Understanding Franchise Tax: A Simple Explanation
What Is Franchise Tax? It’s essential to differentiate between franchise tax and income tax. While income tax is based on the income earned by individuals and businesses, franchise tax is a unique tax imposed on businesses for the privilege of operating in a particular state or jurisdiction, not directly linked to their income. The purpose of franchise taxes is to generate state revenue and regulate businesses operating within its jurisdiction. Income Tax: A tax levied on a company’s net profits