What is Florida's franchise tax?

Florida doesn't actually have a "franchise tax" in the traditional sense. What people often refer to as the "Florida franchise tax" is actually a corporate income tax that applies to corporations and artificial entities conducting business or earning income in Florida. 

Unlike traditional franchise taxes in other states, like South Carolina, that may tax capital stock or net worth, Florida only taxes income at a rate of 5.5% of federal taxable income with Florida-specific adjustments. 

Recent legislation has created temporary rate reductions for certain tax years, making it essential to stay current with Florida's evolving tax regulations.

Who is subject to Florida's ‘franchise’ tax?

Florida's corporate income tax applies to specific business entities while exempting others:

• C corporations doing business in Florida are subject to the state’s corporate income tax.
• Limited liability companies (LLCs) that elect to be taxed as corporations are subject to Florida corporate income tax.
• Foreign corporations must pay Florida corporate income tax if they have nexus in the state. 

Exempt entities

Certain entities are exempt from Florida’s corporate income tax. 

• Single-member LLCs 
• Multi-member LLCs treated as partnerships
• Partnerships and sole proprietorships
• Organizations that are tax-exempt under IRC Section 501
• Insurance companies that pay a premium tax to Florida
• Homeowner and condominium associations

Understanding these distinctions is essential for structuring business operations and investments to ensure compliance with Florida tax laws and to optimize tax strategies across different types of business entities.

Filing requirements and deadlines

Florida businesses file either:

• Form F-1120A (Short Form): For corporations with $45,000 or less of Florida net income, 100% Florida-source income, and no credits or alternative minimum tax liability
• Form F-1120 (Standard Form): For all other corporations, including those with multi-state operations

These can be filed online via the Florida Department of Revenue.

Deadlines

For standard filing, returns are due the first day of the fourth month after your tax year ends (May 1 for calendar year filers). Corporations expecting to owe $2,500 or more must make quarterly estimated tax payments.

Penalties

Missing deadlines results in:

• Late filing penalty: 10% per month, up to 50% of tax due
• Late payment penalty: 10% of unpaid tax if paid after the due date

Tax incentives and credits

Florida offers several tax credits that can significantly reduce your corporate tax liability when strategically utilized. 

Each credit has specific eligibility requirements and application processes requiring careful planning and timely submission.

Discern helps you with filings in 51 jurisdictions

Florida's corporate income tax system requires attention to detail and strategic planning. Effectively managing your tax obligations involves monitoring legislative changes, maintaining thorough documentation, using technology to streamline compliance, and working with knowledgeable tax professionals.

While Discern can't help you with your corporate taxes in Florida, we can help with your annual report and serve as your registered agent. And we manage these filings across all 50 states and DC simultaneously. Setup only takes a few minutes.