What Is Corporate Franchise Tax?
Corporate franchise tax is charged to a corporation by the state in which the corporation has filed and registered to do business. The tax is not based on income, it's based on the net worth of the company.
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Purpose
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Corporate franchise tax is enforced as a way to raise money for the state. Companies pay the tax in advance of doing business.
Calculating Taxes
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Using the number of shares the corporation issues or the amount of assets it holds, multiplied by the state's current tax rate, is how you determine how much tax is owed by the company.
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State Taxes Vary
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The tax amount varies from state to state. Nevada is a state with little or no corporate franchise tax. In Delaware and Texas, taxes are higher for corporations.
Paying Taxes
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Payment due dates are determined based on the beginning date of the taxable period. Various states require a yearly tax payment due between March 1 and April 15. Other states require a tax payment to be made every fourth month on the 15th from the beginning date. An annual report often accompanies the corporation's tax filing.
Payment Options
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Corporations can pay taxes with debit or credit cards or through checking or savings accounts. Some states have systems in place to make payments online.
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References
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