Foreign Franchise Tax Law and Legal Definition

The foreign franchise tax is a tax upon the privilege of foreign corporations to conduct business in a particular state. It is computed upon the capital stock value of the corporation.

In J. L. Mott Corp. v. Commonwealth, Board of Finance & Revenue, 12 Pa. Commw. 493 (Pa. Commw. Ct. 1974), the court held that in the state of Pennsylvania, the foreign franchise tax subjects foreign corporations to a tax at the rate of five mills imposed on the value of the corporation's capital stock.