How to Pay Franchise Tax in California

The California Franchise Tax is an annual levy on businesses operating or registered within the state. This tax is distinct from income or sales taxes, functioning as a privilege tax for conducting business in California. Timely payment is important for businesses to maintain good standing with the state. This guide outlines the process for fulfilling California Franchise Tax responsibilities.

Identifying Your California Franchise Tax Obligation

Most formal business entities in California are subject to the annual Franchise Tax. This includes corporations (C and S corporations), Limited Liability Companies (LLCs), Limited Partnerships (LPs), and Limited Liability Partnerships (LLPs) registered with the California Secretary of State or “doing business” in California. The tax applies regardless of whether the entity generates profits or conducts active business.

A minimum annual Franchise Tax of $800 is generally imposed on these entities. Corporations may pay more based on net income, and LLCs may incur additional fees based on gross sales. Some newly incorporated or qualified corporations may be exempt from the minimum tax in their first year, instead paying a tax based on net income.

Information Needed for Payment

Before making your California Franchise Tax payment, gather key information. This helps ensure a smooth and accurate transaction. You will need:
Your California Secretary of State (SOS) File Number or Corporate Number, which identifies your business with the state.
Your Federal Employer Identification Number (FEIN).
The exact payment amount, which may be the $800 minimum or a higher amount based on your entity’s income.
The specific tax year for which the payment is being made.
These details can typically be found on previous tax notices, corporate formation documents, or through the California Franchise Tax Board (FTB) website.

Making Your California Franchise Tax Payment

Paying your California Franchise Tax can be done online or by mail. Online payment via the Franchise Tax Board’s (FTB) website allows for immediate processing. The FTB provides options like Web Pay for Businesses, which enables direct payment from a bank account, or payment via credit card through a third-party processor (a convenience fee may apply).

To use Web Pay for Businesses:
Navigate to the FTB website, select “Pay,” and choose “Bank Account” to proceed to “Web Pay Business.”
Select your entity type (e.g., Corporation).
Enter your Entity ID (California corporation number or SOS file number) and FEIN, and provide your name.
Select the appropriate tax form (e.g., Form 100 for corporations, Form 568 for LLCs) and the payment type (e.g., “Annual tax or fee” or “Estimated tax”).
Input the payment amount and desired payment date.
Enter your bank routing and account numbers to complete the transaction.

Alternatively, payment can be submitted by mail using a check or money order. Include the appropriate payment voucher (e.g., Form FTB 3586 for e-filed returns with a balance due). Make the check or money order payable to the “Franchise Tax Board.” Write your business name, FTB ID or Business Entity ID, and the tax year on the payment. Mail the payment voucher and check to the address specified in the voucher instructions, typically to the Franchise Tax Board, PO Box 942857, Sacramento CA 94257-0501.

Payment Deadlines and Verification

Payment deadlines for the California Franchise Tax are crucial to avoid penalties. For most calendar-year filers, the annual tax is due by the 15th day of the fourth month after the close of the tax year, typically April 15th. For corporations, the minimum franchise tax is often due the first quarter of each accounting period. Limited Partnerships (LPs) and Limited Liability Partnerships (LLPs) generally have payments due on the 15th day of the third month of their taxable year.

While extensions for filing a tax return may be available, an extension to file does not extend the payment due date for the tax owed. Payment must still be submitted by the original deadline to avoid penalties and interest. After making a payment, verify its receipt by the FTB. You can check your payment history and account details by logging into your MyFTB account. The FTB website also offers tools to check refund status, which can help confirm payment processing.