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Is my corporation subject to franchise tax or income tax?

The franchise tax is a tax for the privilege of doing business within California and is imposed upon all banks and corporations "doing business" in California. The amount of the tax is the greater of:

  • California net income times the appropriate tax rate.
  • The $800 minimum franchise tax.

See Doing Business in California for more information. 

If you qualified with the Secretary of State, your corporation is subject to the franchise tax until you dissolve your corporation.

The income tax is imposed on all corporations that, while not "doing business" in California, do "derive income from sources within this state". For example, if your corporation is a limited partner in a limited partnership doing business in California, your corporation would be subject to corporate income tax. Unincorporated associations are also subject to corporation income tax. The amount of tax is California net income times the appropriate tax rate.

See tax rates table for more information.

Taxpayers doing business or deriving income from within and outside the state will use Schedule R to determine their California net income.

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