Tennessee Tax Relief: Payment Plans, OIC & Debt Help
Owe Tennessee state taxes or received a notice from the Tennessee Department of Revenue (TN DOR)? Tennessee has no personal income tax on wages, but it does impose franchise tax, excise tax, business tax, and sales tax. Do not guess your next move. We review your Tennessee tax balance, notice, deadline, payment options, and collection risk so you know what to do next.
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Tennessee Tax Relief Overview
Owing Tennessee state taxes is different from owing the IRS. The Tennessee Department of Revenue (TN DOR) has its own rules, deadlines, and collection tools. Federal tax relief strategies do not automatically apply to Tennessee state tax debt.
Tennessee Has No Personal Income Tax on Wages
Tennessee does not impose a personal income tax on wages or salaries. The Hall Income Tax on interest and dividends was fully repealed effective January 1, 2021. This means individual wage earners generally do not face Tennessee state income tax problems.
However, Tennessee does impose several significant business taxes that can create serious liability:
- Franchise Tax — 0.25% of Tennessee net worth, minimum $100/year
- Excise Tax — 6.5% of Tennessee taxable income (corporate income tax)
- Business Tax — Gross receipts tax on businesses with $100K+ in receipts
- Sales & Use Tax — 7% state rate + local, up to 9.75% combined
Depending on your situation, you may need one or more of the following:
A payment plan to pay over time; an Offer in Compromise (OIC) to settle for less than the full amount — Tennessee DOES have an OIC program; an appeal if you received a Notice of Proposed Assessment you disagree with; penalty relief if penalties make the balance impossible to pay; lien release or distress warrant help if collection action has started; and filing help if you have unfiled Tennessee tax returns.
Tennessee Tax Relief Options at a Glance
What Tennessee Tax Notice Did You Receive?
Select your notice type for a quick explanation of what it means and your options.
What the Tennessee Department of Revenue Can Do to Collect
If you owe Tennessee state taxes and do not address the balance, the Tennessee Department of Revenue has a range of collection tools. Not every case reaches the most serious actions, but the longer a balance goes unpaid, the more options the state may use.
Tennessee Franchise & Excise Tax
Tennessee imposes two primary taxes on businesses: the franchise tax and the excise tax. These apply to corporations, LLCs, limited partnerships, and business trusts that are chartered, qualified, or registered in Tennessee or doing business in the state.
Franchise Tax
Rate: 0.25% of Tennessee net worth, computed on Schedule F of the franchise and excise tax return.
Minimum: $100 per year
Applies to: All corporations, LLCs, limited partnerships, and business trusts doing business in Tennessee
Note on the property measure: For tax years ending before January 1, 2024, franchise tax was based on the greater of net worth or the book value of real and tangible property in Tennessee (Schedule G). Public Chapter 950 (2024) repealed this property measure, effective for tax years ending on or after January 1, 2024. Franchise tax is now calculated solely on net worth. Businesses that paid franchise tax under the old property measure for tax years ending on or after March 31, 2020, may have been eligible for a refund, though that refund claim window closed on November 30, 2024.
Tenn. Code Ann. §§ 67-4-2101 et seq.
Excise Tax (Corporate Income Tax)
Rate: 6.5% of Tennessee taxable income
Base: Net earnings or income for the tax year
Effectively: Tennessee's corporate income tax
Tenn. Code Ann. Title 67, ch. 4, pt. 20 (this pinpoint statutory citation was flagged internally as pending independent verification during our review process — confirm the exact section directly with TN DOR before relying on it).
$100 Minimum Franchise Tax Applies Even to Inactive Businesses
The minimum franchise tax of $100 per year applies regardless of whether the company is active or inactive, if it is incorporated, domesticated, qualified, or otherwise registered through the Secretary of State to do business in Tennessee. Many businesses overlook this obligation, and penalties accrue.
Key Facts About Tennessee F&E Tax
Source: TN DOR — Franchise & Excise Tax
Tennessee Business Tax
The Tennessee business tax is a privilege tax on the privilege of doing business in the state. It is a gross receipts tax, meaning it is based on your total gross receipts rather than net profit. This can catch businesses off guard, especially those with high revenue but thin margins.
Key Facts About Tennessee Business Tax
Note: the rate table below has not been independently re-verified line-by-line against the current Business Tax Manual in this review pass — confirm current rates directly with TN DOR before relying on the specific figures.
