Indiana Franchise Tax: What You Need to Know as a Business Owner



As a business owner in Indiana, it’s important to know about the state’s franchise tax. This tax is imposed on businesses that operate in the state, and there are a few things you need to know about it before you file your taxes. In this blog post, we will discuss what the Indiana franchise tax is, who is required to pay it, and how to go about filing for it. We will also provide some tips for minimizing your liability under this tax.

What is the Indiana franchise tax

The Indiana franchise tax is a state tax imposed on businesses with a presence in the state. The amount of the tax is based on the gross receipts of the business. Businesses must file an annual report with the Indiana Department of Revenue detailing their gross receipts. The tax rates range from 0.1% to 8.5%, depending on the amount of gross receipts. The tax is due annually on May 15th. Businesses that do not file their annual report by the due date are subject to a late filing penalty of 5% of the tax due, plus interest.

The Indiana franchise tax is an important source of revenue for the state, and it helps to fund vital public services such as education and infrastructure. Small businesses are especially important to the state’s economy, and the franchise tax helps to level the playing field between small businesses and large corporations. In addition, the franchise tax helps to encourage businesses to locate in Indiana, which creates jobs and boosts economic growth. Overall, the Indiana franchise tax is an important tool for promoting economic development in the state.

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Who is required to pay it

Businesses in Indiana are required to pay a franchise tax if they are organized as corporations, LLCs, or LLPs. The tax is based on the company’s gross income, and the rate depends on the company’s business structure.

For example, a corporation with $100,000 in gross income would owe $500 in franchise tax, while an LLC with the same income would owe $600. The tax is due annually, and businesses must file their return by April 15th. Late payments are subject to interest and penalties.

How to go about filing for it

  1. First, research the Indiana Secretary of State’s website for information on franchising in the state.
  2. Next, contact the Franchise Tax Division of the Indiana Department of Revenue to request forms and instructions.
  3. Then, complete the appropriate forms and submit them to the Franchise Tax Division along with the required filing fee.
  4. Finally, once your franchise tax return is accepted, you will be sent a confirmation notice. Be sure to keep this documentation for your records.

What are some tips for minimizing your liability under this tax

  • If you are self-employed, make sure to set aside money each month to cover your taxes. This will help you avoid any surprises come tax time.
  • Keep good records of all your business expenses. This will help you maximize your deductions and minimize your liability.
  • Hire a qualified tax professional to prepare your return. This will ensure that everything is done correctly and that you take advantage of all the deductions and credits you are entitled to.
  • Make sure you file your return on time. If you owe taxes, you may be subject to late fees and interest charges.
  • Pay your taxes on time. If you cannot pay the full amount, contact the IRS to arrange for a payment plan. By doing so, you can avoid penalties and interest charges.


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What are the consequences of not paying the franchise tax

Failing to pay the franchise tax in Indiana can result in a number of consequences, including late fees, interest, and penalties. The Franchise Tax Board may also file a notice of lien with the county recorder, which will make it difficult to sell or refinance your property.

In addition, the FTB can initiate a collection action against you, which could result in wage garnishment or seizure of assets. If you’re facing financial difficulties, it’s important to contact the FTB as soon as possible to discuss payment options. By taking proactive steps, you can avoid some of the more severe penalties associated with failing to pay the franchise tax.

Can you file for an exemption from the franchise tax

In Indiana, businesses are required to pay a franchise tax. This tax is based on the value of the business’s assets, and it is generally due at the end of the year. However, businesses may be eligible for an exemption from this tax if they meet certain criteria. For example, businesses that are owned by non-residents or that have less than $50,000 in assets may be exempt.

Businesses that are owned by charities or that are engaged in agricultural production may also be exempt. To apply for an exemption, businesses must submit a completed Exemption Application form to the Department of Revenue. The form must be filed before the end of the taxable year for which the exemption is being claimed. If the exemption is approved, the business will not be required to pay the franchise tax for that year.

How can you go about appealing a decision if you believe that you have been assessed an incorrect amount of tax

If you believe that you have been assessed an incorrect amount of tax as a business in Indiana, there are a few steps you can take to appeal the decision.

  • First, you should contact the Department of Revenue and request a copy of your tax return.
  • Next, you will need to file a petition with the Board of Tax Review outlining your grounds for appeal.
  • Finally, you will need to submit any supporting documentation to the Board.
  • Once your appeal is filed, the Board will review your case and issue a decision.
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If you are still not satisfied with the outcome, you may be able to file an appeal with the Indiana Tax Court. However, it is important to note that this process can be lengthy and expensive, so you should always consult with an experienced tax attorney before taking any further action.

Concise recap

The Indiana franchise tax is a business privilege tax that all businesses in the state are required to pay. There are a number of ways to go about filing your franchise tax, and it’s important to do so correctly and on time. If you miss the deadline or underpay your taxes, there can be severe consequences. However, with a little bit of preparation and some sound advice, minimizing your liability for the Indiana franchise tax doesn’t have to be difficult.



Frequently Asked Questions

Is there a franchise tax in Indiana?

The franchise tax is usually either a flat tax or an amount based on a business’ net worth. Indiana, like most states, has a corporate tax, but unlike many other states, there is no franchise tax or preferential tax that usually applies to businesses here.

What taxes does an LLC pay in Indiana?

If you choose to tax your LLC as a corporation, you will have to pay Indiana corporate income tax. Indiana’s current corporate income tax rate is 5.25% and must be reduced to 4.9% by July 2021.

What is franchise tax due?

The deadline to pay is the 15th day of the 4th month after the end of the tax year, by which time you must have paid all of your tax liability.

How is franchise tax calculated?

The Indiana franchise tax is calculated using a number of different factors, including the value of your business’s assets. The exact amount you will owe will depend on the specific details of your business. However, businesses with less than $50,000 in assets may be exempt from this tax.

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