Franchise Tax

AAA

DEFINITION of 'Franchise Tax'

A tax levied at the state level against businesses and partnerships chartered within that state. In some states, companies with operations in that state may also be liable for the tax even if they are chartered in another state. This is a privilege tax that gives the business the right to be chartered and/or operate within that state.

BREAKING DOWN 'Franchise Tax'

The amount of franchise tax in any given state can differ greatly depending on the tax rules within each state. Some states will calculate the amount of franchise tax owed based on assets or net worth of the business, while other states look at the capital stock of the company.

RELATED TERMS
  1. Nevada Corporation

    A business incorporated in the state of Nevada, which is known ...
  2. Flat Tax

    A system that applies the same tax rate to every taxpayer regardless ...
  3. Local Tax

    A tax assessed and levied by a local authority such as a county ...
  4. Tax Liability

    The total amount of tax that an entity is legally obligated to ...
  5. Corporate Tax

    A levy placed on the profit of a firm, with different rates used ...
  6. Tax Credit

    An amount of money that a taxpayer is able to subtract from the ...
Related Articles
  1. Entrepreneurship

    Getting To Know Business Models

    Learning how to assess business models helps investors identify companies that are the best investments.
  2. Entrepreneurship

    Is Buying A Franchise Wise?

    If you like being your own boss, this is not the job for you.
  3. Personal Finance

    Share The Wealth With Franchises

    Skip the first step and build off of someone else's successful business model.
  4. Economics

    The Top 9 Things to Know About Hillary Clinton's Economic View

    Find out where former secretary of state and Democratic presidential candidate Hillary Clinton stands on the economy, jobs, trade and education.
  5. Retirement

    How do you calculate penalties on a 401(k) early withdrawal?

    Find out how to calculate the penalties on early withdrawals from your 401(k), including the impact of the additional 10% tax penalty, vesting and income tax.
  6. Savings

    A Look at the Cost and Tax Treatment of College

    Is there more we can do to improve the affordability of post-secondary education? We take a look at how students and colleges are taxed today.
  7. Taxes

    What's Wrong with the American Tax System

    American's are highly taxed and we still run a deficit. We explain why.
  8. Investing Basics

    What's a Holding Company?

    A holding company is a corporation that owns enough voting stock in another company to control its management and policies.
  9. Taxes

    What's IRS Form 2848 Used For?

    It's a power of attorney tax form and here's what it can, and cannot, do.
  10. Mutual Funds & ETFs

    Understanding Taxation On Leveraged ETFs

    Read about the potential tax implications for investors of leveraged exchange-traded funds, or ETFs, and learn why leveraged ETF taxation can be so complicated.
RELATED FAQS
  1. Are spousal Social Security benefits taxable?

    Your spousal Social Security benefits may be taxable, depending on your total household income for the year. About one-third ... Read Full Answer >>
  2. What is the Social Security tax rate?

    The Social Security tax rate is 12.4% as of 2015. Of that amount, the employee is responsible for half, or 6.2%, and the ... Read Full Answer >>
  3. What is the Social Security administration responsible for?

    The main responsibility of the U.S. Social Security Administration, or SSA, is overseeing the country's Social Security program. ... Read Full Answer >>
  4. How is Social Security tax calculated?

    The Old-Age, Survivors and Disability Insurance program, or OASDI, tax is calculated by taking a set percentage of your income ... Read Full Answer >>
  5. Are my Social Security disability benefits taxable?

    Social Security disability benefits may be taxable if you receive other income that places you above a certain threshold. ... Read Full Answer >>
  6. What are the penalties of cashing out a 401(k) before retirement?

    Standard distribution regulations for 401(k) retirement accounts require that you reach age 59.5 or become unable to work ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
  2. Gorilla

    A company that dominates an industry without having a complete monopoly. A gorilla firm has large control of the pricing ...
  3. Elephants

    Slang for large institutions that have the funds to make high volumes trades. Due to the large volumes of stock that elephants ...
  4. Widow's Exemption

    In general terms, a widow's exemption refers to the amount that can be deducted from taxable income by a widow, thereby reducing ...
  5. Wedding Warrant

    A warrant that can only be exercised if the host asset, typically a bond or preferred stock, is surrendered. Until the call ...
  6. Marlboro Friday

    A reference to Friday, April 2, 1993, when Philip Morris, the maker of Marlboro cigarettes, announced that it would be cutting ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!