Business Tax Rates by Classification
Source: TN DOR — Business Tax | Tenn. Code Ann. §§ 67-4-701 through 67-4-7302
Tennessee Sales & Use Tax
Tennessee's sales and use tax is the state's principal source of tax revenue, accounting for approximately 60% of all tax collections. The state has one of the highest average sales tax rates in the nation.
Tennessee Sales Tax Rates
Trust Fund Tax Status
Sales tax collected from customers is considered a trust fund tax — it belongs to the state the moment it is collected. Failure to remit sales tax can trigger aggressive collection action, including personal liability for responsible persons.
Source: TN DOR — Sales & Use Tax | Tenn. Code Ann. Title 67, ch. 6
Tennessee Tax Payment Plans
If you cannot pay your Tennessee state tax balance in full, the Tennessee Department of Revenue offers installment payment agreements (IPAs) that allow you to pay your balance over time. Payment plans are available through TNTAP (Tennessee Taxpayer Access Point) or by emailing a completed application.
Key Conditions for Tennessee Payment Plans
Interest on Payment Plans Is Higher
The interest rate on installment payment agreements is 13% for the period July 1, 2026, through June 30, 2027, which is higher than the general delinquency rate of 10.75% for the same period. This means the longer your plan lasts, the more you will pay in interest. A shorter plan term saves money.
Source: TN DOR — Payment Plans
Tennessee Offer in Compromise (OIC)
Yes — Tennessee has an Offer in Compromise (OIC) program. Unlike some states (such as Alabama), Tennessee allows taxpayers to settle tax liabilities for less than the full amount owed under certain circumstances. This is one of the most significant advantages for Tennessee taxpayers facing unpayable tax debt.
Tennessee OIC: Key Facts
An OIC is an agreement between you and the Department of Revenue to settle a tax liability for less than the full amount; it's available when you have a verifiable inability to pay the full liability; the Department may accept an offer when it is unlikely the full amount can be collected; and the offer represents the most the Department can expect to collect over several years.
OIC Eligibility Requirements
Before an offer will be considered, the Department requires that: all required tax returns have been filed — an open filing gap will get an offer denied outright; the taxpayer is not in an open or active bankruptcy proceeding — bankruptcy protections must be resolved first, and offers involving debt in an active bankruptcy should instead be addressed through the bankruptcy proceeding itself; the taxpayer has received a tax bill for at least one period included in the offer; and the taxpayer has responded fully to all requests for additional information and documentation.
OIC Application Requirements
Complete financial disclosure with all required supporting documentation; a fully completed Offer in Compromise Application. The Commissioner of Revenue is authorized to compromise tax liabilities, and compromises may be subject to approval of the Attorney General and Reporter and the Comptroller of the Treasury.
OIC Contact Information
Email: Revenue.Offers@tn.gov | Phone: (615) 741-7071 or (844) 729-8689
Do not assume federal OIC strategies directly apply to Tennessee state tax debt. Tennessee has its own application process, documentation requirements, and approval standards.
Source: TN DOR — Offer in Compromise Defined | Tenn. Code Ann. § 67-1-102 | TN DOR — CS-OIC-2 Eligibility
Tennessee Tax Appeals and Informal Conferences
If you disagree with a Tennessee tax assessment, you have the right to challenge it. Tennessee provides two main paths: the informal conference process through the TN DOR Hearing Office, and a direct suit in Chancery Court.
Informal Conference Process
Taxpayers may request an informal conference within 30 days of a Notice of Proposed Assessment. The informal conference allows taxpayers to resolve disputes over tax assessments and refund claim denials in a non-adversarial setting.
90-Day Chancery Court Deadline Is Jurisdictional
Taxpayers may file suit in Chancery Court within 90 days of the date the assessment becomes final. The 90-day deadline is jurisdictional and strictly enforced. In Cherokee Fiber & Assocs., Inc. v. Gerregano (2024), the court reaffirmed that this deadline cannot be extended. The venue is in Davidson County (Nashville) or the county where the taxpayer resides or principally conducts business.
Chancery Court Appeal Process
Taxpayers must file within 90 days of the assessment becoming final; venue is Davidson County (Nashville) or the county where the taxpayer resides or principally does business. Taxpayers may also pay the final assessment and file a refund action under Tenn. Code Ann. § 67-1-1802. The legality of the tax cannot be challenged in distress warrant proceedings.
Source: TN DOR — Informal Conference Overview | Tenn. Code Ann. § 67-1-1438(b)-(h) | Tenn. Code Ann. § 67-1-1801
Tennessee Penalty Relief
Penalty relief is different from a payment plan. A payment plan lets you pay over time. Penalty relief asks Tennessee to reduce or remove penalties when allowed under state rules.
