New York City is famous for its extreme tax rates, but the franchise tax is statewide rather than central to the regulations of the city itself. If you own a business, you’ve probably noticed the franchise tax pop up on your corporate taxes when you filed. If you’ve ever wondered “what is the franchise tax”, we’re here to help!
Back To Basics
In short, the NYC franchise tax is a government levy charged by the state to certain types of businesses and corporations. There are certain activities that, if a business engages in them, requires them to fall subject to the state’s franchise tax (regardless of whether they are registered to do business in New York).
The New York State franchise tax is more complex than most other states and focuses on closing loopholes that allow businesses to minimize their taxes. As a result, the state imposes four different ways of calculating tax: net income, minimum taxable income, business and investment capital, and a fixed dollar minimum tax. Perhaps a little confusingly, New York corporate income tax is sometimes called a franchise tax; they apply to both S corporations and C corporations. Essentially, the city is trying to milk its businesses — which benefit greatly from their centralized location — for every penny.
In For A Penny
It seems to be doing pretty well: the Department of Finance collects around $35.8 billion in revenue for the Big Apple. Taxes are already overwhelming and confusing; owning a business in the most profitable yet expensive city in America seriously ups the ante. Fortunately, there are a number of expert accountants available that have extensive experience in the field. They are able to save you money where possible and ensure that everything that you own gets paid, on time and in full, with no mistakes.
If you’re still pulling your hair out while “what is the franchise tax” plays on loop in your mind, it may be time to find a tax specialist or tax accountant to handle the details. With so many other vital things to be concerned over — like the management of your business — leaving the technical mumbo-jumbo to the professionals is always a good idea!