Texas Franchise Tax: Minimum Requirements & Thresholds

Title: Texas Franchise Tax: Minimum Requirements & Thresholds

Description: Texas has a franchise tax of 0.75% on taxable margin. No tax is due if annual revenue is ≤$2.65M. Learn the rules under Tex. Tax Code Ch. 171.

Does Texas have a minimum franchise tax?

Yes, Texas imposes a franchise tax under Tex. Tax Code Ch. 171. However, no tax is due if your annualized total revenue does not exceed $2,650,000 (2026 threshold). For entities exceeding this threshold, the standard rate is 0.75% of taxable margin. Retail and wholesale businesses pay 0.375%; the EZ computation method applies 0.331%. All entities must file an annual report by May 15, regardless of tax liability.

Revenue Threshold & Exemption

The $2,650,000 annual revenue exemption is the key rule. If your business stays below this amount, you owe no franchise tax, regardless of entity type (LLC, corporation, partnership). This threshold adjusts annually for inflation. The Comptroller of Public Accounts administers the tax under Tex. Tax Code Ch. 171.

Tax Rates for Taxable Entities

Businesses exceeding the revenue threshold calculate franchise tax using one of three methods:

Standard rate: 0.75% of taxable margin
Retail/wholesale rate: 0.375% of taxable margin
EZ computation rate: 0.331% of total revenue minus cost of goods sold

Taxpayers select the method producing the lowest liability.

Filing Requirements

All entities must file the Public Information Report (PIR) or Ownership Information Report (OIR) with the Texas Comptroller by May 15 each year, even if no tax is owed. Filing is free. The deadline is firm—there is no grace period.

Late filing penalties:

$50 penalty per report
5% additional penalty if paid 1–30 days late
10% additional penalty if paid over 30 days late
Interest accrues after 61 days

Consequences of Non-Compliance

Failure to file timely reports results in forfeiture of the right to transact business. The Comptroller may forfeit your entity, and the Secretary of State may involuntarily terminate it. Reinstatement requires filing all delinquent reports, paying all taxes, penalties, and interest, obtaining a tax clearance from the Comptroller, and paying a $75 reinstatement fee.

Next Steps

Monitor your annualized revenue to determine if you exceed the $2,650,000 threshold
File your annual report with the Texas Comptroller by May 15 each year at comptroller.texas.gov
If you exceed the threshold, calculate your franchise tax liability using the applicable rate and pay by May 15
Keep records of gross revenue to support the exemption claim

This is general information, not legal advice.