If you own a business in Tennessee, you might be asking how to minimize other taxes and excise tax in order to increase your profits. Excise tax is a tax on a number of goods and services, including utilities, gasoline, alcohol, and cigarettes. To avoid unneeded taxes and fees, it’s critical to comprehend Tennessee’s rules and exemptions.
Creating a limited liability company (LLC) or a corporation, more precisely a S corporation, is one technique to avoid excise tax. A corporation that has chosen to be taxed under Subchapter S of the Internal Revenue Code is known as a S corporation. This enables the company to pass on profits and losses to shareholders rather than paying corporate federal income tax. Tennessee does not impose a state income tax on S companies and recognizes them.
However, LLCs are pass-through corporations, which means that business income is distributed to the individual members for personal tax reporting rather than being taxed at the corporate level. Tennessee’s franchise and excise tax, which is dependent on the company’s net value or capital and income, is levied against LLCs.
Businesses in Tennessee must pay sales tax on top of excise and franchise taxes. Tennessee’s county-specific sales tax rates range from 7% to 9.75%. The statewide sales tax rate is 7% as of 2021. In Tennessee, a number of items, including food, prescription medications, and farm equipment, are exempt from sales tax. What is the Federal Income Tax Rate for Businesses in This Regard?
The federal income tax rate for businesses should also be noted. C corporations, which are not pass-through businesses, will pay a corporate tax rate of 21% starting in 2021. S companies and other pass-through businesses don’t pay corporate federal income taxes; instead, they pass through profits and losses to shareholders for inclusion on their individual tax returns.
As a business owner in Tennessee, there are a number of strategies to minimize excise tax and other taxes, including creating a S corporation or LLC and being aware of the state’s tax laws and exemptions. To choose the best approach for your company, speak with an accountant or tax counselor.