Date of this Version
Franchising World, September 2010
The Iowa Supreme Court in late May heard oral arguments in KFC Corp. vs. Iowa Department of Revenue, a case that could have a substantial financial impact on franchisors across the nation. Iowa asserted that KFC is subject to the state’s corporate income tax based solely on the fact that it received royalties from franchisees in Iowa. The state cited Geoffrey v. South Carolina Tax Commission and related cases in support of its position. However, a victory by the state would represent an extension of those cases because KFC involves licensing agreements between unrelated parties. The KFC case could result in a landmark decision for states attempting to impose income tax on out-of-state franchisors and other similarly situated taxpayers.