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Investments glossary

Franchise Tax


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The term franchise tax refers to a tax paid by certain enterprises that want to do business in some states. Also called a privilege tax, it gives the business the right to be chartered and/or to operate within that state. Companies in some states may also be liable for the tax even if they are chartered in another state. Despite the name, a franchise tax is not a tax on franchises and is separate from federal and state income taxes that must be filed annually.

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