Does the federal S election protect me from Tennessee tax?

No. Tennessee does not follow the federal S election for its own tax — the corporation is taxed at the entity level regardless. This is the single most expensive misunderstanding an S-corp owner can have in this state.

Which Tennessee return does an S corporation file?

FAE 170 (Franchise and Excise Tax Return) - same return filed by S-corporations as by C-corporations.

S-corp election · TN

Tennessee S-Corporation Election

By Edmond Hui · Facts verified July 29, 2026 against primary state sources

Edmond Hui · Founder, MyStateLLC

Edmond Hui is a software engineer and serial entrepreneur based in New York who has founded multiple online businesses across e-commerce, media, and information publishing. Before transitioning into tech, he spent years as a commercial real estate professional closing deals totaling over 100,000 square feet, giving him firsthand experience with business formation and entity structuring. He built MyStateLLC to provide the free, state-specific LLC guidance he wished existed when forming his own companies.

Tennessee does not follow the federal S election for its own tax. The S corporation is taxed at the entity level in Tennessee regardless of what the IRS recognizes — this is the single most expensive misunderstanding an S-corp owner can have in this state.

State treatmentDoes not follow the federal election

Separate state formNot required

State corporate income taxYes

The federal S election does not protect you from Tennessee tax

Tennessee is one of only 2 states that has a corporate income tax and still declines to follow the federal S election. The corporation is taxed at the entity level here whatever the IRS recognizes, so the usual reason for making the election — pass-through treatment — does not apply to your Tennessee liability. Entity-level taxes on S corporations are not unique to these states — California, Illinois, New York, Massachusetts and Delaware all follow the election and still levy one. What is unusual here is that the election is disregarded outright.

Does Tennessee recognize the federal S election?

State treatment of the S election

Follows the federal election	No
Separate state election form	None required
State return	FAE 170 (Franchise and Excise Tax Return) - same return filed by S-corporations as by C-corporations

What an S corporation still owes Tennessee

Tennessee does NOT follow the federal S-corporation election for franchise & excise tax. S-corporations are subject to TN F&E tax at the ENTITY level exactly like C-corporations: 6.5% excise tax on net earnings plus 0.25% franchise tax on net worth (minimum $100), filed on Form FAE 170. Tennessee also has no individual income tax on wages (Hall income tax on investment income was fully repealed as of 2021), so S-corp income does not flow to a personal state income-tax return either.

Franchise or gross-receipts tax

Franchise tax of 0.25% ($0.25 per $100) of net worth, minimum franchise tax $100. Per the 2024 Tennessee Works Tax Act, the alternative minimum franchise-tax base measured by the value of real and tangible property located in TN (the property measure / Schedule G) was repealed effective for tax years ending on or after Jan 1, 2024; franchise tax is now computed on net worth only. Applies to all corporations, LLCs and LPs doing business in TN.

Tennessee corporation vs Tennessee LLC

State filing charges only. Corporate income tax and franchise tax are excluded because both depend on income or net worth, so no flat figure exists for either entity.

	Corporation	LLC
Formation filing fee	$100	$300
Report cadence	Every year	Every year
Report fee	$20	$300
Entity-level tax on the LLC side	—	Franchise and Excise Tax

Worth noticing: a corporation is $200 cheaper to file here than an LLC. That is the exception nationally — corporations are the cheaper filing in only 15 of the 50 states, the two entities cost the same in 25, and the LLC is cheaper in 10.

Full Tennessee LLC cost breakdown · LLC vs C-corp explained · LLC vs S-corp explained

How Tennessee compares

State treatment of the federal S election	States
Follows the federal election, no state form needed	43
No corporate income tax, so no state election exists	4
Has a corporate income tax and does not follow the election — the corporation is taxed like a C corporation	2
Follow the election but still impose some entity-level tax on the S corporation — California, Illinois, New York, Massachusetts and Delaware among them	—
Require a separate state election form as well	1

Compare all 50 states · LLC vs S-corp · S-corp salary and savings calculator

Frequently Asked Questions

: No. Tennessee does not follow the federal S election for its own tax — the corporation is taxed at the entity level regardless. This is the single most expensive misunderstanding an S-corp owner can have in this state.
: Tennessee does NOT follow the federal S-corporation election for franchise & excise tax. S-corporations are subject to TN F&E tax at the ENTITY level exactly like C-corporations: 6.5% excise tax on net earnings plus 0.25% franchise tax on net worth (minimum $100), filed on Form FAE 170. Tennessee also has no individual income tax on wages (Hall income tax on investment income was fully repealed as of 2021), so S-corp income does not flow to a personal state income-tax return either.
: FAE 170 (Franchise and Excise Tax Return) - same return filed by S-corporations as by C-corporations.

Where these numbers come from

This page covers how Tennessee treats the federal S-corporation election and what an S corporation still owes the state. Every figure was checked against Tennessee's own published sources on July 29, 2026— the state business filing agency's fee schedule, the governing statute, and where a state tax applies, the state Department of Revenue. Commercial formation-service pages were used as leads only and are never cited. Anything the review could not confirm from an official source is left blank on this page rather than filled with an estimate.

Corporate income tax and franchise tax are quoted as the state publishes them, as rate schedules and thresholds, and are excluded from every dollar total here. They depend on income or net worth, so there is no flat figure that would be true for every corporation.

Primary sources: