Texas Franchise Tax Guide (2024)

Franchise Tax and Public Report Filings for Texas LLCs

In LLCs in Texas, nearly all entities must file a franchise tax report, but this guide is specifically for Texas LLCs.

Approximately 90% of Texas LLCs are exempt from paying franchise tax due to their annualized total revenue being less than $1,230,000.

Nonetheless, your LLC is still required to submit a No Tax Due Report (Form 05-163) and a Public Information Report (Form 05-102). When filing online via WebFile, these forms are combined.

What is the Texas Franchise Tax?

The Texas franchise tax is a tax levied for the privilege of conducting business within Texas, which includes the legal protections offered by state law. This tax is managed by the Texas Comptroller of Public Accounts.

All Texas LLCs must file a Franchise Tax Report, regardless of their operational activity, revenue levels, or IRS taxation status.

(For a brief historical perspective, you can explore the history of the Texas franchise tax.)

What is the Franchise Tax Rate?

According to Section 171.002 of the Texas Tax Code, the franchise tax rates are as follows:

• 0.375% of taxable margin for wholesalers and retailers
• 0.75% of taxable margin for all other entities
• 0.331% of total revenue for those using the EZ computation method

Majority of LLCs Do Not Pay Tax but Must Still File

Approximately 90% of Texas LLCs are not required to pay franchise tax.

Your Texas LLC will not owe franchise tax if:

• The LLC's annualized total revenue for the year falls below the "No Tax Due Threshold", or
• The calculated tax liability is below $1,000

For the 2022 and 2023 report years, the No Tax Due Threshold stands at $1,230,000.

Even if your LLC has no tax liability, you must still file both the No Tax Due Report (Form 05-163) and the Public Information Report (Form 05-102).

Veteran-Owned LLCs

Veteran-owned LLCs in Texas are exempt from franchise tax for their first five years. However, they must still file a No Tax Due Report (Form 05-163) annually. Additional details are provided below.

Common Scenarios for Texas LLCs

Most LLCs

Their annualized total revenue is under $1,230,000. These LLCs don't owe tax but must file the following reports:

• Public Information Report (Form 05-102)
• No Tax Due Report (Form 05-163)

Established LLCs

Their annualized total revenue exceeds $1,230,000. These LLCs must file:

• Public Information Report (Form 05-102)
• Either the EZ Computation Report (Form 05-169) or the Long Form (Form 05-158-A & Form 05-158-B)
• Supporting documentation may be needed

What is Annualized Total Revenue?

Annualized total revenue applies when an LLC’s tax year is not a full 12 months. This typically occurs in the LLC's initial franchise tax reporting year.

When Are Franchise Tax Reports Due?

Your Texas LLC's Annual Franchise Tax Report, along with the Public Information Report, must be submitted by May 15 each year.

The initial reports are due in the year following the LLC's formation.

For instance:

• If your LLC is approved on August 5, 2023, the first report is due by May 15, 2024.
• If approved on January 10, 2024, the report is due by May 15, 2025.

Texas franchise tax reports are due for the current year, not in arrears. For example, if your LLC is approved on August 5, 2023, your franchise tax reports are due by May 15, 2024, based on the 2024 report year.

Reminder Notices for Texas Franchise Tax

Since 2021, if the Texas Comptroller has your LLC's email address, you'll receive an email reminder rather than a physical notice.

If the Comptroller doesn't have your email or if your LLC hasn't filed before, you'll receive a physical reminder notice between January and March. These reminders are courtesy notifications it remains your responsibility to file your Texas Franchise Tax Report annually.

We recommend setting a recurring reminder on your phone or computer.

Penalties for Non-Filing of Texas Franchise Tax Reports

Failure to file franchise tax reports may result in:

• Penalties and interest
• Forfeiture of the right to do business in Texas (as per sections 171.251 and 171.252 of the Texas Tax Code)
• Denial of the right to sue or defend in Texas courts
• Personal liability for LLC debts and taxes (as per section 171.255)
• Ineligibility for state contracts or permits

A 45-day grace period is provided after receiving a "Notice of Pending Forfeiture". If the tax obligation is not addressed within this period, your LLC will forfeit its right to conduct business in Texas, and the aforementioned penalties will apply.

