What States Have Franchise Tax: Calculation and Thresholds

Roughly 20 states charge a franchise tax, and if you want to know what states have franchise tax obligations for your business, the working list is Alabama, Arkansas, California, Connecticut, Delaware, Georgia, Louisiana, Nebraska, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Vermont, Wisconsin, and Wyoming. A franchise tax is a charge for the legal right to exist and operate as a registered business entity in a state, not a tax on profit, so you can lose money all year and still owe it. The specific name, calculation method, and deadline differ from state to state.

The States That Charge a Franchise or Business-Privilege Tax

Some states call the tax something else, but the underlying concept is the same: a recurring charge based on a company’s legal presence, capital, or revenue.

Alabama levies an annual business privilege tax on every corporation, LLC, and disregarded entity doing business in the state, calculated on net worth.¹
Arkansas imposes a franchise tax on corporations organized or doing business in the state.
California charges an $800 minimum franchise tax to every corporation and LLC incorporated, registered, or doing business in the state, with an exemption for newly formed or newly qualified corporations in their first taxable year.²
Connecticut collects a business entity tax that functions like a franchise tax on corporations.
Delaware taxes all domestic corporations based on authorized shares or assumed par value capital, with a $175 minimum and a $200,000 maximum ($250,000 for large corporate filers).³
Georgia assesses a corporate net worth tax on a tiered schedule, with a maximum of $5,000 for companies with net worth above $22 million.⁴
Louisiana charges $2.75 per $1,000 of capital employed in the state above $300,000, with an initial franchise tax of $110.⁵
Nebraska levies a franchise tax on corporations doing business in the state.
New Jersey imposes a capital stock or franchise-style tax on corporations.
New York taxes general business corporations under Article 9-A, calculating liability on the highest of three measures: business income, business capital, or a fixed-dollar minimum.⁶
North Carolina charges $1.50 per $1,000 of a corporation’s tax base with a $200 minimum. S corporations pay $200 on the first $1 million and $1.50 per $1,000 above that.⁷
Pennsylvania collects a capital stock/franchise-style tax on corporations.
Rhode Island imposes a minimum entity tax that functions like a franchise tax, covering corporations, LLCs, and limited partnerships.
South Carolina charges a corporate license fee that operates as a franchise-style tax.
Tennessee levies a franchise tax alongside its excise tax. For tax years starting January 1, 2024, the tax is based solely on net worth, replacing the older property-based calculation.⁸
Texas applies a margin-based franchise tax to nearly all business entities doing business in or organized in the state, at 0.375% for retail and wholesale and 0.75% for all others.⁹
Vermont levies a franchise tax on corporations.
Wisconsin imposes a combined franchise/income tax structure on corporations.
Wyoming collects an annual report license tax from corporations and LLCs.

Delaware deserves a separate note. Hundreds of thousands of companies incorporate there for its business-friendly court system and corporate law and then operate entirely in other states. Those companies still owe Delaware franchise tax every year with no physical presence or revenue in the state. A company incorporated in Delaware but operating in Texas likely owes franchise tax in both.

States Phasing Out or Repealing Their Franchise Tax

Three states are on the way out, so check the current year before assuming you still have to file.

Oklahoma eliminated its franchise tax entirely starting with tax year 2024. The 2023 return was the last one businesses needed to file.¹⁰

Illinois is midway through a multi-year phase-out. For 2026, the first $100,000 of franchise tax liability is exempt. No payment is required after January 1, 2027, and the statute is formally repealed on January 1, 2028.¹¹

Mississippi has been ratcheting its rate down by $0.25 per $1,000 of capital each year since 2019. In 2026 the rate is $0.50 per $1,000, dropping to $0.25 in 2027 and disappearing in 2028.¹² Savings during a wind-down are not automatic. Keep filing the required reports through the final year or you risk penalties.

Which Business Entities Owe It

C corporations are the traditional target, but most states have expanded the net. Texas applies its franchise tax to nearly every entity type: corporations, LLCs, partnerships, professional associations, and business trusts.¹³ Alabama covers corporations, LLCs, and disregarded entities.¹ Other states limit coverage to corporations and leave LLCs to pay only standard registration fees. The entity types covered vary more than people expect, so check the statute in each state your business is registered in.

Registration also matters independently of formation. State franchise tax laws distinguish between domestic entities (formed in that state) and foreign entities (formed elsewhere but registered to do business there). Registering with a state’s Secretary of State as a foreign entity triggers the obligation to file.

Physical presence through offices, employees, or inventory has always created nexus. Many states now also apply economic nexus. California considers a company to be doing business in the state if its California sales exceed a threshold amount, even with no employees or office there.¹⁴ Trip one of those thresholds and you owe the franchise tax whether you’ve set foot in the state or not.

How the Tax Is Calculated

States that all use the same label arrive at the bill through completely different formulas. Four approaches dominate.

Net Worth or Capital

Alabama, Georgia, Louisiana, North Carolina, and Tennessee base the tax on what the company is worth. Georgia’s tiered schedule runs from $10 for a company with less than $10,000 in net worth up to $5,000 for one above $22 million.⁴ Louisiana charges $2.75 per $1,000 of capital employed in the state above $300,000.⁵ Asset-heavy businesses pay more, profitable or not.

