The Texas franchise tax is an annual “privilege” tax on businesses that operate in Texas—including most LLCs, corporations, and S-corps. The good news for small businesses: for the 2026 report year, if your annualized total revenue is at or below the $2.65 million no-tax-due threshold, you owe no franchise tax. Reports are due May 15, 2026. But even businesses that owe nothing usually still have to file an informational report, and missing the deadline brings penalties. Here’s what every Texas small business owner needs to know.
This article is general information, not tax or legal advice. Confirm current thresholds, forms, and dates with the Texas Comptroller or a qualified tax professional before filing.
What is the Texas franchise tax?
The Texas franchise tax is a tax on the privilege of doing business in Texas, administered by the Texas Comptroller of Public Accounts. It applies to “taxable entities”—including LLCs, corporations, S-corps, professional associations, and limited partnerships. Sole proprietors and general partnerships owned entirely by individuals are generally not subject to it.
Unlike a sales tax or income tax, it’s based on your business’s margin, not your personal income. Texas has no state personal income tax, so for many owners the franchise tax is the main state-level business tax to track.
Who has to pay Texas franchise tax?
Most formal business entities registered or doing business in Texas must file a franchise tax report each year, whether or not they owe anything. That includes:
- LLCs (single-member and multi-member)
- Corporations and S-corporations
- Professional associations and limited partnerships
Entities generally exempt from filing include sole proprietorships and certain general partnerships directly owned by natural persons, plus some nonprofits and passive entities.
What is the no-tax-due threshold for 2026?
For the 2026 report, the no-tax-due threshold is $2.65 million in annualized total revenue (up from $2,470,000 in 2025 due to inflation adjustment). If your business’s annualized total revenue is at or below $2.65 million, you owe no franchise tax.
The majority of Texas small businesses fall under this threshold and therefore owe $0 in franchise tax—but that doesn’t necessarily mean you can skip filing (see below).
If I owe no tax, do I still have to file something?
Usually yes. Texas eliminated the standalone “No Tax Due Report,” but businesses below the threshold generally still must file an informational report:
- Public Information Report (PIR) — for corporations, LLCs, and similar entities, or
- Ownership Information Report (OIR) — for entities such as certain partnerships.
These reports keep your registered agent, officer/member, and ownership details current with the state. Skipping them can jeopardize your business’s good standing. Confirm which report applies to your entity on the Comptroller’s website.
How is the franchise tax calculated if I’m over the threshold?
If your revenue exceeds $2.65 million, the tax is based on your taxable margin, calculated as the lowest of a few methods:
- Total revenue minus cost of goods sold (COGS)
- Total revenue minus compensation
- Total revenue × 70%
- Total revenue minus $1 million
That margin is then multiplied by your tax rate—generally 0.375% for retail/wholesale and 0.75% for most other businesses. Many smaller entities over the threshold can use the simpler E-Z Computation method at a reduced rate if they qualify. A tax professional can determine the best method for you.
When is the Texas franchise tax due?
The annual report and any payment are due May 15 each year (May 15, 2026 for the 2026 report). If May 15 falls on a weekend or holiday, the deadline moves to the next business day. Extensions are available if requested properly, but an extension to file is generally not an extension to pay any tax owed.
What are the penalties for filing late?
Missing the deadline is costly. Typical consequences include:
- A $50 penalty for a report filed after the due date.
- A 5% penalty on tax paid 1–30 days late, rising to 10% after 30 days.
- Interest on unpaid tax that begins accruing after 60 days.
- Loss of good standing, and eventually forfeiture of your business’s right to transact business in Texas and of liability protection for owners if the delinquency isn’t cured.
Losing good standing can prevent you from filing lawsuits or getting loans, so don’t let franchise tax filings slip.
Simple compliance checklist
- Confirm your entity type and whether you must file.
- Track annualized total revenue against the $2.65 million threshold.
- File the correct report (tax report and/or PIR/OIR) by May 15.
- Keep clean books all year so the numbers are ready.
- Set a calendar reminder for next year.
Frequently Asked Questions
Do small businesses in Texas owe franchise tax?
For the 2026 report, businesses with annualized total revenue at or below $2.65 million owe no franchise tax. Most small businesses fall under this threshold, but many still must file an informational report (PIR or OIR).
When is the Texas franchise tax due in 2026?
The report and any payment are due May 15, 2026. If the date falls on a weekend or holiday, it shifts to the next business day.
Do I have to file if my business owes zero franchise tax?
In most cases, yes. Even below the no-tax-due threshold, entities generally must file a Public Information Report or Ownership Information Report to stay in good standing.
What happens if I file my franchise tax report late?
You may face a $50 late-filing penalty, a 5%–10% penalty on tax owed, interest after 60 days, and eventually loss of good standing or forfeiture of your entity’s rights and liability protection.
Who is exempt from Texas franchise tax?
Sole proprietorships and certain general partnerships owned solely by individuals are generally not subject to franchise tax, along with some nonprofits and passive entities. Most LLCs, corporations, and S-corps must file.
Stay compliant with bilingual tax help in Dallas
VIP Choice Service helps DFW small businesses file their Texas franchise tax reports on time and keep clean books year-round—in English and Spanish. We’ll confirm which report applies to your entity and make sure you never lose good standing.
Call (972) 807-2217 or visit vipchoiceservice.com for a free bilingual consultation. Office: 9550 Forest Lane, Suite 440, Dallas, TX 75243.
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