What Happens If You Don’t Pay
Franchise & Excise Taxes in Tennessee?

Running a business in Tennessee means juggling endless responsibilities, from managing payroll to serving clients. With so much competing for your attention, it can be tempting to push state tax obligations aside. But ignoring franchise and excise taxes is one of the fastest ways to jeopardize everything you’ve worked for.

Here’s the hard truth: what happens if you don’t pay Tennessee franchise and excise taxes is not limited to a slap on the wrist. The state imposes steep penalties, and those charges build month after month until the debt becomes overwhelming. Worse, if the delinquency continues, the Secretary of State can have your TN business charter revoked, leaving you without the legal authority to operate.

Many business owners only realize the seriousness of the situation once they’ve already lost financing, strained vendor relationships, or seen their charter marked “revoked” in public records. At that point, untangling the problem is far more expensive and stressful.

You don’t have to wait until things reach that stage. With the right guidance, you can explore Tennessee business tax help options to catch up on what you owe, reduce penalties, and protect your company from being shut down. To get help now, contact us at Damien’s Law today.

Key Takeaways

• Franchise and excise taxes in Tennessee are mandatory and can’t be ignored.
• Penalties, interest, and mounting debt may occur as a result of falling behind.
• Continued nonpayment can result in your business charter being revoked.
• Losing your charter means losing legal standing and credibility with partners.
• Acting early gives you more options to resolve the problem and protect your business.

Quick Overview: What Are Franchise & Excise Taxes?

When business owners hear “franchise and excise taxes,” it can sound like complicated government jargon. In reality, these are two of the most important state tax obligations in Tennessee, and missing them is often the first step toward serious trouble.

Here’s how they work:

• Franchise tax is Tennessee’s way of charging businesses for the privilege of operating in the state. It’s based on whichever is higher, your company’s net worth or the value of the property you own or use here. That means even in years when you don’t turn a profit, you’ll likely still owe something.

• Excise tax is tied directly to your business earnings. Tennessee charges 6.5% of net income from activities in the state, so the more you make, the more excise tax you’ll owe. But there is a $50,000 exemption available as of 2025.

The state combines both of these on a single return, Form FAE-170, and requires filing every year. Even if you had no income, the form still has to be submitted. This is where many owners get tripped up, because they assume no profits means no tax. But according to Tennessee law, failing to file or pay on time triggers automatic Tennessee franchise tax penalties.

If you’re already wondering what happens if you don’t pay Tennessee franchise and excise taxes, the answer starts here: once you miss a deadline, the clock begins ticking. Penalties, interest, and other enforcement tools come into play quickly, and if the debt lingers too long, the risk of having your TN business charter revoked becomes very real. That’s why understanding the basics is so important. It’s the first step in protecting your company and knowing when to seek Tennessee business tax help before things escalate.

The Cost of Nonpayment: Penalties and Interest

So what actually happens when you miss a franchise or excise tax deadline in Tennessee? The short answer is that the bill doesn’t just sit quietly on your account; it grows, and fast.

The state starts by adding Tennessee franchise tax penalties. These penalties tack on 5% of the unpaid amount for every month you’re late, up to a maximum of 25%. Think about that for a moment: a $10,000 balance can quickly turn into $12,500, and that’s before interest is added.

Interest is where many business owners get blindsided. Tennessee sets an adjusted annual rate that currently ranges from about 12.5% to 13.25%. Unlike a one-time fee, interest compounds as long as the debt remains unpaid. That means every day that passes adds a little more weight to the balance you owe.

To make matters worse, the state can assess separate penalties for failing to file and failing to pay. In other words, if you didn’t send in the form and didn’t make a payment, you could be hit with multiple layers of charges for the same tax year.

This is often the stage where business owners start searching for Tennessee business tax help. The numbers grow so quickly that it feels impossible to catch up. Unfortunately, the Department of Revenue has no problem letting the balance pile up, as unpaid accounts eventually provide the state with justification to revoke your TN business charter.

The penalties and interest are truly just the beginning. Left unchecked, the financial strain can snowball into legal consequences that threaten the future of your business.

Charter Revocation: Losing the Right to Do Business

If penalties and interest sound stressful, they’re only part of the story. In Tennessee, unpaid franchise and excise taxes can lead to something far more devastating: losing your legal authority to operate.

Once your account is more than 90 days delinquent, the Department of Revenue can certify your debt to the Secretary of State. At that point, your TN business charter is revoked automatically. 

