated tax payments using Form 1040-ES. These payments cover both income and self-employment taxes on your share of the business income. Missing deadlines or underpaying can lead to IRS penalties, even if you pay in full later.

Working with an accountant can help ensure accurate calculations, on-time payments, and a smarter overall tax strategy.

Key deadlines:

• April 15
• June 16
• September 15
• January 15

Pro Tip: Set calendar reminders 15 days before each deadline. This gives you time to prepare without the last-minute rush that leads to mistakes.

Tennessee State Taxes

Tennessee Franchise and Excise Tax

All LLCs that are registered in Tennessee or doing business in the state are required to pay the state’s franchise and excise tax.

• Franchise tax: 0.25% of your LLC’s net worth ($100 minimum)
• Excise tax: 6.5% of your LLC’s net income

Filing requirements:

• Use Form FAE 170
• Due April 15, 2025 
• File through TNTAP

Bottom Line: For every $1,000 your LLC earns in net income, expect to pay about $65 in excise tax, plus at least $100 in franchise tax (more if your net worth is higher). 

Sales and Use Tax

If your Tennessee LLC sells physical products or certain services:

• Collect the 7% sales tax (plus local sales taxes up to 2.75%) 
• Register for a seller’s permit with the Tennessee Department of Revenue
• File and pay monthly, quarterly, or annually through TNTAP
• Use Tennessee Form SLS 450 

60-Second Check: Do I Need to Collect Sales Tax?

• Do you sell physical products in Tennessee? → If yes, collect tax
• Do you sell digital products? → Generally not taxable
• Do you provide services? → Most services are exempt
• Do you sell online to Tennessee customers? → If yes, collect tax

Services typically exempt from sales tax include:

• Professional services (legal, accounting)
• Personal services (haircuts, fitness training)
• Medical services

Products typically subject to sales tax include:

• Tangible personal property
• Prepared food
• Some digital products

Tennessee Business Tax

Most LLCs that sell goods or services in Tennessee are also required to pay the state’s gross receipts-based business tax. 

• Rate: 0.02% to 0.1875% of gross receipts 
• Rate varies by business type (e.g., retailer, wholesaler, or service provider)
• Due April 15, 2025
• Use Tennessee Form BUS 428
• File online through TNTAP 

Unemployment Insurance (UI) Tax 

If you have employees in Tennessee, you will be responsible for paying state unemployment insurance tax.

• Register with the Tennessee Department of Labor and Workforce Development
• The rate for new employers is based on your NAICS code 
• Rate for employers is 2.7% (0.01%-10% afterwards) 
• Tax is due quarterly and filed through the Jobs4TN Employer Portal

Annual Report Filing

While not a tax, your Tennessee LLC must file an annual report to stay in good standing with the state.

• Due by the fourth month following the end of your LLC’s fiscal year
• $50 per member, with a minimum fee of $300 and a maximum of $3,000
• Filed with the Tennessee Secretary of State
• Failure to file within 60 days of the due date can lead to administrative dissolution of your LLC

Calendar Alert: Set a reminder to ensure you don’t miss this easy but required filing.

Local Tax Considerations

Local Option Sales and Use Taxes

Tennessee allows cities and counties to impose their own local sales and use taxes, which your LLC must account for when selling in multiple locations across the state.

Cities and counties with local sales taxes include:

• Nashville (2.75%)
• Gatlinburg (2.75%)
• Clarksville (2.50%)
• Pigeon Forge (2.75%)
• Other Tennessee jurisdictions

Filing requirements:

• You do not need to file separate returns for each city or county
• Local sales taxes are filed together with state sales tax using Form SLS 450
• All taxes are submitted through the TNTAP portal

Property Taxes

If your LLC owns real property in Tennessee:

• Rates vary by locality
• Assessed annually
• May qualify for various exemptions based on business type
• Personal property tax may apply to business equipment

Tax Calendar and Filing Tips

Key Deadlines for Tennessee LLCs

January:

• January 15: Final estimated tax payment for previous year
• January  31: Tennessee UI tax due
• January 31: Issue W-2s/1099s to employees/contractors
• January 31: Fourth quarter federal payroll tax payment due 

April:

• April 1: Tennessee LLC Annual Report due (for calendar year filers)
• April 15: Federal income and self-employment tax returns due

• April 15: First quarter estimated tax payment due 
• April  30: Tennessee UI tax due
• April 30: First quarter federal payroll tax payment due

June: 

• June 16: Second quarter estimated tax due 

July: 

• July  31: Tennessee UI tax due
• July 31: Second quarter federal payroll tax payment due 

September:

• September 15: Third quarter estimated tax payment due

October:

• October 31: Tennessee UI tax due
• October 31: Third quarter federal payroll tax payment due

Record-Keeping Checklist

Keep these records for at least seven years:

• Business income records (invoices, receipts)
• Expense receipts and documentation
• Bank and credit card statements
• Asset purchase and improvement records
• Vehicle mileage logs
• Home office documentation
• Payroll records
• Previous tax returns

Tax Strategies for Tennessee LLCs

S Corporation Election Benefits

Converting your LLC to an S Corporation for tax purposes can save on self-employment taxes:

1. File Form 2553 with the IRS
2. Pay yourself a “reasonable salary” subject to employment taxes
3. Take remaining profits as distributions exempt from self-employment tax

Example: An LLC making $100,000 in profit pays 15.3% self-employment tax on the entire amount. As an S Corp, if $60,000 is a reasonable salary and $40,000 is taken as distributions, only the $60,000 is subject to employment taxes.

Potential Savings: In this example, you’d save about $6,120 in self-employment taxes.

Business Expense Deductions

Common deductions Tennessee LLC owners often overlook:

• Home office deduction
• Business mileage (70¢ per mile for 2025)
• Health insurance premiums
• Retirement plan contributions
• Professional development expenses
• Business meals (50% deductible)

Forms and Resources

Federal Tax Forms

• Schedule C: Profit or Loss From Business (sole proprietors)
• Form 1065: U.S. Return of Partnership Income
• Schedule K-1: Partner’s Share of Income, Deductions, Credits
• Form 1120-S: U.S. Income Tax Return for an S Corporation
• Form 2553: Election by a Small Business Corporation (S Corp)
• Form 8832: Entity Classification Election

Tennessee Tax Forms

• Form FAE 170: Tennessee Franchise and Excise Tax Return 
• Form BUS 428: Tennessee Business Tax Return
• Form SLS 450: State and Local Sales and Use Tax Return

Helpful Resources

• Tennessee Department of Revenue
• Tennessee Taxpayer Access Point
• Internal Revenue Service
• Tennessee Department of Labor and Workforce Development