How to File Business Taxes in Texas: Franchise Tax and Deadlines

To file business taxes in Texas, you register your entity with the Texas Comptroller, file an annual franchise tax report by May 15, collect and remit sales tax if you sell taxable goods or services, and separately meet your federal income and employment tax obligations with the IRS. Texas has no state income tax on businesses, so the state-level work centers on the franchise tax and, where it applies, sales tax.

Do You Actually Owe the Franchise Tax

The franchise tax applies to nearly every structured business entity operating in Texas: corporations, LLCs, limited partnerships, limited liability partnerships, business trusts, professional associations, and joint ventures.¹

Two situations are outside the tax. If you run a business as an individual without forming a legal entity, you have no franchise tax obligation. And a general partnership whose partners are all natural persons, with liability not limited by state law, is also exempt. Note the fine print on sole proprietorships: filing as one for federal tax purposes is not enough. A single-member LLC that files a Schedule C federally is still a taxable entity in Texas because it was formed in a way that limits liability.

Everyone else must file every year, even entities that owe zero tax. Filing is how you keep the right to transact business in the state.²

Get Your Tax ID Numbers First

Two numbers identify your business to the taxing authorities, and you need both before you can file anything.

The Federal Employer Identification Number (EIN) comes from the IRS. Form your entity with the Texas Secretary of State first, then apply for the EIN — applying in the wrong order can delay things. You need the entity’s legal name exactly as it appears on the formation documents plus the name and SSN or ITIN of the “responsible party,” meaning the person who ultimately controls the entity (typically a principal officer for a corporation or a general partner for a partnership).³ The online application at irs.gov issues the EIN immediately.⁴

With the EIN in hand, complete the Texas Online Tax Registration Application on the Comptroller’s website.⁵ The Comptroller will assign your 11-digit Texas Taxpayer Number.⁶ That number goes on every report, payment, and letter you send the Comptroller. Allow two to three weeks for your registration materials to arrive.

Filing the Texas Franchise Tax Report

The No-Tax-Due Threshold

For the 2026 report year, entities with annualized total revenue of $2.65 million or less owe no franchise tax.⁷ Any entity whose calculated tax comes out below $1,000 also owes nothing.⁸

If you fall below the threshold, you no longer file a separate No Tax Due Report. That form (05-163) was discontinued starting with the 2024 report year.⁹ You do still file an information report each year (see below).

Calculating the Tax if You Owe It

If your revenue is above the threshold, the tax is based on your “taxable margin.” You pick the method that gives you the lowest margin from four choices:¹⁰

Total revenue times 70%.
Total revenue minus cost of goods sold.
Total revenue minus compensation, with the compensation deduction capped at $480,000 per employee for the 2026 report year.¹¹
Total revenue minus $1 million.

Apply the rate that fits your business:

0.375% for retail or wholesale businesses.
0.75% for all other taxable entities.⁸
0.331% for entities with $20 million or less in annualized total revenue that elect the EZ computation. The EZ method taxes total revenue directly (no margin calculation) and uses its own form, 05-169.¹¹

Which Forms You File

Most businesses submit two documents:

Form 05-158, the Franchise Tax Report, where you report total revenue, apply your chosen deduction, and calculate the tax.¹²
Form 05-102, the Public Information Report, which lists current officers, directors, managers, or members. Corporations and LLCs file this. Other entity types file Form 05-167, the Ownership Information Report.¹³

Businesses below the no-tax-due threshold file only the Public Information Report (or Ownership Information Report). No Form 05-158, no discontinued No Tax Due Report.⁹

How to Submit

The Comptroller’s Webfile system, reached through the eSystems portal, is the fastest route: enter your data, review, submit, and get immediate confirmation.¹⁴ Paper filers can download the forms, complete them in Adobe Reader, print, and mail to the address on the form. Put your 11-digit taxpayer number on any check. For payments, you can authorize an ACH debit for the exact amount or pay by credit card (a small convenience fee applies).

Deadline and Extensions

The report is due May 15 each year. If May 15 falls on a weekend or legal holiday, the deadline moves to the next business day.¹⁰

You can push the filing deadline to November 15 by requesting an automatic extension through Webfile or by filing Form 05-164 on or before May 15.¹⁵ Read that carefully: the extension moves the filing date, not the payment date. Any tax you owe is still due May 15, and penalties and interest accrue on unpaid amounts even when your extension is valid.

A narrower rule applies if you’re required to pay by Electronic Funds Transfer because you paid $10,000 or more in franchise tax in the prior state fiscal year. In that case, the first extension runs to August 15, and a second extension can carry you to November 15.

What Happens if You File Late or Skip It

A $50 late-filing penalty attaches to every delinquent report, whether or not any tax is owed.¹⁶ If you owe tax and pay late, more penalties stack on top:

5% if payment is 1 to 30 days late.
10% if payment is more than 30 days late.
An additional 10% (for a 20% total) if payment comes after the date on a Notice of Tax Due.