Revenue or Margin

Texas looks at what a company brings in rather than what it owns. The tax is calculated on total revenue minus either cost of goods sold or total compensation paid, whichever produces a lower taxable margin. For 2026, the rate is 0.375% for retail and wholesale and 0.75% for everyone else.⁹ This hits high-revenue, low-margin businesses harder than a net-worth method would.

Authorized Shares or Par Value

Delaware offers two calculation methods and lets you use whichever produces the lower tax. The authorized shares method starts at $175 for up to 5,000 shares.¹⁵ The assumed par value capital method charges $400 per million dollars (or fraction) of assumed par value capital, with a $400 minimum. For companies with a large number of authorized shares but modest total assets, the par value method often produces a dramatically lower bill.¹⁶ Whichever method you pick, the maximum is $200,000 for most companies or $250,000 for large corporate filers.³

Flat Minimum

California is the simplest: every corporation and LLC owes $800 per year, regardless of revenue, net worth, or share count.² Profitable companies owe more above that floor. The $800 minimum is one reason dormant California LLCs are expensive to keep alive.

Deadlines and Minimum Payments

Deadlines do not follow a single national schedule, and some states tie the due date to your entity’s formation anniversary rather than a fixed date. Two of the most common:

Delaware domestic corporations must file the annual report and pay franchise tax by March 1. Foreign corporations registered in Delaware have until June 30. A $200 penalty applies immediately if a domestic corporation misses March 1.¹⁵
Texas franchise tax reports are generally due May 15.

Minimum payments vary widely. Delaware’s floor is $175, California’s is $800, and many other states set minimums in the $200 range. These apply even if the business had no revenue or activity. Non-stock, non-exempt corporations in Delaware also pay $175 per year.¹⁵

One error is surprisingly common: filing the tax return but not the annual report, or vice versa. Many states require both, and missing either can trigger penalties or put the entity out of good standing even if the tax itself was paid.

Exemptions and No-Tax-Due Thresholds

Not every business in a franchise-tax state actually owes money.

Texas has the most generous threshold. For the 2026 report year, any entity with annualized total revenue of $2.65 million or less owes no franchise tax. Those businesses still file a Public Information Report or Ownership Information Report even though the tax is zero.¹⁷ Entities with revenue of $20 million or less can use a simplified E-Z Computation Report.

California exempts newly formed or newly qualified corporations from the $800 minimum in their first taxable year.² Starting in year two, the full minimum applies. Corporations that conducted no business and had a tax year of 15 days or fewer also qualify for an exemption.

Nonprofits are not automatically exempt from franchise tax in any state. A 501(c)(3) designation from the IRS covers federal income tax only. Most states require a separate application to the state comptroller or tax authority for franchise tax exemption. Miss that step and you’ll owe the tax even with a valid IRS exemption letter.

What Happens If You Don’t File

The consequences escalate in a predictable sequence. First is the penalty. Delaware imposes a flat $200 penalty on any domestic corporation that fails to file by March 1, plus interest on the unpaid balance.¹⁵ Other states impose percentage-based penalties that compound monthly.

If the delinquency continues, the state can administratively dissolve the entity or revoke its authority to do business. A dissolved company can lose the ability to enforce contracts, maintain lawsuits, or defend itself in court in some states. It can also lose its registered business name. Lenders and investors treat dissolved status as a red flag.

Reinstatement is possible in most states but not cheap or instant. The typical process involves filing a reinstatement application, paying all back taxes and penalties, and updating your registered agent and principal office information. Reinstatement fees across various states run roughly $25 to $600 on top of back taxes and penalties. Once reinstated, the entity’s legal status usually relates back to the date of dissolution, but the gap period can create complications with contracts signed while the company was technically dissolved.

Owners of dissolved entities face personal exposure as well. Limited liability protection depends on the entity being in good standing. If the state has dissolved your LLC or corporation for failure to file, a creditor or opposing party in a lawsuit can argue the liability shield no longer applies, potentially putting personal assets at risk for business debts incurred during the lapse.

1
Alabama Legislature. Alabama Code 40-14A-22 – Levy and Amount of Tax
2
Franchise Tax Board. Corporations
3
State of Delaware. Annual Report and Tax Instructions
4
Justia. Georgia Code 48-13-73 – Amount of Corporate Net Worth Tax
5
Louisiana Department of Revenue. Corporation Income and Franchise Taxes
6
New York Department of Taxation and Finance. Article 9-A Franchise Tax on General Business Corporations
7
North Carolina Department of Revenue. Corporate Income and Franchise Tax Rates
8
Tennessee Department of Revenue. Franchise and Excise Tax Manual – June 2025
9
Texas Comptroller. Franchise Tax
10
Oklahoma Tax Commission. Businesses – Other Taxes
11
Illinois General Assembly. HB2861 104th General Assembly
12
Tax Foundation. Mississippi Approves Franchise Tax Phasedown, Income Tax Cut
13
State of Texas. Texas Tax Code 171.001 – Tax Imposed
14
Franchise Tax Board. Doing Business in California
15
Delaware Department of Finance. Corporate Franchise Tax
16
State of Delaware. How to Calculate Franchise Taxes
17
Texas Comptroller. Texas Franchise Tax Report Forms for 2026