Austin Business Taxes: What You Need to Know for 2025

Austin Business Taxes: What You Need to Know for 2025

Austin’s vibrant economy and business-friendly environment make it one of the best cities to start and grow a business. However, managing taxes in Texas — and specifically in Austin — comes with its own set of rules and responsibilities. Staying informed about the latest tax changes, deadlines, and requirements is essential for avoiding penalties and optimizing your financial strategy.

If you're a business owner in Austin, here’s what you need to know about managing your business taxes in 2025.

1. Texas Business Taxes: The Basics

Unlike many other states, Texas does not impose a state income tax on individuals or businesses. However, businesses operating in Texas are still subject to other important taxes, most notably:

  • Texas Franchise Tax: This is a privilege tax imposed on most businesses operating in the state.

  • Sales and Use Tax: Businesses selling taxable goods or services must collect and remit this tax.

  • Employment Taxes: Businesses must comply with federal payroll tax requirements, plus Texas-specific unemployment taxes.

While Texas is generally seen as tax-friendly, understanding these obligations is critical to staying compliant.

2. The Texas Franchise Tax Explained

The Franchise Tax is one of the primary business taxes in Texas. It applies to entities like corporations, LLCs, partnerships, and other business types operating in the state.

Key details for 2025:

  • Taxable Margin Calculation: Businesses calculate their taxable margin in several ways (total revenue minus cost of goods sold, compensation, or a flat percentage).

  • Filing Threshold: If your total revenue is $2.47 million or less in 2025, you owe no franchise tax, but you are still required to file a “No Tax Due Report.”

  • Due Date: Annual Franchise Tax Reports are due May 15, 2025.

Failing to file or pay franchise taxes can lead to loss of good standing with the state, fines, or administrative dissolution.

3. Sales and Use Tax in Austin

Although Texas doesn’t charge a state income tax, it does impose a state sales tax of 6.25%, and local jurisdictions (like Austin) can add additional sales taxes.

In Austin, the combined sales tax rate is 8.25% (6.25% state tax + 2% local city and county taxes).

Businesses responsible for collecting sales tax must:

  • Register for a Sales Tax Permit with the Texas Comptroller

  • Collect the correct rate on taxable sales

  • File and remit taxes monthly, quarterly, or annually, depending on sales volume

Important: Certain services in Texas, including telecommunications, amusement services, and data processing, are also subject to sales tax.

4. Employment Taxes and State Unemployment Tax (SUTA)

If you hire employees in Austin, you must withhold and remit federal income tax, Social Security, and Medicare taxes. Additionally, Texas requires businesses to pay State Unemployment Tax (SUTA).

For 2025:

  • The new employer SUTA tax rate starts around 2.7% on the first $9,000 of each employee’s wages.

  • Rates may vary annually based on an employer’s experience rating.

Registering with the Texas Workforce Commission (TWC) is mandatory once you hire employees.

5. Federal Tax Responsibilities

Although Texas businesses avoid state income tax, federal obligations still apply, including:

  • Federal income taxes (corporations, partnerships, and some LLCs must file annual returns)

  • Payroll tax payments and filings

  • Estimated tax payments for businesses that expect to owe $1,000 or more in federal taxes

Deadlines for federal tax filings mirror national dates, including:

  • March 15, 2025: Filing deadline for S-corporations and partnerships

  • April 15, 2025: Filing deadline for sole proprietors and C-corporations (calendar year filers)

6. Local Austin Business Regulations

While the state handles most business tax matters, Austin businesses must still pay attention to local requirements such as:

  • Business Licenses and Permits: Certain industries (like food service, health, construction) require city-issued licenses.

  • Personal Property Rendition: Businesses must file a personal property tax rendition with the Travis Central Appraisal District by April 15, 2025, listing business assets like furniture, equipment, and inventory.

Failure to file a rendition can result in a penalty of up to 10% of the assessed value.

7. Changes to Watch for in 2025

Each year, tax laws and thresholds can change. Some updates Austin businesses should monitor for 2025 include:

  • Franchise Tax threshold adjustments based on inflation

  • Updated SUTA rates from the Texas Workforce Commission

  • Potential local ballot initiatives affecting property tax rates or special business assessments

  • Changes in sales tax rules for digital services or online transactions

Working with a CPA ensures that you stay ahead of these changes and avoid surprises at tax time.

Why Work With a CPA in Austin?

Navigating Austin’s unique business tax environment requires local expertise. A professional accountant can help you:

  • Determine your Franchise Tax obligations

  • Properly collect and remit sales tax

  • Optimize your business structure for tax efficiency

  • Prepare accurate and timely filings

  • Stay compliant with state and federal regulations

At Dimov Tax Specialists, we specialize in helping Austin businesses manage taxes, streamline accounting, and create strategic financial plans for growth.

Final Thoughts

Understanding your business tax obligations in Austin is crucial for maintaining compliance, avoiding penalties, and planning for growth. With a mix of state, local, and federal rules to follow, it’s easy to miss important deadlines or deductions without expert help.

By partnering with an experienced CPA, you can confidently navigate the 2025 tax year and keep your business on track for success.

Ready to simplify your business taxes in Austin? Contact Dimov Tax Specialists today for expert support tailored to your business needs.

George Dimov