Tennessee allows waiver of penalties for reasonable cause under Tenn. Code Ann. § 67-1-1444. The Department may waive penalties under its administrative authority when the taxpayer demonstrates reasonable cause for the failure to file or pay.
Tennessee Penalty Structure
Rates shown are for the period July 1, 2026, through June 30, 2027, per TN DOR's annual rate notice. Rates reset each July 1.
How to Request Penalty Relief
Submit a written request demonstrating reasonable cause; provide supporting documentation for your circumstances. The Department has discretionary authority to grant or deny.
Source: TN DOR — Penalties and Interest | Tenn. Code Ann. § 67-1-801 | Tenn. Code Ann. § 47-14-102(7) | Tenn. Code Ann. § 67-1-1444
Tennessee Tax Liens
A Tennessee tax lien is a public claim filed by the state against your property. It arises when an initial proposed assessment is made and attaches to all interests in property (real and personal, tangible and intangible). A lien can affect your credit, ability to sell or refinance property, and business operations.
How Tennessee Tax Liens Work
- Creation: A state tax lien arises when a person liable to pay any state tax neglects or refuses to pay. The lien includes taxes, fees, penalties, interest, and costs.
- Filing: A notice of tax lien is recorded with the county register of deeds in the county or counties where the taxpayer's business or residence is located, or any county where the taxpayer has property interests. No fees are collected at recording; fees are billed monthly to the department.
- Duration: 10 years from the date of filing, and can be renewed. After 10 years without renewal, the lien becomes null and void.
- Priority: The state lien is subordinate to deeds of trust and security interests perfected under the UCC that were filed prior to the notice of state tax lien.
- Scope: The lien remains in effect until all amounts are fully paid. It attaches to property acquired after the lien is filed.
- Release: The lien is released upon payment of the liability in full.
Source: Tenn. Code Ann. § 67-1-1403
Tennessee Distress Warrants (Property Seizure)
Tennessee uses distress warrants (distraint) as its primary enforcement mechanism for tax collection. This is the Tennessee equivalent of a levy. A distress warrant authorizes an officer to seize (distrain) and sell personal property of the taxpayer to satisfy delinquent taxes.
10-Day Pre-Seizure Notice
Prior to issuance of a distress warrant, the local collector must give not less than 10 days' written notice to the taxpayer. Do not ignore this notice. Acting during this 10-day window may provide options to stop or delay seizures.
Key Facts About Tennessee Distress Warrants
What Happens If Property Is Seized
Once a distress warrant is executed, the officer may: seize personal property and sell it at auction; if personal property is insufficient, levy upon real estate in the county; if neither can be found, levy on equitable interests and return the warrant to chancery court for an order of sale; and serve notice on the holder of legal title and secured creditor of record.
If you have received a 10-day notice of a distress warrant, act immediately. Once a seizure begins, your property may be sold. No guarantee of stopping the process, but early action provides the best chance.
Source: Tenn. Code Ann. §§ 67-1-1201 through 67-1-1206
Tennessee Statute of Limitations
Understanding the time limits for Tennessee tax assessments and collections is critical. These deadlines affect your rights and the state's ability to pursue your tax debt.
Source: Tenn. Code Ann. § 67-1-1429 | Tenn. Code Ann. § 67-1-1501 | Tenn. Code Ann. § 67-1-1403(f)
Tennessee Unfiled Tax Returns
If you have not filed Tennessee tax returns (franchise, excise, business, or sales tax), that can block most resolution options. TN DOR may estimate your tax and issue assessments based on those estimates — sometimes higher than what you actually owe.
Filing accurate returns can sometimes reduce an incorrect balance. But do not rush or file bad returns. It is better to get the returns prepared correctly with the right income, deductions, and applicable Tennessee provisions.
Why Filing Matters
Unfiled returns block payment plan eligibility and Offer in Compromise eligibility; TN DOR may issue substitute returns with higher tax than you actually owe; penalty relief generally requires all returns to be filed; the statute of limitations on collections may not start until a return is filed; and filed returns establish your correct liability and may reduce the balance.
Which Tennessee Tax Relief Option Fits Your Situation?
Tennessee Government Resources
These are the official Tennessee sources for tax information, payment plans, appeals, and rules. Always check the official source for the most current information.
