Franchise Tax

Franchise tax is a tax charged by some US states to corporations with a nexus (aka a filing obligation) with those states. The common feature of a state's franchise tax is that it is not based on income. Rather, the typical franchise tax calculation centers around the "net worth" of the taxpayer.

Typically, the number of shares they issue or, in some cases, the amount of their assets is used to make this determination. The purpose of the tax is to raise revenue for the state. The state of Delaware has a significant franchise tax, while other states, such as Nevada, have none at all or a smaller one. On the other hand, states with higher corporate income taxes usually have low franchise taxes and vice versa. Thus in the case of Delaware, it has no corporate income tax for companies that are listed as operating outside the state, however, Delaware's corporate franchise tax is substantially higher than that in other states.

Famous quotes containing the words franchise and/or tax:

    Many famous feet have trod
    Sublunary paths, and famous hands have weighed
    The strength they have against the strength they need;
    And famous lips interrogated God
    Concerning franchise in eternity....
    Philip Larkin (1922–1986)

    I have no doubt that it was a principle they fought for, as much as our ancestors, and not to avoid a three-penny tax on their tea; and the results of this battle will be as important and memorable to those whom it concerns as those of the battle of Bunker Hill, at least.
    Henry David Thoreau (1817–1862)