Texas imposes a Franchise Tax on each taxable entity formed or organized in Texas or doing business in Texas. Given Texas does not have corporate income taxes, franchise taxes are the state's primary tax on businesses. Filing Franchise Taxes requires knowledge of detailed financial information about the entity filing them. As a result, this tax is typically filed by a tax accountant.
As State websites go, Texas has relatively clear information about its Franchise Tax on its comptroller website.
If May 15 falls on a weekend or holiday, the due date will be the next business day.
You may request an extension. Generally, extensions are only approved if 100 percent of the tax paid in the prior year, or 90 percent of the tax that will be due with the current year’s report, is paid on or before the original due date of the report.
When an entity is initially registered in Texas, it should have completed a Franchise Tax applicability questionnaire. It can be completed online. This is often forgotten after foreign registering in the state, although Texas will typically notify you.
Corporations, LLCs, and LPs all must file and pay Franchise Taxes in Texas.
A large number of other entity types must file franchise taxes as well. Throughout the history of the tax, excluding certain entity types (e.g. LPs) led to huge numbers of entity conversions for tax avoidance (and hundreds of millions of dollars of missed tax revenue). As a result, the list of entity types that must file has grown over time.
Sole proprietorships (except for single member LLCs), and general partnerships when direct ownership is composed entirely of natural persons (except for limited liability partnerships) are exempt from Franchise Taxes in Texas (as are some less common entity types).
Franchise Tax rates, thresholds and deduction limits in Texas vary by report year. Generally, reporting increases with revenue and margin. Ordering Franchise Tax filing obligations from least to most complex:
An entity with annualized total revenue less than or equal to the no tax due threshold ($2,470,000 in 2024 and 2025) is not required to file a "No Tax Due Report" (Texas did away with that report on January 1, 2024 for 2024 and beyond). However, Corporations, LLCs, LPs, and Financial Institutions are still required to file a Public Information Report. All other entity types must file an Ownership Information Report.
Texas has a Franchise Tax calculation method called "EZ Computation". An entity or a combined group of entities can file using the EZ Computation method if it has annualized total revenue of $20 million or less.
The EZ Computation multiplies the portion of an entity's gross receipts that occurred in Texas by a definition of Total Revenue (you'll need the filing document to calculate Total Revenue), by the EZ Computation Rate. In 2024 and 2025, that EZ Computation Rate is 0.331%.
Corporations, LLCs, LPs, and Financial Institutions filing with the EZ Computation method must also file a Public Information Report. All other entity types must file an Ownership Information Report.
All entities (except passive entities) with annualized total revenue above the no tax due threshold that do not file using the EZ Computation method have to file the "Long Form", 05-158-A and 05-158-B, Franchise Tax Report. Corporations, LLCs, LPs, and Financial Institutions filing with the EZ Computation method must also file a Public Information Report. All other entity types must file an Ownership Information Report.
The form is self explanatory, though a bit complex, and is usually filed by a Tax Accountant. Franchise tax is based on a taxable entity’s margin.
As mentioned before, Texas has fairly detailed information about its Franchise Tax on the Comptrollers website.
