How Much Is the Texas Franchise Tax?

How Much Is the Texas Franchise Tax

If you're a business owner in Texas—or doing business in the state—understanding how much you may owe in Texas Franchise Tax is essential for compliance and financial planning. While the tax rates themselves are relatively low, the rules around thresholds, exemptions, and required filings can be confusing—especially for smaller businesses.

Current Texas Franchise Tax Rates

As of the most recent tax year, Texas uses a margins-based tax system. That means your tax liability is calculated based on your business's total revenue, minus certain deductions, rather than net income. The tax rates are as follows:

  • 0.75% for most taxable entities

  • 0.375% for businesses primarily engaged in retail or wholesale trade

If your business doesn’t fall under the retailer or wholesaler category, you’ll typically pay the standard 0.75% rate on your taxable margin.

No Tax Due Threshold

One of the most important exemptions to understand is the No Tax Due Threshold. For the 2024–2025 reporting period, if your business’s annual revenue is $2.47 million or less, you do not owe any franchise tax. However, and this is key—even if you owe nothing, you are still required to file a report with the Texas Comptroller.

Failing to file can result in penalties or the forfeiture of your entity’s right to do business in Texas, even if no tax is due.

EZ Computation Option

Businesses with annual revenue under $20 million may qualify for the EZ Computation method, which simplifies the process by applying a flat rate of 0.331% to total revenue (no deductions). This is a popular option for companies that owe tax but prefer a simpler filing method.

Summary

Texas Franchise Tax is relatively modest in rate, but the filing requirement is nearly universal for registered businesses. If you operate an LLC, corporation, or partnership and your total revenue exceeds $2.47 million, you may owe tax. If it’s below that, you won’t owe anything—but you still have to file the appropriate report.

To avoid fines and maintain your business's good standing, be sure to file your franchise tax return annually, even if you don’t owe any tax.

George Dimov