What Texas franchise tax is
The franchise tax is how Texas taxes most businesses. The Comptroller describes it as a privilege tax imposed on each taxable entity formed or organized in Texas or doing business in Texas. For LLC owners it works as the state’s annual report: every year, you file something with the Comptroller, even if the tax is zero.
It is separate from forming the LLC with the Secretary of State. Formation fees and steps are on our Texas LLC page.
Who is subject to Texas franchise tax
LLCs are. The Comptroller’s franchise tax overview lists taxable entities as corporations; limited liability companies, including single-member LLCs and series LLCs; banks and savings associations; S corporations; professional corporations; partnerships (general, limited and limited liability); trusts; professional and business associations; joint ventures; and other legal entities.
Not subject:
- Sole proprietorships (but a single-member LLC is subject).
- General partnerships owned directly and entirely by natural persons (not limited liability partnerships).
- Certain unincorporated passive entities.
- Entities with a specific exemption, such as qualifying nonprofits.
The owners’ residence does not matter. A Texas LLC owned by a founder in India or Nigeria is a taxable entity like any other. An LLC formed in another state, such as Wyoming, can also be subject if it is doing business in Texas. Whether your out-of-state LLC has nexus with Texas is a legal and tax question; the Comptroller has a nexus questionnaire (Form AP-114), and a licensed professional can advise.
The no tax due threshold: $2.65 million for 2026 and 2027
If your LLC’s annualized total revenue is at or below the threshold, it owes no franchise tax. The Comptroller’s published thresholds are:
| Report years | No tax due threshold |
|---|---|
| 2024 and 2025 | $2,470,000 |
| 2026 and 2027 | $2,650,000 |
The test uses annualized total revenue, so a report period shorter than 12 months is measured on a 12-month basis. Most small LLCs formed by non-resident founders sit well below this line.
The end of the No Tax Due Report
From 2024 reports onward, an LLC under the threshold no longer files a No Tax Due Report. The Comptroller explains that Form 05-163, the No Tax Due Information Report, is discontinued after Senate Bill 3 (July 2023) raised the threshold and removed that filing.
What did not go away is the information report. An entity at or below the threshold "is not required to file a No Tax Due Report" but must file either Form 05-102 (Public Information Report) or Form 05-167 (Ownership Information Report). Many owners read "no tax due" as "nothing to file" and then receive a penalty notice.
A few special cases file more:
- A taxable entity with zero Texas gross receipts must file the EZ Computation Report or the Long Form.
- A qualifying passive entity must file the EZ Computation Report or the Long Form, completing only certain fields.
- A new veteran-owned business is not required to file a No Tax Due Report for its initial five-year period.
Public Information Report vs Ownership Information Report
You file one of the two, not both. Both are annual information reports: they give the Comptroller current details about the entity, and neither carries a tax payment. Which one applies depends on the type of entity; the 2026 report forms page lists both, and our filing team confirms the right one for your LLC before filing.
| Report | Form | When filed |
|---|---|---|
| Public Information Report (PIR) | 05-102 | Each year by the report due date, with or without a tax report |
| Ownership Information Report (OIR) | 05-167 | Each year by the report due date, for entities that do not file a PIR |
| EZ Computation Report | 05-169 | Above the threshold, total revenue $20 million or less, if the entity chooses it |
| Long Form | 05-158-A and 05-158-B | Above the threshold, or if the entity does not use EZ |
If your details change (for example a new registered agent), the registered agent and office are updated with the Texas Secretary of State, not on the franchise tax report.
Due date: 15 May
Franchise tax reports are due on 15 May each year. If 15 May falls on a Saturday, Sunday or legal holiday, the next business day becomes the due date. That makes the 2027 due date Monday 17 May 2027, because 15 May 2027 is a Saturday.
For a first report, the accounting period starts on the day the entity became subject to the tax, and the end date is the federal accounting year end in the same calendar year, according to the Comptroller’s FAQ.
