Franchise tax

src: i.ytimg.com

A tax franchiser is a government tax (tax) imposed by some US states for certain business organizations such as corporations and partnerships with nexus in the state. The franchise tax is not based on income. In contrast, typical franchise tax calculations are based on net worth or capital held by the entity. Tax franchises effectively charge companies for the privilege of doing business in the state.

Video Franchise tax

Nexus

Whether a business has to pay a franchise tax to a country where its business can cause confusion. Some states report using economic and physical attendance tests, and in some states, there is no written and public interpretation of their testing at all.

Maps Franchise tax

Quill

Physical attendance tests are based on Quill Corp. v. North Dakota, (504 U.S. 298 (1992)), the United States Supreme Court decision on the use of taxes. Quill Corporation is an office supplies retailer. Quill has no physical presence in North Dakota (either salespeople, or retail outlets), but has a licensed computer software program that some North Dakotanya customers use to check the current Quill inventory and place orders directly. North Dakota is trying to impose a usage tax on Quill, who was beaten by the Supreme Court, because Quill has no physical presence in North Dakota.

The physical presence test Quill is used by some countries to determine whether a company should pay a franchise test. Delaware, Hawaii, Massachusetts, Pennsylvania, and Texas reported using physical attendance tests.

src: upload.wikimedia.org

Test of Economic Existence

Many countries apply "economic attendance" tests to determine whether a business will be subject to a state sales or franchise tax. This test, which seems to contradict Quill, implies that States have the right to impose a tax or "nexus" solely on the grounds that a company has a sale or economic benefit from activities within their borders.

src: i.ytimg.com

Amount

About half the US state does not impose a franchise tax. For states that have franchise taxes, the amount is often a fixed cost or based on the total size of business ownership.

src: i.ytimg.com

Relationship to Corporate Tax

Countries with higher corporate income taxes typically have low or no franchise taxes and vice versa.

src: www.capradio.org

Delaware

The state of Delaware has a significant franchise tax. Other countries have nominal or no taxes at all.

src: i.ytimg.com

References

src: www.capradio.org

External links

• Delaware Corporate Franchise Tax Calculator
• Texas franchise tax
• Louisiana Corporation Franchise Tax

Source of the article : Wikipedia