The fallout of charter revocation touches every corner of your business. You may find that contracts you’ve signed are suddenly unenforceable. Banks may hesitate to extend credit, and vendors may stop doing business with you once they see your revoked status in public records. 

Even professional licenses and permits can be jeopardized because the state no longer recognizes your company as being in good standing. Once your charter is revoked, your reputation takes a hit that can be hard to recover from, even if you eventually pay off the debt.

The state has put these enforcement mechanisms in place for a reason: they want compliance, not excuses. But for struggling business owners, it can feel like the walls are closing in. The good news is that there are ways to fix the problem, but the longer you wait, the harder — and more expensive — it becomes. This is where timely Tennessee business tax help can make the difference between recovery and closure.

What to Expect If Your Charter Is Revoked

Having your business charter revoked can feel like the end of the road, but it doesn’t always have to be permanent. Tennessee law allows for reinstatement, though the process is far from simple.

First, you’ll need to pay all outstanding franchise and excise taxes, along with the penalties and interest that have built up. Until the Department of Revenue certifies that your account is back in good standing, you can’t even begin the reinstatement process. For many owners, this means scrambling to come up with thousands of dollars just to get back to square one.

Once the Department of Revenue clears your account, you then have to file formal reinstatement paperwork with the Secretary of State. This step is governed by Tennessee Code Annotated § 67-1-1442, which outlines exactly how the process works. It’s not just a matter of paying the bill. You’ll need to prove to the state that your business is ready to comply moving forward.

The hardest part is what happens during the time you’re revoked. Debt continues to grow, and relationships you’ve built with banks, vendors, and clients may weaken. Some businesses even lose access to financing or professional licenses, making recovery even harder.

This is why so many owners don’t realize the full weight of what happens if you don’t pay Tennessee franchise and excise taxes until they’re deep in the reinstatement maze. Getting your charter back is possible, but it’s stressful, expensive, and disruptive to your business’s reputation. The smarter move is to seek Tennessee business tax help before revocation ever happens.

Resolution Options for Delinquent F&E Taxes

It’s clear that ignoring Tennessee franchise and excise taxes only makes the problem worse. The good news is that you have options. The state provides several ways to get back on track, but most require you to act quickly and in good faith. This is where working with experienced professionals can make the difference between sinking deeper and finding a way out.

Payment Plans Through TNTAP

For many business owners, the most realistic first step is setting up a payment plan through the Tennessee Taxpayer Access Point (TNTAP). This allows you to spread the debt over time instead of paying a lump sum. While interest still applies, a payment plan can stop additional collection actions and give you room to breathe.

Penalty Waivers

Tennessee allows penalty waivers if you can demonstrate “reasonable cause.” You’ll need to provide a valid reason, such as a serious illness, a natural disaster, or another unforeseen event outside your control. A successful waiver request can remove thousands of dollars from your balance, making repayment more manageable.

Offer in Compromise

In limited cases, the state may consider an Offer in Compromise, which settles your debt for less than the full amount owed. These are typically approved only for taxpayers who can prove financial hardship. While rare, this can be a lifeline for businesses on the brink.

Voluntary Disclosure Agreement (VDA)

If the state hasn’t contacted you yet, you may be eligible for a Voluntary Disclosure Agreement. This program rewards honesty: by coming forward before the Department of Revenue finds you, you may qualify for reduced penalties and a shorter lookback period.

Each option above has strict requirements, and the paperwork alone can be confusing. Having a tax attorney who knows the system can give you the best chance of resolving the issue before it spirals into charter revocation.

Act Before Your Business Is at Risk

If there’s one lesson to take away, it’s this: unpaid franchise and excise taxes in Tennessee never disappear on their own. The longer you wait, the bigger the problem becomes. Penalties and interest continue to accumulate, and eventually, you risk having your TN business charter revoked.

But you don’t have to face this alone. Whether you’re already dealing with Tennessee franchise tax penalties, worried about what happens if you don’t pay Tennessee franchise and excise taxes, or simply trying to avoid trouble in the first place, help is available. With the right strategy, you can set up a payment plan, request penalty relief, or explore other resolution programs that fit your situation.

At Damiens Law, we focus on guiding Tennessee business owners through these exact challenges. We know how stressful tax problems can be, and we know how high the stakes are when your company’s future is on the line. Our team is here to cut through the confusion, negotiate with the Department of Revenue, and fight for the best possible outcome.

Don’t wait until the state closes the door on your business. Reach out today to learn how we can provide the Tennessee business tax help you need to protect your livelihood and get back in good standing.