Tennessee imposes a Franchise and Excise tax on limited liability companies and corporations. It has two levels: 6.5% excise tax on the net earnings of the entity, and $0.25 per $100 based on either the fixed asset or equity of the entity, whichever is greater. Many people do not realize that the rent of your building is considered a taxable item for franchise tax. For examples, if you rent a building for $100,000 a year, you will owe $2,000 tax on it. Excise tax is an income tax; it is a 6.5% tax on the entities net income. There are several adjustments that can be made. The most common adjustment is an adjustment to depreciation expense and an adjustment to any gains and losses based on this difference to depreciation. When dealing with excise tax, remember that salaries and wages paid to owners of a corporation or LLC is deductible for excise tax, and Tennessee does not have a tax on earned income.