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California has a high corporate tax rate and strict rules, but its large market and strong economy can benefit some businesses. Companies incorporated or operating in the Golden Gate state should understand the tax rate, how it applies and the filing process. A financial advisor can help with specific tax planning needs.
As of 2025, California imposes a flat corporate income tax rate of 8.84%. This rate applies uniformly, without graduated brackets, meaning all taxable income is subject to the same percentage. Banks and financial institutions are subject to a slightly higher rate of 10.84%. In addition to the corporate income tax, California requires corporations to pay an annual franchise tax of $800 in the first quarter of each accounting period as well as statewide sales and use tax rates of 7.25%.
The application of California’s corporate tax rate varies based on a corporation’s incorporation status and business activities within the state:
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Domestic corporations: These entities are incorporated under California law and are subject to the state’s corporate income tax on all net income derived from both within and outside California. They are also required to pay the annual minimum franchise tax of $800.
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Foreign corporations: Companies incorporated in another state or country that conduct business in California are subject to California’s corporate income tax on income earned within the state. They must also comply with the minimum franchise tax requirement.
For example, consider a corporation incorporated in Nevada that operates a branch in California. This foreign corporation must pay California’s 8.84% corporate income tax on the net income generated from its California operations. Additionally, it is obligated to pay the $800 minimum franchise tax annually, regardless of profitability.
Businesses operating or incorporated in California must follow specific steps to report income and meet tax obligations. Understanding the process can help companies avoid penalties and stay compliant with state regulations. Here are five general steps to help you file your corporate taxes.
Find out which tax forms and payments your business needs to file based on its structure and activities:
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Domestic corporations: Must file Form 100 (California Corporation Franchise or Income Tax Return) annually, reporting all income and paying the applicable taxes, including the minimum franchise tax.
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Foreign corporations: Required to file Form 100 if they are registered to do business in California or have income derived from California sources.
