Franchise tax

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A franchise tax is a government levy (tax) charged by some US states to certain business organizations such as corporations and partnerships with a nexus in the state. A franchise tax is not based on income. Rather, the typical franchise tax calculation is based on the net worth of or capital held by the entity.

The state of Delaware has a significant franchise tax, while other states, such as Nevada, have none at all or a smaller one. States with higher corporate income taxes usually have low or no franchise taxes and vice versa. Thus in the case of Delaware, it has no corporate income tax for companies that are listed as operating outside the state, however, Delaware's franchise tax rate is substantially higher than those in other states.

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