Franchise Tax

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. State Income Tax

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

    A financial institution whose primary roles are to accept and ...
  6. Pick-Up Tax

    A tax imposed by state authorities based on the estate tax credit ...
Related Articles
  1. Personal Finance

    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. Personal Finance

    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. Personal Finance

    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. Personal Finance

    10 States With High Sales Taxes

    Most states have sales taxes of some kind for goods and services. Here's a rundown of the states that have the highest sales taxes.
  5. Professionals

    So, You Want to Earn Your CFA?

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

    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.
  7. Personal Finance

    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.
  8. Personal Finance

    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.
  9. Financial Advisor

    State Taxes Retirees Should Know About

    State taxes plays a critical role in the quality of life of retirees. Here's what to consider.
  10. Personal Finance

    10 States with Highest Income Taxes

    Find out who is actually paying the most state taxes as a percent of their income. California and New Jersey are not in the top 10.
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 do I do with out of state property and income reporting?

    If I own a single family home that I rent out in another state and receive income for, does that need ... Read Answer >>
  4. How can I estimate my tax payments to only cover the portion for state taxes?

    My wife and I will be filing jointly for the upcoming 2016 tax season. However, my job doesn't tak... Read Answer >>
  5. 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 >>
  6. What is the difference between income tax and capital gains tax?

Trading Center