Navigating DC’s corporate tax landscape is a bit different than in most states. Instead of a standard “Corporate Income Tax

Navigating DC’s corporate tax landscape is a bit different than in most states. Instead of a standard “Corporate Income Tax,” the District levies a Franchise Tax on corporations and unincorporated businesses for the privilege of doing business within its borders.

​As of 2026, here are the primary taxes you should know about:

​1. Corporate Franchise Tax

​If you form a corporation, you are subject to the Corporate Franchise Tax on income derived from DC sources.

• ​Tax Rate: 8.25% of net taxable income.

• ​Minimum Tax: Even if your corporation has no profit, you must pay a minimum tax based on your DC gross receipts:
  • ​$250 if DC gross receipts are $1 million or less.
  • ​$1,000 if DC gross receipts are greater than $1 million.
  . ​2. Unincorporated Business Franchise Tax ​If you choose to operate as an LLC or partnership (unless you elect to be taxed as a corporation), DC still taxes the entity itself if your gross receipts exceed $12,000.
  • ​Tax Rate: 8.25% (same as the corporate rate).
  • ​Exemption: There is a $5,000 salary allowance for owners and a 30% allowance for personal services in some cases, but generally, pass-through entities are taxed at the entity level in DC—a rarity compared to most states.
  ​3. Sales and Use Tax ​DC’s general sales tax rate has recently seen scheduled increases.
  • ​Current Rate (as of Oct 1, 2025): 6.5%
  • ​Future Rate (effective Oct 1, 2026): 7.0%
  • ​Note: Certain services and goods (like alcohol for off-premise consumption or hotels) carry higher specific rates.
  ​4. Personal Property Tax ​If your corporation owns tangible personal property (furniture, computers, equipment) located in DC with a total value exceeding $225,000, you must pay a Personal Property Tax.
  • ​Rate: $3.40 per $100 of assessed value.
  ​Important 2026 Update: The “Finnigan Method” ​Starting January 1, 2026, DC has transitioned to the Finnigan method for “apportionment.” ​What this means for you: If your corporation is part of a larger group of related companies, DC will now look at the sales of all members of the group to determine how much income is taxed in DC, even if some of those specific members don’t have a physical presence in the District. ​Summary Checklist
  • ​Form FR-500: You must file this tax registration form before you can pay any of the taxes above.
  • ​Estimated Taxes: If you expect your DC franchise tax to exceed $1,000 for the year, you are required to pay quarterly estimated taxes.
  • ​Biennial Report: Don’t forget the $300 filing fee every two years (due April 1st) to keep your entity active.
  ​Are you planning to have physical office space in the District, or will this be a remote/consulting-based corporation? (This affects your Personal Property and Nexus calculations.)