- Tennessee Department of Revenue (TN DOR) — Official tax agency portal
- TNTAP (Tennessee Taxpayer Access Point) — Online account portal for taxpayers
- TN DOR — Franchise & Excise Tax
- TN DOR — Business Tax
- TN DOR — Sales & Use Tax
- TN DOR — Hall Income Tax (Repealed)
- TN Taxpayer Bill of Rights
- TN DOR — Payment Plans
- TN DOR — Offer in Compromise
- TN DOR — Informal Conference Overview
- TN DOR — Penalties and Interest
- Tenn. Code Ann. § 67-1-1403 (Tax Liens)
- Tenn. Code Ann. § 67-1-1205 (Distress Warrants)
- Tenn. Code Ann. Title 67 (Taxes & Licenses)
Not Sure What to Do With Your Tennessee Tax Situation?
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Frequently Asked Questions About Tennessee Tax Relief
Does Tennessee have a state income tax?
No. Tennessee does not have a personal income tax on wages or salaries. The Hall Income Tax, which previously taxed interest and dividend income, was fully repealed effective January 1, 2021. Tennessee is one of nine states without a general income tax. However, Tennessee imposes a franchise tax (0.25% of net worth), an excise tax (6.5% of taxable income), a business tax on gross receipts, and a sales tax of up to 9.75%.
What is the Tennessee franchise tax?
The Tennessee franchise tax is 0.25% of Tennessee net worth, with a minimum tax of $100 per year, payable by any corporation, LLC, limited partnership, or business trust chartered, qualified, or registered in Tennessee or doing business in the state. This minimum applies even to inactive businesses. Note: Prior to tax years ending on or after January 1, 2024, the franchise tax was based on the greater of net worth or a property measure (book value of real and tangible property in Tennessee). Public Chapter 950 (2024) repealed the property measure, so net worth is now the sole basis for the tax.
What is the Tennessee excise tax?
The Tennessee excise tax rate is 6.5% of Tennessee taxable income. The excise tax is based on net earnings or income for the tax year and is effectively Tennessee's corporate income tax. It applies alongside the franchise tax to corporations, LLCs, limited partnerships, and business trusts doing business in Tennessee.
What is the Tennessee business tax?
The Tennessee business tax is a privilege tax on the privilege of doing business in the state. It is a gross receipts tax. Business tax applies to businesses with gross receipts of $100,000 or more (threshold updated effective for tax years ending on or after December 31, 2023). Businesses with gross receipts between $3,000 and $100,000 need a minimal activity license. Tax rates vary by classification from 0.025% to 0.3%.
Does Tennessee have an offer-in-compromise program?
Yes. Tennessee has an Offer in Compromise (OIC) program under Tenn. Code Ann. § 67-1-102. An OIC is an agreement between the taxpayer and the Department of Revenue to settle a tax liability for less than the full amount owed when the taxpayer has a verifiable inability to pay. To qualify, the taxpayer must have filed all required tax returns and must not be in an open or active bankruptcy proceeding — those cases are addressed through the bankruptcy process instead. OIC applications require complete financial disclosure and supporting documentation. The Commissioner is authorized to compromise tax liabilities, subject to approval of the Attorney General and Reporter and the Comptroller of the Treasury. Contact: Revenue.Offers@tn.gov or (615) 741-7071.
Can I get a payment plan for Tennessee state taxes?
Yes. Tennessee DOR offers installment payment agreements (IPAs) for taxpayers unable to pay in full. To qualify, you must owe at least $300 and agree to monthly payments of at least $50. Plans range from 2 to 60 months and require an automatic bank draft (direct debit). Taxpayers who have had two or more payment plans in the previous two years must submit a 25% down payment. Interest on payment plans is 13% (for the period July 1, 2026 – June 30, 2027). Apply through TNTAP or email Payment.Plan@tn.gov.
Can Tennessee seize my business property?
Yes. Tennessee uses distress warrants (distraint) as the primary enforcement mechanism for tax collection. The Department of Revenue may issue distress warrants to collect delinquent taxes. A distress warrant authorizes an officer to seize (distrain) and sell personal property of the taxpayer. Prior to issuance, the local collector must give not less than 10 days' written notice. If personal property cannot be found, the warrant may be levied upon real estate or equitable interests in property.
What is Tennessee's sales tax rate?
Tennessee's state sales tax rate is 7%. Local sales tax rates range from 1.5% to 2.75%, bringing the maximum combined rate to 9.75%. Food and food ingredients are taxed at a reduced state rate of 4% (though local taxes still apply at the full rate). Candy, dietary supplements, and prepared foods are taxed at the full 7% state rate. Sales tax is Tennessee's principal revenue source, accounting for about 60% of all tax collections.
How long does a Tennessee tax lien last?
