If you fall more than 90 days behind on franchise or excise taxes in Tennessee, the consequences go far beyond late fees. The Department of Revenue can notify the Secretary of State, and your charter may be revoked automatically. No court order, no lengthy process, just an immediate loss of your company’s legal right to operate.
That revoked status is public record. Banks can freeze accounts, contracts may be voided, and new deals can collapse the moment a vendor or lender checks your standing. For many owners, this discovery comes at the worst possible time: while applying for financing, renewing a license, or closing a client deal.
This is one of the toughest enforcement tools in Tennessee tax law, and it’s used regularly. Here’s what revocation really means, how it happens, and what you can do if you’ve already fallen behind.
The 90-Day Rule Explained.
When it comes to Tennessee franchise and excise taxes, the clock starts ticking the moment you miss a payment. If the franchise or excise taxes go unpaid for more than 90 days, the Department of Revenue doesn’t just send another reminder. Instead, the Commissioner of Revenue certifies your delinquency and notifies the Secretary of State.
That single step triggers the automatic revocation of the charter. There’s no court hearing, no appeals process before it happens, and no extra grace period beyond the 90 days. The law was designed this way on purpose. Tennessee wanted a clear, enforceable cutoff that forces businesses to keep their tax obligations current.
For many owners, the surprise is how quickly this can sneak up. Maybe cash flow was tight and you meant to catch up “next month.” Maybe your accountant overlooked a filing, or the notice was sent to an outdated address. Whatever the reason, once that 90-day window closes, the revocation process is already in motion.
And it isn’t an empty threat. Each year, the Secretary of State publishes lists of businesses whose charters have been revoked. These are real companies — corporations, LLCs, partnerships — that failed to meet their obligations. If your name ends up on that list, anyone doing a quick background check can see that your company no longer has legal standing in Tennessee.
A Real-World Scenario
Imagine you run a small construction company and fall behind on franchise and excise taxes during a slow season. Ninety days later, you’re gearing up to bid on a municipal project, only to discover your charter has been revoked. The city can’t legally award a contract to a company without good standing, so your opportunity disappears overnight. Worse, your competitors (and maybe even your clients) can see your revoked status in public records.
This is how the 90-day rule plays out in practice. You can lose real business opportunities at the worst possible moment.
The 90-day rule is straightforward, but the consequences are anything but simple. To understand the impact, you have to look at what revocation does to your ability to run your business.
What Charter Revocation Means for Business Owners
Once the Secretary of State records the revocation, your company no longer has the legal authority to operate. In practical terms, this can disrupt nearly every part of your business.
- Contracts and licenses can be voided. If a TN business charter is revoked, clients or vendors may be able to walk away from agreements without penalty. Professional and business licenses tied to your entity can also be suspended until you’re reinstated.
- Financing can dry up. Banks, credit unions, and private lenders often run quick checks with the Secretary of State before issuing loans. When they see your business in revoked status, they may freeze accounts, pull back credit lines, or deny new financing altogether. For businesses already managing Tennessee franchise and excise tax problems, losing access to funding can make it nearly impossible to catch up.
- Reputation takes a hit. A revoked charter is public record. That means prospective partners, customers, and even competitors can see that you’ve fallen into Tennessee DOR tax delinquency. In industries where trust and credibility are everything, that kind of red flag can cause lasting damage.
- Operations can grind to a halt. Without legal standing, you can’t enter new contracts, enforce existing ones, or bid on government projects. For many owners, this is where the real financial pain sets in — opportunities slip away, while unpaid taxes and penalties continue to pile up.
Simply put, when the state of Tennessee revokes a business charter for unpaid taxes, it can put your entire operation on hold. Getting back into good standing is possible, but it requires paying off the debt, including penalties and interest, before the state will even consider reinstatement.
How Franchise and Excise Taxes Work in Tennessee
To understand why the state takes unpaid balances so seriously, it helps to know what franchise and excise taxes actually are. These aren’t optional add-ons; they’re the backbone of how Tennessee taxes businesses.
Excise tax is a 6.5% tax on your company’s net earnings. In other words, if your business makes a profit, Tennessee expects a percentage of those earnings.
Franchise tax is a little different. It’s based on whichever is greater: your company’s net worth or the value of real and personal property you own in Tennessee. Even if your profits are low, the state still expects you to pay at least the minimum franchise tax.
Most corporations, LLCs, and partnerships that operate in Tennessee have to file both of these taxes every year by submitting Form FAE-170. Missing the filing deadline or skipping payment isn’t just a bookkeeping error; it’s considered a Tennessee DOR tax delinquency. And once you’re on that list, the countdown toward charter revocation begins.
For small business owners, these taxes can feel complicated, especially if you don’t have in-house accounting. But Tennessee law doesn’t make exceptions for confusion or oversight. Whether you’re a one-person LLC or a large corporation, the expectation is the same — file and pay on time.
