The nexus standards for state franchise taxes
are much broader than for income taxes.
Corporations filing online may pay franchise taxes
by Visa, MasterCard, Discover or electronic check.
The Arkansas Court of Appeals has held that "officers and directors of a corporation who actively participate in its operation during the time when the corporate charter is revoked for failure to pay corporate franchise taxes
are individually liable for debts incurred during the period of revocation."
The ruling lists as deductible the Indiana gross receipts tax, Kentucky license tax, Michigan SBT, Washington and West Virginia B&O taxes, and other state net worth-based taxes, including the net worth portion of the Texas and Ohio franchise taxes
In West Virginia, Pennsylvania and North Carolina, taxpayers have to report both income and franchise taxes
on the same form.
The Internal Revenue Service disallowed the deductions for such franchise taxes
on the grounds that an accrual was not permitted by section 461(d) and the pertinent regulations.
65-190 held that a refund of New York State corporation franchise taxes
resulting from a net operating loss (NOL) carryback was accruable as income in the tax year of the loss that gave rise to the refund.
[section] 1.861-8(e)(6)(i) provides that the deduction for state income and franchise taxes
is definitely related, and thus allocable, to the gross income with respect to which those taxes are imposed.
However, the limited partnership will be subject to the state's minimum franchise tax, because it is registered to do business in the state, and will be subject to both excise and franchise taxes
if it does business in the state sufficient to establish nexus.
99-126,(22) the Tax Commissioner addressed the deductibility of the Illinois and Ohio franchise taxes
. The Illinois franchise tax, which is imposed on corporations for the privilege of exercising their franchise or authority to transact business in the state, is based on paid-in capital.
To begin with, unlike the tax involved in Metropolitan Life, the corporate franchise taxes
are imposed by the state constitution.
Accordingly, a QSSS may be liable for a number of "nonincome" taxes, such as franchise taxes
based on net worth, equity or a fixed fee basis.