SIC Code and NAICS Code

When filing Franchise Tax Reports, include your LLC's:

• SIC Code (Standard Industrial Classification)
• NAICS Code (North American Industry Classification System)

These codes help categorize your LLC’s industry and business activities. This is particularly crucial for retailers and wholesalers, as omitting the SIC code may result in a higher tax rate of 0.75% instead of the reduced 0.375% rate.

Filing Process

(This section outlines the steps following the formation of an LLC in Texas and its approval by the Secretary of State.)

Franchise Tax Responsibility Letter from the Comptroller Contents of the Welcome Letter

Within about 2-3 weeks, you will receive an "11 digits" from the Texas Comptroller, known as the Franchise Tax Responsibility Letter (Form 05-280).

This letter is sent to your Registered Agent’s address.

Taxpayer Number (11 digits)

Issued by the Texas Comptroller, this number identifies your LLC for state tax obligations and filings. It is distinct from your Federal Tax ID Number (EIN).

File Number

Assigned by the Secretary of State, used to identify your LLC for administrative purposes.

WebFile Number

FQ Number

For the Franchise Tax Questionnaire.

XT Number

For franchise tax filings.

RT Number

For various Texas taxes including:

• sales tax
• use tax
• crude oil tax
• and others

Create a WebFile Account

• Visit the WebFile login page (also known as Texas Comptroller eSystems).
• Click "Sign up".
• Create a User ID and check its availability.
• Enter your email address and other contact information.
• Create a password and continue.
• Set a security question.
• Agree to the terms and click "Create User Profile".
• You will receive a success message: click "Continue" to access the WebFile homepage.

Your WebFile account is now set up.

Complete the Franchise Tax Questionnaire

• Log into WebFile.
• Select "Franchise Accountability Questionnaire".
• Enter your 11-digit Taxpayer Number and the WebFile Number starting with "FQ".
• Answer the questionnaire and provide additional contact details.
• After submission, the Comptroller's Office will issue new WebFile Numbers as necessary.

Mailing Address

You can update the mailing address where the Comptroller will send notices.

This address is separate from the Secretary of State's address and can be located in any state or country.

File Your Franchise Tax Reports (Due by May 15th)

• Franchise Tax Reports must be filed by May 15 each year.
• Your first report is due the year following LLC approval.
• At the end of the year, calculate annualized total revenue to determine tax liability.
• If no tax is owed, file the reports but do not pay. If tax is owed, choose between margin taxation or the EZ Computation method, if eligible.
• Consulting an accountant in Texas for calculations and deductions is advisable.

Details on Texas LLC Franchise Tax Reports

In Texas, LLCs are required to file one of three types of franchise tax reports:

• No Tax Due Report
• Long Form
• EZ Computation Form

Additionally, all LLCs are required to submit a Public Information Report (PIR) to provide ownership details to the Comptroller.

The type of franchise tax report your LLC must file is determined by its annualized Total Revenue.

Before diving into the forms, let’s explain how to calculate your Texas LLC's Total Revenue.

Calculating Total Revenue for a Texas LLC

Total Revenue is derived from your LLC's federal income tax return. While there are additional details and exceptions, the following is a simplified method based on the Texas Tax Code: Section 171.1011.

Single-Member LLC

Most Single-Member LLCs are taxed as Sole Proprietorships and report their business activities on IRS Schedule C.

Total Revenue is typically reported on line 3 of this schedule.

If the Single-Member LLC owns rental properties, business activities are reported on IRS Schedule E. In this scenario, Total Revenue is generally found on line 3 (total rents). If the LLC sells rental property, add line 17 from IRS Form 4797 to the Total Revenue.

Multi-Member LLC

Most Multi-Member LLCs are taxed as Partnerships, with business activities reported on IRS Form 1065.

Total Revenue is calculated by summing lines 1c, 4, 5, 6, and 7 from page 1, plus lines 3a and 5 from page 4 (the "Schedule K" section).

If the Multi-Member LLC owns rental properties, add line 17 from IRS Form 8825 to the amount above to determine the Total Revenue.

Alternatively

An LLC can elect to be treated as a corporation for federal tax purposes, with two types of corporate taxation:

LLC taxed as an S-Corporation

An S-Corp LLC reports its business activities on IRS Form 1120S.

Total Revenue is calculated by adding lines 1c, 4, and 5 from page 1, plus lines 3a and 4 through 10 from page 3 (the "Schedule K" section).

