Texas Franchise Tax 2026: Rates, the $2.65M Threshold and Who Has to File
By John Rush
Checked November 9, 2026 · How we score
Texas has no personal income tax and no corporate income tax. What it has instead is the franchise tax, sometimes called the margin tax. It's charged on the privilege of being formed in Texas or doing business there, and it applies to LLCs as well as corporations.
For most new companies it costs nothing. The threshold is high: $2.65 million of annualized revenue for reports due in 2026 and 2027. The thing founders actually miss is the annual paperwork that still comes due every May, even when no tax is owed.
Every figure below comes from the Texas Comptroller's franchise tax page and the 2026 report instructions (Form 05-915).
What is the Texas franchise tax rate?
There are three rates. Which one applies depends on what your business does and which report you file.
| Computation | Rate | Applied to | Who can use it |
|---|---|---|---|
| Standard (Long Form) | 0.75% | Taxable margin | Most entities |
| Retail / wholesale | 0.375% | Taxable margin | Entities primarily engaged in retail or wholesale trade |
| EZ computation | 0.331% | Apportioned total revenue (no deductions) | Annualized total revenue of $20 million or less |
These rates have applied to reports due since 2016 and are unchanged through 2027.
There is no minimum tax. If your calculated tax comes out under $1,000, you don't pay it, though you still have to file the report.
What is the no-tax-due threshold for 2026 and 2027?
The threshold is $2,650,000 for reports originally due on or after January 1, 2026 and before January 1, 2028, so it covers the 2026 and 2027 reports. For 2024 and 2025 it was $2,470,000. The Comptroller adjusts it every two years.
The test uses annualized total revenue. If your first report covers less than 12 months, you scale the revenue up to a full year. Here's the Comptroller's own example: $800,000 earned over 108 days annualizes to $2.70 million. That's over the threshold even though actual revenue was well below it.
The threshold works as a cliff, not an exemption amount. Once you're over $2.65 million, tax is calculated on your full taxable margin, not just the amount above the threshold.
Do LLCs pay franchise tax in Texas?
Yes. The tax applies to every "taxable entity" that is organized in Texas or doing business there. That includes:
- LLCs, including single-member LLCs and series LLCs
- corporations, including S corporations and professional corporations
- partnerships (general, limited and LLPs), professional associations, business associations and joint ventures
Your federal tax treatment doesn't change this. A single-member LLC that the IRS disregards is still a separate taxpayer in Texas.
The tax does not apply to:
- sole proprietorships (single-member LLCs don't count as sole proprietorships here)
- general partnerships owned directly and entirely by natural persons (LLPs are still taxable)
- certain passive entities, grantor trusts, estates and exempt organizations
So "taxes on an LLC in Texas" usually comes down to this: no state income tax, the franchise tax only above $2.65 million, and sales tax if you sell taxable goods or services. Full state costs are on the Texas state page.
Do you still file a No Tax Due Report?
No. This changed in 2024. After Senate Bill 3 (2023), the Comptroller discontinued the No Tax Due Report for reports originally due on or after January 1, 2024. If your annualized revenue is at or below the threshold, you don't file a franchise tax report at all.
You still have to file an information report each year, though:
- Public Information Report (PIR), Form 05-102, for corporations, LLCs, limited partnerships, professional associations and financial institutions. It lists officers, directors and managers and the registered agent.
- Ownership Information Report (OIR), Form 05-167, for every other taxable entity, such as general partnerships that aren't owned entirely by individuals, or trusts.
Both are covered on the Comptroller's filing requirements page, and you can file them for free through Webfile in a few minutes.
Skipping this report is how small Texas LLCs get forfeited. Even with zero tax due, the Comptroller can forfeit your right to transact business for failure to file a signed PIR.
How is taxable margin calculated?
If you don't use the EZ computation, your margin is the lowest of these four:
| Option | Formula | Usually best for |
|---|---|---|
| 1 | Total revenue × 70% | Businesses with low costs and few employees |
| 2 | Total revenue − cost of goods sold (COGS) | Product, manufacturing and resale businesses |
| 3 | Total revenue − compensation | Service firms with large payrolls |
| 4 | Total revenue − $1 million | Smaller companies just over the threshold |
Compensation is capped at $480,000 per person for 2026 and 2027 reports, up from $450,000 in 2024–2025. Not every business can use COGS. Services generally don't qualify, and the instructions explain the details.
Next, you multiply margin by your apportionment factor: Texas gross receipts divided by gross receipts everywhere. Then you apply the rate. If you have no Texas receipts, your apportionment factor is zero and you owe no tax. You still have to file a report showing that.
Worked example: EZ vs Long Form
Here's a Texas LLC with $3,000,000 in annualized revenue, all from Texas customers. It's over the $2.65M threshold, so it owes tax.
Scenario A: product business. COGS is $1.8M and compensation is $900k.
- 70% of revenue: $2,100,000
- Revenue − COGS: $1,200,000 (lowest)
- Revenue − compensation: $2,100,000
- Revenue − $1M: $2,000,000
- Long Form tax: $1,200,000 × 0.75% = $9,000
- EZ tax: $3,000,000 × 0.331% = $9,930
Long Form wins by $930.