Interest starts accruing 61 days after the report’s due date at a variable rate set each January.¹⁶

The bigger risk is forfeiture. State law requires the Comptroller to forfeit an entity’s right to transact business in Texas when franchise tax filing requirements go unmet. You get at least 45 days’ notice before forfeiture takes effect, and you can cure the deficiencies during that window.²

Once forfeited, the entity loses the right to sue or defend itself in Texas courts, and each officer or director becomes personally liable for the entity’s debts in the same manner as a partner in a partnership. Reinstatement means filing all delinquent reports, paying all outstanding tax plus penalties and interest, requesting a tax clearance letter from the Comptroller, and submitting reinstatement forms and fees to the Secretary of State.¹⁷

Sales and Use Tax

If your business sells taxable goods or services in Texas, get a sales tax permit from the Comptroller before making any taxable sales. Applying through the Texas Online Tax Registration Application is free, though a security bond may be required depending on your situation.¹⁸ The permit takes two to three weeks to arrive.⁵

Sales tax filings are separate from the franchise tax report and run on their own schedule — monthly, quarterly, or annually, depending on your volume of taxable sales. You collect the tax from customers at the point of sale and remit it to the Comptroller through the same Webfile system used for franchise tax.¹⁴ Keep records that clearly separate taxable transactions from exempt ones.

Federal Filings You Still Owe

No state income tax does not mean no income tax. Federal returns are usually the biggest piece of a Texas business’s tax burden.

Income Tax Returns

Calendar-year partnerships file Form 1065 and S corporations file Form 1120-S by March 15. C corporations file Form 1120 by April 15.¹⁹ Partnerships and S corporations are pass-through entities: the business generally doesn’t pay federal income tax at the entity level, and profits and losses flow to the owners’ individual returns via Schedule K-1. C corporations pay tax at the entity level.

Form 7004 grants an automatic six-month extension for most business returns.²⁰ Like the Texas extension, it moves only the filing date; estimated tax must still be paid by the original date.

Estimated Tax

Businesses that expect to owe $500 or more in federal income tax for the year generally must make quarterly estimated payments. For the 2026 tax year, the deadlines are April 15, June 15, and September 15 of 2026, and January 15 of 2027.²¹ Payments are made through the Electronic Federal Tax Payment System (EFTPS) at eftps.gov, which requires enrollment with your EIN, bank information, and a PIN.²²

Employment Taxes

If you have employees, withhold federal income tax, Social Security, and Medicare from wages, and pay the employer’s matching share of Social Security and Medicare. Report these amounts quarterly on Form 941, due by the last day of the month after each quarter — April 30, July 31, October 31, and January 31.²³

Federal Unemployment Tax (FUTA) applies to the first $7,000 paid to each employee during the year and is reported annually on Form 940. The Form 940 for tax year 2025 is due February 2, 2026.²⁴

Confirming Your Filing Was Accepted

Keep the digital confirmation from Webfile or the postmarked envelope for paper filings. Electronic returns process in a few business days; paper takes longer. Check your standing through the Comptroller’s Taxable Entity Search tool. A status showing your franchise tax account in good standing confirms the return was processed and your entity remains eligible to do business in Texas.²

1
State of Texas. Texas Tax Code Chapter 171 – Franchise Tax
2
Texas Comptroller of Public Accounts. Franchise Tax Account Status
3
Internal Revenue Service. Instructions for Form SS-4
4
Internal Revenue Service. Get an Employer Identification Number
5
Texas Comptroller of Public Accounts. Texas Online Tax Registration Application
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Texas Comptroller of Public Accounts. Identify Taxpayer
7
Texas Comptroller of Public Accounts. Texas Franchise Tax Report Forms for 2026
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State of Texas. Texas Tax Code 171.002 – Rates; Computation of Tax
9
Texas Comptroller of Public Accounts. No Tax Due Reporting for Report Year 2024 and Later
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Texas Comptroller of Public Accounts. Franchise Tax Overview
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Texas Comptroller of Public Accounts. 2026 Franchise Tax Instructions
12
Texas Comptroller of Public Accounts. Long Form Report Franchise Tax
13
Office of the Texas Secretary of State. Management and Ownership FAQs
14
Texas Comptroller of Public Accounts. File and Pay
15
Texas Comptroller of Public Accounts. Franchise Tax Extensions of Time to File
16
Texas Comptroller of Public Accounts. Penalties for Past Due Taxes
17
Texas Comptroller of Public Accounts. Reinstating or Terminating a Business
18
Texas Comptroller of Public Accounts. Sales and Use Tax Frequently Asked Questions
19
Internal Revenue Service. Publication 509 (2026), Tax Calendars
20
Internal Revenue Service. About Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns
21
Internal Revenue Service. Estimated Tax
22
Bureau of the Fiscal Service. Your Guide for Paying Taxes
23
Internal Revenue Service. Instructions for Form 941
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Internal Revenue Service. Instructions for Form 940