In Short
Texas franchise tax is owed only when annualized total revenue is above the no-tax-due threshold: $2.65 million for 2026 and 2027 reports, $2.47 million for 2024 and 2025 [1]. Above it, the tax is 0.75% (0.375% for retail and wholesale) of the lowest of four margins, apportioned to Texas, or 0.331% of revenue with the EZ computation up to $20 million [1][3]. A business with $5 million of revenue and $3 million of cost of goods sold owes $15,000 for 2026, due May 15 [1].
How to Use the Texas Franchise Tax Calculator
- Enter total revenue for the accounting year the report covers (the 2026 report usually uses 2025).
- Enter cost of goods sold and compensation; leave either at 0 if it doesn't apply.
- Set the Texas share of your gross receipts, and switch on retail or wholesale if that is your main business.
- Or tap Say It All: “We had 5 million in revenue with 3 million in cost of goods sold and 1.2 million in compensation, 80 percent in Texas.”
- Switch the report year to see 2025, and download the May 15 reminder.
The Formula
Texas taxes a business's margin, and lets you pick the margin method that gives the lowest number. The EZ computation is a simpler alternative for revenue of $20 million or less.
- Margin = the lowest of: 70% of revenue · revenue − cost of goods sold · revenue − compensation · revenue − $1 million
- Taxable margin = margin × (Texas gross receipts ÷ all gross receipts)
- Tax = taxable margin × 0.75% (0.375% for retail or wholesale)
- EZ computation = revenue × Texas share × 0.331% (no deductions or credits)
- No tax due if revenue ≤ the threshold, or if the tax is under $1,000
Worked Examples
| Scenario | Inputs | Result |
|---|---|---|
| Below the threshold | $2,000,000 revenue (2026 report) | At or below $2.65M · $0 tax · file a Public Information or Ownership Information Report |
| Manufacturer | $5,000,000 revenue, $3,000,000 COGS, $1,200,000 compensation | Lowest margin $2,000,000 (revenue − COGS) × 0.75% = $15,000 |
| Service firm with a large payroll | $3,000,000 revenue, $2,500,000 compensation | Lowest margin $500,000 (revenue − compensation) × 0.75% = $3,750; EZ would be $9,930 |
| Wholesaler | $12,000,000 revenue, $9,000,000 COGS, retail/wholesale rate | Margin $3,000,000 × 0.375% = $11,250 |
Illustrative examples, not projections. Figures use the tax year shown and the assumptions above.
Who Has to Pay Texas Franchise Tax?
Most businesses formed or doing business in Texas: corporations, LLCs, partnerships with limited liability, professional associations and other taxable entities [3]. Sole proprietorships and general partnerships owned directly by people are generally not taxable entities.
Whether tax is owed depends on revenue. For 2026 and 2027 reports, a business with annualized total revenue at or below $2.65 million owes no franchise tax; for 2024 and 2025 reports the threshold was $2.47 million [1]. Above it, a computed tax under $1,000 is also not due, but the report is still filed [4].
What Changed for No Tax Due Businesses in 2024?
Starting with the 2024 report year, a business at or below the threshold no longer files a No Tax Due Report: the Comptroller discontinued that form [2]. It still files a Public Information Report (Form 05-102) or an Ownership Information Report (Form 05-167) each year [2].
There are exceptions. Qualifying passive entities file the EZ or long-form report but no information report; businesses with zero Texas gross receipts file a report showing zero; and members of a combined group follow the group's rules [2].
How Is the Margin Figured?
Texas lets a business compute its margin four ways and use the lowest: 70% of total revenue, revenue minus cost of goods sold, revenue minus compensation, or revenue minus $1 million [3]. Product businesses usually win with cost of goods sold; service businesses with large payrolls often win with compensation, which counts each person's pay up to a yearly cap ($480,000 for 2026 and 2027 reports, $450,000 for 2024 and 2025) [1].
The margin is then apportioned to Texas by the share of gross receipts from Texas, and taxed at 0.75%, or 0.375% for businesses primarily engaged in retail or wholesale trade [1][3]. Businesses with $20 million or less of revenue can use the EZ computation instead, 0.331% of apportioned revenue, but without any deductions or credits [1][5].
Frequently Asked Questions
What is the Texas franchise tax threshold for 2026?
$2,650,000 of annualized total revenue for reports due in 2026 and 2027. It was $2,470,000 for 2024 and 2025 reports [1].
When is Texas franchise tax due?
May 15 each year. When May 15 falls on a weekend or holiday, the due date moves to the next business day [1].
Do I still have to file if I owe no Texas franchise tax?
Usually yes. Since the 2024 report year, businesses at or below the threshold skip the No Tax Due Report but still file a Public Information Report or Ownership Information Report [2].
What is the Texas franchise tax rate?
0.75% of taxable margin for most businesses, 0.375% for businesses primarily engaged in retail or wholesale trade, and 0.331% of revenue with the EZ computation for revenue up to $20 million [1].
What is the penalty for filing a Texas franchise tax report late?
$50 for each report filed after its due date, even when no tax is due, plus 5% of the tax paid 1 to 30 days late or 10% after 30 days [1].
Does a single-member LLC pay Texas franchise tax?
An LLC is a taxable entity in Texas, so yes, once its revenue is above the threshold, even if the IRS disregards it for federal income tax [3].
Sources
- Franchise Tax (rates, thresholds and deduction limits; due date) — Texas Comptroller of Public Accounts
- No Tax Due Reporting for Report Year 2024 and Later — Texas Comptroller of Public Accounts
- Franchise Tax Overview (Publication 98-806) — Texas Comptroller of Public Accounts
- Franchise Tax FAQs: Reports and Payments — Texas Comptroller of Public Accounts
- Requirements for Reporting and Paying Franchise Tax — Texas Comptroller of Public Accounts
Official sources only: the IRS, SSA, BLS and other government agencies. Read how Zentavos researches.