This information applies to reports originally due on or after Jan. 1, 2008, unless otherwise noted.
Each taxable entity formed in Texas or doing business in Texas must file and pay franchise tax. These entities include:
See Franchise Tax Rule 3.586 for a list of some activities considered to be “doing business in Texas.”
The following entities do not file or pay franchise tax:
Franchise tax is based on a taxable entity’s margin. Unless a taxable entity qualifies and chooses to file using the EZ computation, the tax base is the taxable entity’s margin and is computed in one of the following ways:
Total revenue is determined from revenue amounts reported for federal income tax minus statutory exclusions.
Exclusions from revenue include the following:
Cost of goods sold generally includes costs related to the acquisition and production of tangible personal property and real property. Taxable entities that only sell services or intangibles will not generally have allowable costs; however there are exceptions for certain industries.
The compensation deduction includes the following:
Compensation does not include 1099 labor or payroll taxes paid by the employer.
Margin is apportioned to Texas using a single-factor apportionment formula based on gross receipts.
The following franchise tax credits are available:
Taxable entities that are part of an affiliated group engaged in a unitary business must file a combined group report. Members of a combined group must use the same method to compute margin.
Historically, each taxable entity was required to file a Franchise Tax Report (No Tax Due, EZ Computation or Long Form) and an Information Report (Public Information Report or Ownership Information Report). However, effective for reports due in 2024, taxable entities with total revenue at or below the no tax due threshold are no longer required to file a Franchise Tax Report but must continue to file an information report each year.
See Tax Rates, Threshold, and Deduction Limits for information on current and historic tax rate, threshold, and deduction limit information.
Franchise tax reports are due on May 15 each year. If May 15 falls on a Saturday, Sunday or legal holiday, the next business day becomes the due date.
The Comptroller’s office will tentatively grant an extension of time to file a franchise tax report upon timely receipt of the appropriate form. Timely means the request is received or postmarked on or before the due date of the original report. See Franchise Tax Extensions of Time to File for more information.
You can file your franchise tax report, or request an extension of time to file, online.
There is a $50 penalty for a franchise tax report filed after the due date, even if no tax is due with that report and even if the taxpayer subsequently files the report.
This publication is intended as a general guide and not as a comprehensive resource on the subjects covered. It is not a substitute for legal advice.