A Tennessee notice of tax lien is effective for 10 years from the date of filing and can be renewed. If a lien has remained on file for more than 10 years without renewal, it becomes null and void. The commissioner may cause a renewal to be filed prior to expiration. The priority of the state lien continues based on the date of filing of the original notice.
Can I appeal a Tennessee tax assessment?
Yes. Taxpayers may request an informal conference with the TN DOR Hearing Office within 30 days of a Notice of Proposed Assessment. The informal conference allows you to present evidence and dispute the assessment. A written decision is issued within 10 days of the conference conclusion. Alternatively, taxpayers may file suit in Chancery Court within 90 days of the date the assessment becomes final. The 90-day deadline is jurisdictional and strictly enforced.
What is a Tennessee distress warrant?
A distress warrant is Tennessee's primary tax enforcement tool. It authorizes an officer to seize (distrain) and sell personal property to satisfy delinquent taxes. Before issuance, the taxpayer must receive at least 10 days' written notice. If personal property cannot be found, the warrant may extend to real estate or equitable interests. Property held as tenants by the entirety is protected unless both spouses are jointly liable.
What are Tennessee's tax penalties and interest rates?
Tennessee imposes a late payment penalty of 5% per month (or part of a month), up to a maximum of 25% of the unpaid amount. Interest on delinquent taxes is 10.75% for the period July 1, 2026, through June 30, 2027. Interest on installment payment agreements is higher at 13% for the same period. These rates reset annually each July 1, so always confirm the current rate on TN DOR's tax rates page before calculating a balance. Penalties may be waived for reasonable cause under Tenn. Code Ann. § 67-1-1444.
What was the Hall Tax?
The Hall Income Tax was Tennessee's tax on interest and dividend income, originally enacted in 1929. It was phased out over a six-year period beginning in 2016 and was fully repealed effective January 1, 2021. The repeal saves Tennessee taxpayers more than $350 million annually. No Hall Tax is owed for tax years beginning on or after January 1, 2021.
What if I have unfiled Tennessee tax returns?
Unfiled returns can block most resolution options, including a payment plan and Offer in Compromise. TN DOR may estimate your tax and issue assessments that are higher than what you actually owe. Filing accurate returns can sometimes reduce an incorrect balance. The statute of limitations on collections may not start until a return is filed. Do not rush or file bad returns — get them prepared correctly.
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Sources Used
These are the official government sources used for this page. Always check the current official source for the most up-to-date information.
- Tennessee Department of Revenue — Official Portal: www.tn.gov/revenue ↗
- TN DOR — Franchise & Excise Tax: www.tn.gov/revenue/taxes/franchise---excise-tax.html ↗
- TN DOR — Business Tax: www.tn.gov/revenue/taxes/business-tax.html ↗
- TN DOR — Sales & Use Tax: www.tn.gov/revenue/taxes/sales-and-use-tax.html ↗
- TN DOR — Hall Income Tax (Repealed): www.tn.gov/revenue/taxes/hall-income-tax.html ↗
- TN DOR Support — Payment Plans: revenue.support.tn.gov ↗
- TN DOR Support — Offer in Compromise: revenue.support.tn.gov ↗
- TN DOR Support — Informal Conference: revenue.support.tn.gov ↗
- TN DOR Support — Penalties and Interest: revenue.support.tn.gov ↗
- TN DOR — Taxpayer Bill of Rights: www.tn.gov/revenue/taxpayer-bill-of-rights.html ↗
- TNTAP — Online Portal: tntap.tn.gov ↗
- Tenn. Code Ann. § 67-1-102 — OIC Authority: law.justia.com ↗
- Tenn. Code Ann. § 67-1-1403 — Tax Liens: law.justia.com ↗
- Tenn. Code Ann. § 67-1-1205 — Distress Warrants: law.justia.com ↗
- Tenn. Code Ann. § 67-1-1438 — Informal Conference: law.justia.com ↗
- Tenn. Code Ann. § 67-1-1429 — Assessment Limitations: law.justia.com ↗
- Tenn. Code Ann. § 67-1-801 — Penalties and Interest: law.justia.com ↗
- Tenn. Code Ann. Title 67 — Complete Tax Code: law.justia.com ↗
Disclaimer: This page provides general information about Tennessee state tax collection procedures and is not legal advice. Tax laws and agency procedures change. Always consult the official Tennessee Department of Revenue website or a qualified tax professional for advice specific to your situation. No guarantee of any particular outcome is expressed or implied. Approval for payment plans, Offers in Compromise, penalty relief, and other resolutions is discretionary.