Reinstatement Process After Revocation
If your charter has already been revoked, the good news is that reinstatement is possible. The bad news is that it’s rarely quick or easy. Tennessee doesn’t just flip a switch once you’ve paid your overdue bill — there’s a formal process you’ll need to complete before your business is legally recognized again.
1. Pay Every Dollar Owed
Reinstatement requires full payment of franchise and excise taxes, along with penalties, interest, and administrative fees. The state won’t issue a compliance certificate until the balance is zero. For some businesses, this means paying off months or even years of debt.
2. Obtain a Certificate of Tax Compliance
Once your account is clear, the Department of Revenue issues a certificate of compliance. This is the official document that proves you no longer have a Tennessee DOR tax delinquency. Without it, the Secretary of State won’t even review your reinstatement request.
3. File with the Secretary of State
With your certificate in hand, you must file a reinstatement application through the Secretary of State’s office. This filing often includes a reinstatement fee on top of what you’ve already paid the Department of Revenue.
4. Reapply for Licenses or Contracts if Required
Revocation creates gaps in your business record. Professional licenses may need to be revalidated, contracts may require amendment, and some financing arrangements could be lost altogether. Even after reinstatement, the “revoked” status can create ripple effects.
5. Prepare for Delays
This process is not instant. Depending on how quickly you can pay off the debt and how fast the agencies process your paperwork, reinstatement may take weeks or months. During that time, your business remains without legal standing.
The takeaway is simple: while it’s possible to get a TN business charter revoked and reinstated to good standing, it is costly, time-consuming, and damaging to your reputation. Preventing revocation in the first place is far easier than trying to recover from it.
Penalties and Interest While You Wait
One of the most painful parts of dealing with unpaid franchise and excise taxes in Tennessee is how quickly the balance grows. Even if you plan to get caught up later, penalties and interest keep adding up every single month you wait.
The penalty structure is harsh. Tennessee law sets a penalty of 5% of the unpaid amount for every month your balance is overdue, up to a maximum of 25%. That means if you owe $10,000 in franchise and excise taxes, the penalty can climb as high as $2,500 — and that’s before interest is added.
On top of penalties, interest accrues daily at a rate set by the state each year. Recently, the rate has ranged from 12.5% to 13.25% annually. That doesn’t sound like much until you break it down: on a $10,000 balance, that’s an additional $1,250 to $1,325 in interest every year you delay – even more if you take compounding into account.
Imagine your business falls behind by $10,000 and you do nothing for six months. By then, you’ve likely hit the full 25% penalty ($2,500) and roughly $625 in interest. Your $10,000 problem has already grown to more than $13,000. And if your tax delinquency also triggered charter revocation, you’re paying thousands more just to get reinstated before you can legally operate again.
This is why waiting to fix the problem almost always makes it worse. Penalties and interest don’t stop simply because your charter is revoked. They keep climbing until you resolve the debt in full.
Resolution Options Before It Gets That Far
The best way to avoid the nightmare of a revoked charter is to tackle tax problems early. Tennessee has several programs designed to help struggling business owners get back on track before things spiral out of control.
The Tennessee Taxpayer Access Point (TNTAP) allows qualifying businesses to set up installment agreements. Instead of paying your entire balance in one lump sum, you spread payments out over time. Approval isn’t automatic, but if granted, it can stop your Tennessee DOR tax delinquency from escalating further.
In some cases, the Department of Revenue will waive penalties if you can show “reasonable cause.” This often applies to first-time issues, natural disasters, or situations outside of your control. The taxes and interest will still be due, but cutting out the penalty portion can save thousands.
Tennessee has a limited Offer in Compromise program that can reduce your balance if paying in full would create extreme hardship. This is not a quick fix — it requires documentation, review, and approval from the Commissioner. Still, for businesses drowning in debt, it may be a lifeline.
If you know you’ve missed filings but the state hasn’t contacted you yet, a voluntary disclosure can soften the blow. By coming forward first, you may qualify for reduced penalties and avoid the stigma of having your unpaid taxes situation exposed publicly.
Taking action through one of these channels can make the difference between a manageable problem and a disaster that ends your right to do business. Waiting until your TN business charter revoked is a matter of public record will only make resolution more expensive and more complicated.
Take Action Before It’s Too Late
If you’re behind on franchise or excise taxes in Tennessee, don’t wait for the clock to run out. Once the state revokes your charter, the fallout touches every part of your operation.
The good news is that you still have options. Whether it’s setting up a payment plan, seeking penalty relief, or exploring settlement programs, there are ways to resolve your Tennessee franchise and excise tax problems before they shut your doors. But the longer you wait, the more penalties, interest, and risks pile up.
At Damiens Law, we’ve helped business owners across the state face down Tennessee DOR tax delinquency and protect what they’ve built. If you’ve received notices or you’re worried about a looming deadline, now is the time to get professional help from our tax attorneys.
Contact Damiens Law today to learn how we can help you address your unpaid taxes and guide you toward a solution that protects your business.
