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How Much Texas Franchise Tax Do You Owe
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Texas Franchise Tax Calculator
Estimate your Texas franchise tax using all 5 official methods. Results sent to your email.
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Texas Franchise Tax FAQs — Answered by The Tax Planet Experts
Everything Texas businesses need to know about franchise tax obligations, rates, filing methods, and common mistakes — answered by The Tax Planet experts.
What is the Texas Franchise Tax?
he Texas Franchise Tax is a privilege tax imposed on businesses that operate in Texas. Unlike a traditional corporate income tax, it is calculated based on a company’s margin — not its net profit — making it unique compared to most other states.
Texas is one of a small number of U.S. states with no corporate income tax. Instead, the franchise tax functions as an annual fee for the right to do business in the state. It applies to revenue and typically amounts to less than 1% of a company’s taxable margin, depending on the industry and calculation method used.
Who is required to pay Texas Franchise Tax?
The Texas Franchise Tax is a privilege tax imposed on businesses that operate in Texas. Unlike a traditional corporate income tax, it is calculated based on a company’s margin — not its net profit — making it unique compared to most other states.
Exempt entities include:
As of January 1, 2020, out-of-state businesses earning more than $500,000 in gross receipts from Texas sources must also file — even without a physical presence in the state.
What are the current Texas Franchise Tax rates?
As of January 1, 2020, out-of-state businesses earning more than $500,000 in gross receipts from Texas sources must also file — even without a physical presence in the state.
What are the current Texas Franchise Tax rates?
As of January 1, 2020, out-of-state businesses earning more than $500,000 in gross receipts from Texas sources must also file — even without a physical presence in the state.
As of January 1, 2020, out-of-state businesses earning more than $500,000 in gross receipts from Texas sources must also file — even without a physical presence in the state.
Which industries are most affected by the Texas Franchise Tax?
Service-based businesses — especially those with few employees and low overhead — carry the heaviest burden. They cannot claim a COGS deduction and face the standard 0.75% rate.
Manufacturing and retail businesses benefit from:
Industries like technology, staffing, real estate services, and professional consulting are most exposed.
Does an out-of-state company need to pay Texas Franchise Tax?
Yes. Since January 1, 2020, Texas enforces an economic nexus standard. Any out-of-state entity receiving more than $500,000 in annual gross receipts from Texas-based activities must file a Franchise Tax Report — even without a physical presence in Texas.
What are the most common Texas Franchise Tax filing mistakes?
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