he Development of State Corporate Taxes. Most states impose annual franchise or privilege taxes on corporations. The states impose these taxes on the right to exist as a domestic corporation, on the privilege of doing business in the state as a foreign corporation, or on the actual conduct or carrying on of business in the state by a corporation. These taxes may be measured by the corporation's net income or by its capital stock. Corporate franchise taxes are frequently described by their measure rather than their subject. Accordingly, a franchise tax measured by net income is frequently referred to as a "net income" tax, and a franchise tax measured by capital stock is frequently referred to as a "capital stock" tax