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Level 3
posted May 11, 2024 10:05:36 AM

State Excise Tax (TN) - reported on Line 14, 1065?

Hello, reading the software and IRS instructions, I am still not clear on where to report the state (not Federal) excise taxes on Form 1065.  I do see "franchise" tax but Tennessee has a separate franchise tax which is assets-based.  The entity is a multi-member LLC (partnership, really) and delivers salon services.

 

If it is not reported on Line 14, where would it be reported?

 

Also, I notice that the form says it would be reported whether "paid or incurred".  The LLC reports on a cash basis and has not yet paid the excise tax for 2023.  Would it still be reported even though it will be paid in 2024?

0 1 14545
1 Replies
Level 13
May 11, 2024 5:01:58 PM

Response to your question(s):

  • Report it on line 14 with all other taxes
  • Since you are on the cash basis, report this expense when paid
  • The language you are referencing will come into play if a taxpayer is on the "accrual" method of accounting.  There are several additional factors that would come into play as well, but this does not apply to you being on the cash method of accounting.
  • Using the cash method of accounting with an LLC taxed as a partnership can be tricky.  Hopefully you are profitable.  If you are allocating losses to the members I would recommend getting some professional input.  There is a missed / overlooked rule where a partnership / LLC taxed as a partnership cannot use the cash method of accounting if more than 35% of the losses are allocated to limited partners or limited entrepreneurs.  This provision is within the definition of the tax shelter rules.  This is just a heads up and outside of your specific question.