Franchise Tax

Tax Rate: $0.25 per $100 of a company's Tennessee-based net worth.

Corporations are eligible to receive franchise tax credits equal to the following:

Tax credit of $4,500 per new full-time employee:

  • In businesses that meet requirements of a minimum 25 new fulltime jobs and additional capital investment of $500,000 and offer a minimal health care plan.
  • For new jobs in the future resulting in a net increase in jobs.

No franchise tax on:

  • Finished goods inventory in excess of $30 million for fiscal year beginning on July 15, 1998.
  • Property under construction, not being utilized by the business.
  • Pollution control equipment.

Property rented from an industrial development board may be capitalized on the business books.

For companies that increase Tennessee investment while also doing business in other states, Tennessee offers double, weighted sales apportionment formula for franchise and excise taxes. This means that property, payroll and sales are all taxed, but they are taxed in fourths, not thirds. Property and payroll have one fourth each and sales has two fourths.

The jobs tax credit can be applied to both the franchise and excise tax.  The percentage of franchise and excise tax liability may be offset by 50% of total liability.