Franchise Tax
Many states impose a corporate income tax. In some states, corporations may also be subject to a franchise tax, business privilege tax, net worth tax, or similar annual business tax. Requirements, tax bases, and filing obligations vary by state. For details about each state’s franchise tax requirements and rates, see the states DOR website.
Franchise tax requirements vary by state and entity type. Not every corporation, LLC, or business entity is subject to the same filing requirements. Be sure to review the filing requirements for every state in which the corporation conducts business or is otherwise required to file.
States that currently impose a franchise tax, franchise fee, business privilege tax, net worth tax, or a similar annual business tax on certain business entities include:
- Alabama (Business Privilege Tax)
- Arkansas (Franchise Tax)
- California (Franchise Tax)
- Delaware (Franchise Tax)
- Georgia (Net Worth Tax)
- Illinois
- Illinois has an annual report, Form BCA 14.05, on which franchise tax and fees are paid. This form, and the calculated taxes and fees, is administered and collected by the IL Secretary of State and thus is not supported in TaxAct. Illinois also has a Corporate Income and Replacement tax Form IL-1120 that is available in TaxAct.
- Louisiana
- Louisiana repealed its corporation franchise tax for franchise tax periods beginning on or after January 1, 2026. Corporations may still have obligations for prior periods.
- Minnesota (Corporate Franchise Tax)
- Mississippi (Franchise Tax)
- Mississippi is phasing out its franchise tax; the tax is scheduled for repeal for tax periods beginning on or after January 1, 2028.
- New York (Franchise Tax)
- North Carolina (Franchise Tax)
- South Carolina (Corporate License Fee)
- Tennessee (Franchise and Excise Tax)
- Texas (Franchise Tax/Margin Tax)
- Wyoming (Annual Report License Fee)
NOTE: States frequently update their tax rules, and names like “privilege tax” “annual report fee” or “minimum corporate tax” are often used interchangeably with franchise tax.
Calculating Franchise Tax
If the franchise tax is calculated as part of the state tax return and all required information has been entered, the software automatically calculates the tax on the applicable state forms. Some states require separate annual reports, franchise fees, or business registration filings that are submitted outside the income tax return. These fees may not be calculated or paid through the software.
Paying Franchise Tax
Annual franchise taxes and fees are generally paid directly to the state agency administering the tax, either electronically through the state’s online filing system or by submitting the required payment voucher with the state return. Refer to the instructions for the applicable state form or the state’s business filing portal for payment options and due dates.