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Understanding Franchise Tax Account Status

Some states have formed a franchise tax on every taxable entity found or doing business in the area. The imposed franchise tax is what is referred to as privilege tax, where people pay for franchise tax for the privilege of running their businesses in the area. Therefore, entities in that area must file a franchise tax report whether they are required to pay tax or not. If people want to know if their businesses have the right to operate in the places, they need to visit the franchise tax account status. This way, they can learn whether or not business entities` right to do business is active.

The following are the list of account statuses, these include active, eligible for termination or withdrawal which implies that the entity has met the franchise tax requirement to file for termination or withdrawal with the secretary state. Another status on the list is fortified that shows the entity`s right to transact business in the area is fortified. On the other hand, non-established implies that the entity’s franchise tax responsibilities ended because the entity has not completed a franchise tax questionnaire with the comptroller. Besides, the status shows franchise tax ended, it means that the business tax responsibilities came to an end since the business has ceased to exist in its state or county of formation or has ceased doing business in the area. Lastly, franchise tax involuntary ended status shows the business` certificate was ended due to tax forfeiture.

The following are some of the entities that are subject to franchise tax, these include state limited banking associations, corporations, savings and loan associations, banks, limited liability companies, trusts, business associations, among other entities. Here are the entities that are not subject to the franchise tax, they include certain unincorporated passive entities, sole proprietorship, real estate mortgage investment conduits, unincorporated political committees, plus many more.

During the calculation of franchise tax, it is worth noting that it is based on the taxable entity’s margin. When calculating, the tax base is year taxable entity’s margin when the taxable entity does not qualify and choose to file using the EZ computation. The tax is calculated using the following ways, these include, total revenue times seventy percent, total revenues less the cost of goods sold, total revenue minus compensation or total revenue minus one million dollars.

Here are some of the ways in which the total revenues can be determined from the number of revenues reported from the federal tax income less statutory exclusion. However, there are some of the revenue exclusion, these include certain flow-through funds, dividends, and interest from federal obligations, schedule C dividends, foreign royalties, and dividends, among others.

If you want to have an easier time knowing your franchise tax status, it is a good idea to seek the services of a tax consultant. However, it is worth noting that not every tax consultant will best meet your needs that is why you need to know the type of expert you want. You will not get the right consultant if you are not sure who you are looking for, for this reason, it is best to research carefully as this will help you get the tax consultant who will best meet your needs.

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