Iowa Supreme Court rules KFC must pay over $240,000 in state taxes

The Iowa Supreme Court upheld a district court decision Thursday that requires fried chicken chain KFC to pay more than $240,000 in corporate income taxes to the state.

The court determined the state could impose income tax on revenue received by a company that doesn't have a presence in Iowa, according to the ruling. KFC doesn't own any restaurants or have employees in Iowa. All the restaurants in the state are owned by independent franchisers.

In 2001, the Iowa Department of Revenue and Finance assessed KFC $248,658 for unpaid corporate income taxes, penalities and interest for 1997-1999, according to the ruling.

The department claimed KFC's royalty income based on the Iowa transactions was “taxable because it is derived from Iowa customers and is made possible by Iowa's infrastructure and legal protection of the Iowa marketplace.”