State Annual Filings and Franchise Taxes
In addition to paying state and local income taxes on the earnings from your business, franchise taxes may also be imposed by the state or local government in the jurisdiction you live or are conducting business in. State franchise taxes can be viewed as fee for the right to conduct business in a state. Franchise taxes are usually paid as part of a required annual or bi annual informational report / filing, however, practice can vary by state. While these "privilege taxes" may not make business owners happy, the good news is that the IRS allows you to deduct state franchise taxes when you prepare your federal tax return.