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. Charter

    A legal document that provides for the creation of a corporate ...
  2. Taxes

    An involuntary fee levied on corporations or individuals that ...
  3. Corporate Charter

    A written document filed with a U.S. state by the founders of ...
  4. Federal Income Tax

    A tax levied by the United States Internal Revenue Service (IRS) ...
  5. State Income Tax

    Tax levied on income at the state level. State income taxes have ...
  6. Chartered Bank

    A financial institution whose primary roles are to accept and ...
Related Articles
  1. Taxes

    9 States Where You'll Pay the Most in Taxes

    Which state you live in can mean thousands of dollars saved or lost in taxes each year. Here's a list of states to avoid when it comes to tax rates.
  2. Taxes

    Use Tax Vs. Internet Sales Tax: How Are They Different?

    Learn about the differences between a use tax and an Internet sales tax. Find out about transactions in which the taxes apply, and to whom they apply.
  3. Taxes

    Taxes in Texas for Small Business: The Basics

    Learn the tax implications for small businesses in Texas, and discover how different types of small businesses, such as LLCs and S Corporations, are taxed.
  4. Financial Advisor

    So, You Want to Earn Your CFA?

    Here are some pros and cons to consider before you take the CFA charter plunge.
  5. Investing

    What to Expect in Charter Communications Earnings?

    This marks Charter's first financial report since its acquisition of Time Warner Cable and Bright House Networks was approved in May by federal regulators.
  6. Taxes

    Taxes in California for Small Business: The Basics

    Understand the tax implications of running a small business in California, and learn which state taxes apply based on business type.
  7. Taxes

    Inside the Hedge Fund Infatuation with Charter Schools

    Find out why the federal tax credits available for investing in charter schools has lured dozens of hedge funds to the lucrative tax benefits available.
  8. Taxes

    Internet Sales Tax Vs. Brick & Mortar Sales Tax

    Learn about the differences between sales taxes and Internet sales taxes, and the goods and services that typically incur each type of tax.
  9. Taxes

    5 States Without Sales Tax

    Learn about the five states that do not charge sales taxes and about other taxes the states levy instead in order to generate revenue.
  10. Taxes

    The 7 Best States For Property Taxes, and Why

    Understand why some states have high property taxes while others have low property taxes. Learn about the states with the lowest property taxes.
RELATED FAQS
  1. What are the best and worst states to pay taxes in?

    Explore and compare the wide variations that exist in the overall tax burden imposed by different states, including which ... Read Answer >>
  2. What is the difference between a state income tax and a federal income tax?

    Learn the difference between state income tax and federal income tax based on tax rates, deductions, tax credits and taxable ... Read Answer >>
  3. What are the benefits of hiring a Chartered Financial Analyst (CFA) to be my financial ...

    Find out what the CFA charter is. Understand the benefits of hiring a Chartered Financial Analyst as a personal financial ... Read Answer >>
  4. Does location matter for taxes when calculating gross sales?

    Learn more about gross sales taxes and how merchants are impacted by them. Find out if different business locations are impacted ... Read Answer >>
Hot Definitions
  1. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  2. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  3. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  4. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
  5. Yuppie

    Yuppie is a slang term denoting the market segment of young urban professionals. A yuppie is often characterized by youth, ...
  6. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
Trading Center