If an S-Corp LLC owns rental properties, include line 17 from IRS Form 8825 in the Total Revenue calculation.

LLC taxed as a C-Corporation

A C-Corp LLC reports business activities on IRS Form 1120.

Total Revenue is the sum of line 1c plus lines 4 through 10.

Statutory Exclusions

After determining Total Revenue, Texas LLCs can deduct certain exclusions, such as:

• Dividends and interest from federal obligations
• Dividends reported on Schedule C
• Foreign royalties and dividends under Internal Revenue Code Sections 78 and 951-964
• Certain flow-through funds
• Other industry-specific exclusions

No Tax Due Report and Public Information Report

Approximately 90% of Texas LLCs are exempt from paying franchise tax because their annualized total revenue is below $1,230,000.

Since 2016, the Texas Comptroller has required that all No Tax Due Reports be filed online via WebFile, instead of mailing them.

The No Tax Due Report and the Public Information Report (PIR) have been combined into a single online filing through WebFile.

Get Started

• Visit the WebFile portal and log in using your username and password.
• Select "WebFile/Pay Franchise Tax".
• Enter your LLC’s 11-digit Taxpayer Number. If your LLC is not listed, you need to add it to your account.
• Choose "File a No Tax Due Information Report".
• Select the report year. If you encounter a "no obligation" message, contact the Comptroller's Office at 1-800-531-5441, extension 34402.
• Answer questions regarding Combined Groups and Tiered Partnerships. Most LLCs do not file as a Combined Group or Tiered Partnership, but it is wise to consult an accountant if unsure.
• Enter your LLC's SIC code and NAICS code.
• Input your accounting year, including the start and end dates. For clarification, refer to the report year versus accounting year section.
• Respond to qualification questions. If your LLC's annualized total revenue is under $1,230,000, answer "yes" to the question "Is the entity's annualized total revenue below the no tax due threshold?" Alternatively, if your Texas LLC had $0 in revenue, answer "yes" to the question "Does this entity have zero Texas Gross Receipts?"

Regarding 100% Veteran-Owned Texas LLCs

Your veteran-owned LLC must have been formed on or after January 1, 2022, and before December 31, 2025, and must be qualified with both the Texas Secretary of State and the Texas Comptroller's office. According to the Texas Administrative Code: Section 3.574, qualifying veteran LLCs:

• Are exempt from franchise tax for 5 years from the formation date
• Still must file a No Tax Due Report
• Do not need to file a Public Information Report (PIR)

Public Information Report (PIR) Details

To view the PIR and understand privacy implications, visit the Comptroller’s Taxable Entity Search page. For example, enter "ABCD" in the "Entity Name" box. Click on an LLC, then select the "Public Information Report" tab. You'll find the LLC Members' or Managers' names and addresses listed. To keep addresses private, you can use a PO box, mailbox rental, or the address of your Texas Registered Agent.

Mailing Address

Review and update your LLC's mailing address if necessary. This address does not need to match your LLC’s Certificate of Formation and can be located in any state or country.

The Comptroller requires this address for sending notices and correspondence.

Principal Office

Provide your LLC's principal office and place of business, which are usually in Texas. This address can also be a home address if applicable.

Officers, Directors, Managers

Enter the names of LLC owners (Members) and any Managers. It's usually not necessary to fill in the "Term expiration date" box.

Owned Entity(ies)

If your LLC owns any subsidiary companies, list them here. Include their Texas SOS File Number if they are registered in Texas.

Owned by

If your LLC is owned by another company, provide that company's details and Texas SOS File Number if applicable.

Registered Agent & Office

Changing your Registered Agent information requires filing with the Secretary of State. You can make changes either by mail or online. The fee is $15 for both methods. Use:

• Paper Form: Change of Registered Agent/Office (Form 401)
• Online Filing: SOSDirect

Declaration Statement, Review, and Submit:

Affirm that all information is accurate and click "Continue". Review your details for accuracy and make any necessary edits before clicking "Submit".

Congratulations! You have successfully filed your Texas LLC No Tax Due franchise tax report. A Confirmation Page will appear. Save or print this page for your records; it will also be available in your WebFile account history.

What if My LLC Doesn't Qualify for No Tax Due?

If your LLC's annualized total revenue exceeds $1,230,000, you will need to file either the:

• Long Form
• EZ Computation Form

Additionally, you must file a Public Information Report.