Extensions
A Texas extension must be requested separately; a federal extension does not count. The Comptroller says that unless you file and pay by the due date, you need to file a franchise tax extension request.
- Most filers (non-EFT): use Webfile or Form 05-164 on or before 15 May, with a payment of at least 90% of the tax due or 100% of the tax reported on the prior year’s report. The extended due date is 15 November.
- EFT payers (those paying $10,000 or more a year): a first extension to 15 August, then a second to 15 November with a further payment.
Rates and how the tax is worked out
Above the threshold, the tax is a percentage of "margin". The Comptroller’s rates for 2026 and 2027 reports are:
| Item | Rate or limit |
|---|---|
| Retail or wholesale entities | 0.375% of margin |
| All other entities | 0.75% of margin |
| EZ Computation (total revenue $20 million or less) | 0.331% |
| Compensation deduction limit | $480,000 ($450,000 for 2024 and 2025) |
Margin is computed in one of four ways: total revenue times 70%, total revenue minus cost of goods sold, total revenue minus compensation, or total revenue minus $1 million. Choosing between methods is a tax decision for your accountant.
Penalties and forfeiture
Late filing costs money even when no tax is due. The Comptroller assesses a $50 penalty on each report filed after the due date, "regardless of whether any taxes or fees are due". Where tax is due and paid late, the penalty is 5% if 1 to 30 days late and 10% after 30 days, plus interest.
If reports or payments stay outstanding, the Comptroller sends statutory notices: Form 05-211 (Notice of Intent to Forfeit Right to Transact Business), Form 05-212 (Notice of Forfeiture of Right to Transact Business) and Form 05-213 (Notice of Forfeiture of Registration). The notices escalate from a warning to forfeiture of the right to transact business and then of the registration.
To reinstate, you file all outstanding franchise tax and information reports, pay the tax, penalty and interest, request a tax clearance letter through Webfile, and send it to the Secretary of State with the reinstatement forms and fees.
Forfeiture can have legal consequences beyond the penalty. If your LLC has received a forfeiture notice, speak to a Texas attorney or CPA as well as filing the missing reports.
How to file through Webfile
Most LLCs file online through the Comptroller’s Webfile system. The steps:
- Find your Texas taxpayer number and your XT Webfile number. The Comptroller explains that the XT number is for franchise tax reports, extension requests and payments; an FQ number is only for the nexus questionnaire.
- Log in to Webfile and choose the franchise tax report for the current report year.
- Enter your annualized total revenue. At or below $2.65 million, you file the information report only.
- Check the accounting period dates and the entity details, then complete the Public Information Report or Ownership Information Report.
- Submit before 15 May (or the next business day) and keep the confirmation.
Above the threshold you complete the EZ Computation Report or Long Form and pay. Paper forms are also available on the Comptroller’s forms page.
Filing it yourself vs using our service
For an LLC under the threshold, filing yourself costs nothing in state fees: Webfile is free and the information report takes little time once you have your XT number. If you are abroad and do not have the Comptroller’s letters, finding those numbers is often the hard part.
Our LLC annual report service covers the Texas franchise filing: we confirm your report year and accounting period, prepare the right information report (and the EZ or Long Form if you are above the threshold, working from figures you or your accountant provide), file through Webfile, and send the confirmation to your client portal with a reminder for next year. We do not choose margin methods or give tax advice. Other state deadlines are in our LLC tax filing deadlines guide.
Sources
- Texas Comptroller: Franchise tax
- Texas Comptroller: Franchise tax overview (98-806)
- Texas Comptroller: No tax due reporting for report year 2024 and later
- Texas Comptroller: 2026 franchise tax report forms
- Texas Comptroller: Franchise tax extensions of time to file
- Texas Comptroller: Franchise tax frequently asked questions
- Texas Comptroller: Franchise tax notices
- Texas Comptroller: Reinstating or terminating a business
Fees, deadlines and rules on this page were last checked on 27 September 2026.