How to Pay Your California Franchise Tax

What the California Franchise Tax Is and Who Pays It

California's franchise tax is an annual tax on corporations, limited liability companies (LLCs), and other business entities that are incorporated in California or doing business here. It is separate from income tax — you pay it whether your business made money or lost money that year. The tax exists simply because your business has the right to operate in the state.

If you are a sole proprietor or a partnership (not incorporated), you do not pay franchise tax. Your business income is taxed as personal income on your individual return instead. If you incorporated your business or formed an LLC in California, or if you incorporated elsewhere but have a physical presence or employees in California, you almost certainly owe it.

The Franchise Tax Board (FTB) is the state agency that collects this tax. They send notices, track payments, and enforce collection. Understanding how and when to pay prevents penalties and keeps your business registration in good standing.

Key Takeaways

• The California franchise tax is due by the 15th day of the fourth month after your tax year ends — usually April 15 for calendar-year businesses.
• You can pay online through the FTB website, by mail with a check, or by electronic funds withdrawal (EFW) directly from your bank account.
• Late payments trigger a penalty of 10 percent of the unpaid tax, plus interest that compounds monthly, so paying on time matters even if you cannot pay the full amount.
• If you cannot pay by the deadline, you can request a payment plan or extension through the FTB, but the request must be made before the due date.
• Franchise tax is separate from income tax and sales tax — you may owe all three, and each has its own due date and payment method.

When Your Franchise Tax Payment Is Due

The standard due date is the 15th day of the fourth month after your tax year ends. For most businesses operating on a calendar year (January through December), that means April 15. If your business runs on a fiscal year — say, July 1 to June 30 — your due date would be October 15.

The FTB mails a notice (Form 100-V or Form 568-V, depending on your entity type) that shows your specific due date, the amount owed, and payment instructions. If you do not receive a notice, that does not mean you do not owe the tax. You are responsible for knowing your due date and paying on time, even if the FTB has not contacted you yet.

If the due date falls on a weekend or holiday, the deadline moves to the next business day. Payments postmarked by the due date are considered on time, but online payments must be submitted by 11:59 p.m. Pacific time on the due date itself.

How to Pay Online Through the FTB

The fastest and most common way to pay is through the FTB's online payment system at onlineservices.ftb.ca.gov. You will need your Social Security Number or Federal Employer Identification Number (EIN), your business name, and the tax year you are paying for. The system accepts credit cards, debit cards, and electronic bank transfers.

When you pay by credit or debit card, a third-party processor charges a convenience fee — typically 2.5 to 3 percent of the payment amount. That fee is not tax-deductible and goes to the processor, not the state. If you are paying a large amount, the fee can be substantial, so compare it against other payment methods.

Electronic funds withdrawal (EFW) through your bank account has no convenience fee. The FTB pulls the money directly from your checking or savings account on the date you specify. This method is free and often the cheapest option if you have the funds available.

Paying by Mail or Phone

You can mail a check to the Franchise Tax Board at the address shown on your tax notice. Include the payment voucher (Form 100-V or 568-V) with your check so the FTB can match the payment to your account. Mail payments should be sent at least one week before the due date to account for postal delays. A check postmarked by the due date is considered on time, but the FTB may not receive and process it for several weeks.

The FTB does not accept phone payments directly. If you need to pay by phone, you must use a third-party payment processor authorized by the state, and those processors charge convenience fees similar to online card payments. The FTB website lists authorized processors if you choose this route.

Whatever method you use, keep proof of payment — a confirmation number from online payment, a cancelled check, or a receipt from a processor. If a dispute arises later, that proof protects you.

What Happens If You Miss the Deadline

A late payment triggers a 10 percent penalty on the unpaid tax amount, calculated from the due date. If you owed $500 and paid 30 days late, you would owe $50 in penalty plus interest. The penalty is separate from the tax itself and is not deductible.

Interest also accrues on the unpaid tax and penalty, compounding monthly at a rate set by the state (currently around 7 to 8 percent annually, but it changes quarterly). The longer you wait, the more interest accumulates. A $500 tax owed three months late could easily grow to $530 or more by the time you pay.

If your business registration lapses because you did not pay franchise tax, the FTB can suspend your ability to do business in California. You cannot legally operate, hire employees, or sign contracts until the tax and penalties are paid and your registration is reinstated. Reinstatement can take weeks and may require additional fees.

Requesting a Payment Plan or Extension

If you cannot pay the full amount by the due date, you can request a payment plan or extension from the FTB. The key is to request it before the due date passes. Requesting after you are already late does not prevent the penalty from accruing, though the FTB may reduce or waive it if you show reasonable cause.

A payment plan allows you to pay the tax in installments over several months. The FTB charges a setup fee (currently $225 for online plans) and continues to charge interest on the unpaid balance, but you avoid the 10 percent late penalty if you set up the plan before the deadline. You can request a plan online through the FTB website or by phone at 1-800-338-0505.

An extension gives you additional time to file and pay, usually 60 days. Extensions do not eliminate the tax or interest, but they can buy you time if you are waiting for business income to arrive or for accounting records to be finalized. Request an extension on Form 3115 or through the online system.

Franchise Tax vs. Income Tax and Sales Tax

Many business owners confuse franchise tax with income tax or sales tax because all three are California taxes with different due dates and payment methods. Franchise tax is a flat annual tax on the right to do business. Income tax is a tax on your business profits, due at the same time as franchise tax (April 15 for calendar-year filers) but calculated differently. Sales tax is collected from customers and remitted monthly or quarterly to the Department of Tax and Fee Administration (CDTFA), not the FTB.

You may owe all three. A corporation pays franchise tax to the FTB, income tax to the FTB, and sales tax to the CDTFA. An LLC pays franchise tax to the FTB, income tax (or pass-through tax) to the FTB, and sales tax to the CDTFA. A sole proprietor does not pay franchise tax but does pay income tax and sales tax. Each has its own due date, payment portal, and penalty structure.

The FTB website shows your franchise tax balance and payment history. The CDTFA website shows your sales tax account separately. Checking both regularly prevents accidental missed payments.

Frequently Asked Questions

Can I deduct franchise tax as a business expense?

No. Franchise tax is not deductible on your federal or California income tax return. It is a tax on the privilege of doing business, not an ordinary business expense. However, you can deduct income tax and sales tax in some circumstances — consult a tax professional about your specific situation.

What if I did not receive a notice from the FTB?

You are still responsible for paying on time. The FTB may not mail a notice if your address is outdated or if there is a processing delay. Check your account online at onlineservices.ftb.ca.gov or call 1-800-338-0505 to confirm your balance and due date. If you have not filed a return, you may owe both the tax and a failure-to-file penalty.

Can I pay franchise tax with a credit card without a convenience fee?

No. All credit and debit card payments through the FTB system include a convenience fee charged by the third-party processor. Electronic funds withdrawal from your bank account is free. If the fee is a concern, pay by EFW, mail, or phone through an authorized processor and compare the total cost.

What if my business closed during the year?

You still owe franchise tax for the year you were in business. When you close, file a final return and pay any remaining tax due. If you did not file a return, the FTB will assess the tax based on available information and send you a bill. Respond promptly to avoid additional penalties.

Does paying franchise tax late affect my credit score?

Franchise tax debt does not directly appear on your personal credit report. However, if the FTB places a lien on your business or personal assets to collect unpaid tax, that lien may appear on your credit report and affect your ability to borrow money. Paying on time or setting up a plan before the deadline prevents liens.