The state permits you to calculate your franchise tax liability using both methods and choose the one with the lower tax amount.

Consulting an accountant for accurate calculations and the best filing method is recommended.

Requesting a Franchise Tax Extension

You can request a franchise tax extension using Form 05-164, either by mail or online via WebFile.

Submit the extension request by May 15th. If granted, the deadline to file the Franchise Tax Report will be extended to November 15th.

Typically, the Comptroller approves the extension only if you make a payment with the request.

For more details, visit the Texas Comptroller's franchise tax extensions page.

Long Form (Forms 05-158-A + Form 05-158-B)

Full Title: Texas Franchise Tax – Long Form (Form 05-158-A & Form 05-158-B)

• The Long Form is used by LLCs that do not qualify for the EZ Computation Report or those with annualized total revenue exceeding $20 million.
• This form can be filed online or by mail and may require additional reports. Consult your accountant for further details.
• The Long Form also requires a Public Information Report (05-102) to be completed.

Franchise Tax Calculation Using the Long Form

Calculate Total Revenue minus the highest of these four allowable deductions: This result is your Gross Margin.

• Cost of Goods Sold
• Compensation
• $1 million
• 30% of Total Revenue

Multiply your Gross Margin by the percentage of your business conducted in Texas ("apportionment") to determine your Taxable Margin.

Multiply your Taxable Margin by the applicable Tax Rate. Currently, the rates are 0.375% for wholesalers and retailers, and 0.75% for all other businesses.

Methods of Filing the Long Form

• Online via WebFile
• By mail

Download the Long Form (05-158-A & 05-158-B)

• Visit the Texas Franchise Tax Forms page.
• Select the appropriate report year.
• Click on "Long Form" and download the PDF for Forms 05-158-A and 05-158-B.
• Additional forms may be necessary based on your specific situation.

Mailing address: (send original signatures)

Texas Comptroller
PO Box 149348
Austin, TX 78714-9348

Important Notes for Mail Filing:

• When filing by mail, ensure you send the Long Form with original signatures, along with any supplementary documents required.
• Confirm the mailing address on the form, as it may be subject to change.

Filing the EZ Computation Report (Form 05-169)

The EZ Computation Report is an alternative to the Long Form for LLCs with annualized total revenue above the No Tax Due threshold but $20 million or less.

Online Filing:

• Submit the EZ Computation Report electronically through the WebFile system.

Mail Filing:

• Download the EZ Computation Report (Form 05-169) from the Texas Franchise Tax Forms page.
• Select the report year.
• Click on "EZ Computation" and download the PDF for Form 05-169.
• Additional forms might be necessary; consult with an accountant if needed.

Mailing address: (send original signatures)

Submit the completed report with original signatures to:

Texas Comptroller
PO Box 149348
Austin, TX 78714-9348

Important Notes for Mail Filing:

• Ensure the EZ Computation Report sent by mail includes original signatures.
• Double-check the mailing address on the form, as it might change.

Public Information Report (PIR)

The Public Information Report (Form 05-102) must be filed if you are using the Long Form or EZ Computation Report, but not if you filed a No Tax Due Report.

Filing Requirements

• The PIR must be filed annually alongside your franchise tax report.
• It is due at the same time as your franchise tax report.
• This report updates the LLC's contact information with the Comptroller, including addresses and details of members, managers, officers, and/or directors.

Filing Online

• Log in to WebFile.
• Click on "WebFile/Pay Franchise Tax".
• Select your LLC's Taxpayer Number.
• Choose "File a Public/Ownership Information Report" to start the process.

Filing by Mail

Download the Public Information Report (Form 05-102) from the Texas Franchise Tax Forms page.

Choose the relevant report year and download the form. Send the completed form to:

Comptroller of Public Accounts
Open Records Section
PO Box 13528
Austin, TX 78711-3528

Important Notes for PIR Filing:

• The mailing address may change, so verify it against the address listed on the Public Information Report form.
• To keep personal addresses private, consider using a PO box, a mailbox rental service, or your Texas Registered Agent's address.

Texas Comptroller Contact Information

For any questions, you can contact the Texas Comptroller at 800-252-1381.

Their hours are Monday through Friday, from 8 am to 5 pm Central Time. If you call early, their hold times are very short (1-5 minutes).