Scenario B: software or consulting firm. It has no COGS and $500k of compensation.
- Lowest margin is revenue − $1M: $2,000,000
- Long Form tax: $2,000,000 × 0.75% = $15,000
- EZ tax: $9,930
EZ wins by about $5,000. Lean service businesses between $2.65M and roughly $4M in revenue usually come out ahead with EZ. Run both calculations every year.
When is the Texas franchise tax due?
Annual reports, and the PIR or OIR, are due May 15 each year. If May 15 falls on a weekend or holiday, the deadline moves to the next business day. The report is based on the accounting year that ended in the previous calendar year. Texas has no estimated tax payments. See the Comptroller's due dates page.
Extensions are available if you request them by May 15 through Webfile or Form 05-164:
- Most filers get an extension to November 15. That fell on November 16 in 2026 because the 15th was a Sunday. You must pay at least 90% of this year's tax, or 100% of last year's tax.
- EFT payers, meaning entities that paid $10,000 or more in the prior state fiscal year, first extend to August 15. They can then extend again to November 15 by paying the balance by August 15.
- If you were under the threshold last year, you can file a zero-dollar extension using the 100% option. That also covers a late PIR.
A federal extension does not extend your Texas deadline.
What happens if you don't file?
Here are the penalties from the 2026 instructions:
- $50 for every report filed late, even when no tax is due
- 5% of unpaid tax, plus another 5% if the tax is more than 30 days late
- interest starting 60 days after the due date, at prime + 1%
If you still haven't filed or paid 45 days after a Notice of Intent to Forfeit, the state can forfeit your right to transact business in Texas. When that happens, officers and directors become personally liable for company debts incurred after the due date, and the entity can't sue or defend itself in a Texas court. Leave it 120 days past that forfeiture and the Secretary of State can forfeit the registration entirely. For an LLC, that means losing the company.
How does it affect a non-US owner of a Texas LLC?
The franchise tax looks at the entity, not where the owner lives. A Texas LLC with foreign owners follows the same rules: no tax under $2.65M, a PIR every May 15, and the same rates above the threshold. In practice:
- The PIR is public and lists your managers and officers. Texas isn't an anonymous-LLC state.
- Because tax is apportioned by Texas gross receipts, a Texas LLC that sells mostly to customers outside Texas pays very little even above the threshold. It still has to file the Long Form or EZ report.
- Federal obligations stay the same. A foreign-owned single-member LLC still files its federal information return. See our LLC for non-US residents guide.
- An out-of-state LLC with no Texas presence can still owe Texas franchise tax once its Texas gross receipts reach $500,000 in a year. That's the Comptroller's economic nexus rule (Rule 3.586).
Is Texas a good state for an LLC compared to Wyoming or Florida?
If you live or operate in Texas, form there. You'd have to register a foreign LLC in Texas anyway, and you'd still owe the same franchise tax. Filing costs $300 and there's no annual fee. For most startups, the only recurring task is the PIR.
If you're a remote or non-US founder with no Texas ties, Wyoming is simpler: no franchise tax, more privacy and a cheap annual report. Compare them side by side in Texas vs Wyoming and Florida vs Texas. See all states with no income tax, and the full fee picture in how much it costs to start an LLC.
Not tax or legal advice. Thresholds and rates are from the Texas Comptroller as of November 2026. Confirm with a CPA before you file.
Frequently asked questions
Do I have to file a Texas franchise tax report if my LLC made no money?
Not a franchise tax report. Since 2024, entities at or below the $2.65 million no-tax-due threshold don't file a No Tax Due Report. You must still file a Public Information Report (Form 05-102) or Ownership Information Report by May 15, or the Comptroller can forfeit your LLC's right to do business.
What is the Texas franchise tax threshold for 2026?
$2,650,000 of annualized total revenue for reports originally due in 2026 and 2027, up from $2,470,000 for 2024 and 2025. At or below it, no tax is due. Above it, tax is calculated on your full taxable margin.
When is the Texas franchise tax due?
May 15 each year, or the next business day if it falls on a weekend or holiday. Non-EFT filers can extend to November 15 by requesting an extension and paying at least 90% of the current year's tax or 100% of last year's. EFT payers extend to August 15 first.
Do single-member LLCs pay Texas franchise tax?
Yes. Single-member LLCs are taxable entities in Texas even though the IRS disregards them. Only true sole proprietorships and general partnerships owned entirely by individuals are outside the tax. Below $2.65 million in revenue, a single-member LLC owes nothing but still files a Public Information Report.
What happens if I don't file the Texas Public Information Report?
You pay a $50 late-filing penalty for each late report. If you don't file within 45 days of a Notice of Intent to Forfeit, the LLC can lose its right to transact business, and officers and managers become personally liable for debts incurred afterwards. After 120 more days, the registration itself can be forfeited.
Related
Not tax or legal advice. Rates and rules change; we check official sources and update every page, but verify with a licensed adviser in the country before acting. Spotted something out of date? Use the correction form below.