Franchise Tax Calculator
State franchise taxes are levied on businesses for the privilege of doing business within the state. The tax base varies: Texas uses a margin (modified revenue) approach, Delaware uses net worth or par value capital, and Tennessee uses net worth. The rate is applied to the tax base (after any minimum or maximum provisions) to arrive at the tax due. This calculator applies a generic rate to any user-supplied tax base, making it useful for Texas margin tax, net-worth approaches, and other franchise tax structures. Enter your taxable base and rate, and optionally a minimum tax.
Franchise tax formula
Computed Tax = Tax Base x (Rate / 100)
Tax Due = max(Computed Tax, Minimum Tax)
The minimum tax floor prevents the tax from falling below a set amount even when the computed tax is very low. For example, California imposes a minimum franchise tax of $800 regardless of taxable income. Where no minimum applies, the computed tax is the tax due.
Texas franchise tax: margin calculation
Texas businesses must compute taxable margin as the least of four options: (1) 70% of total revenue; (2) total revenue minus cost of goods sold; (3) total revenue minus compensation; or (4) total revenue minus $1 million. The standard rate of 0.75% applies to most entities. Retailers and wholesalers may use 0.375%. Enter the lowest of the four margin options as your taxable base.
Franchise tax FAQ
What is a franchise tax?
A franchise tax is a privilege tax levied on businesses for the right to exist, operate, or do business in a state. It is not a tax on income per se, but rather on the business entity itself. The base can be capital stock, net worth, net income, or a margin calculation, depending on the state.
Which states have a franchise tax?
Major franchise tax states include Texas (margin tax at 0.75% or 0.375%), California (minimum $800 franchise tax), Illinois (net income-based), Delaware (net worth or assumed par value capital), and Tennessee (net worth at 0.25%). Many other states have similar entity-level taxes under different names.
How is the Texas franchise tax calculated?
Texas uses a margin-based approach. The taxable margin is the lesser of: 70% of total revenue, total revenue minus cost of goods sold (COGS), total revenue minus compensation, or total revenue minus $1 million. The rate is 0.75% for most businesses (0.375% for retailers and wholesalers). The EZ computation rate is 0.331%.
Is franchise tax the same as income tax?
No. A franchise tax is a privilege tax on the right to do business. Income tax is levied on profits. Some businesses owe franchise tax even if they have no net income. In states like California, the minimum franchise tax is $800 regardless of profitability.
Can I deduct state franchise tax on my federal return?
Yes. State franchise taxes paid in the course of doing business are generally deductible as an ordinary and necessary business expense on the federal tax return (Schedule C for sole proprietors, or the business return for corporations and partnerships).
Official sources
- Texas Comptroller Franchise Tax: Texas Franchise Tax.
- California FTB Franchise Tax: CA Minimum Franchise Tax.
Reviewed by the CalculatorHub team, edited by James Graham, 15 June 2026. See our methodology.