KFC Corp. has been ordered to hand over almost $250,000 in unpaid corporate income taxes to the state of Iowa.
Interestingly, the company doesn’t have any restaurants or employees in the state – all units are owned by franchisees.
However, the franchise operators pay KFC for the use of its logo and systems, and adhere to the company’s menu, marketing and facility stipulations. This is enough presence to derive income and therefore owe income taxes, according to a unanimous ruling that was handed down by the Iowa Supreme Court Dec. 30.
According to Bloomberg, the Iowa Department of Revenue and Finance claimed KFC owed the money, including interest and penalties, for 1997, 1998 and 1999. KFC challenged the assessment because it didn’t own property in Iowa, but it was overturned in the state’s highest court last week.