Texas Franchise Tax Guide 2026 — Thresholds, Rates and May 15 Filing

Texas LLC Franchise Tax: 2026 Thresholds, Rates, and Filing Guide

5 months ago · Updated 4 days ago

Scope: Covers Texas franchise-tax thresholds, No Tax Due treatment, Public Information Reports, calculations and May 15 deadlines.

The Texas franchise tax for LLCs is the state's annual privilege tax on businesses operating in Texas. Despite Texas having no personal income tax, it does impose this entity-level tax — and every LLC is subject to it. The good news: the vast majority of small Texas LLCs owe $0. The bad news: you still have to file every year by May 15, or face penalties and risk losing your LLC's right to operate. This guide covers the exact thresholds, rates, who must file, and how to stay compliant.

Texas LLC Franchise Tax — 2026 Quick Facts

Based on current Texas Comptroller rules and Tax Code §171 (verified May 2026)

No-Tax-Due Threshold (2026)
$2.65 Million
Standard Rate (most LLCs)
0.75%
Retail/Wholesale Rate
0.375%
Annual Filing Deadline
May 15
Late Filing Penalty
$50 minimum
PIR Filing Fee
$0 (Free)
Track Your May 15 Deadline →
$2.65M
2026 no-tax-due threshold. Up from $2.47M in 2024–2025.
0.75%
Standard franchise tax rate. Unchanged since 2024.
May 15
Annual deadline. Fixed — not based on formation date.
$50
Late filing penalty. Even when $0 tax is owed.
In This Guide
  1. What Is the Texas Franchise Tax?
  2. Do Texas LLCs Pay Franchise Tax?
  3. No-Tax-Due Threshold: 2024, 2025, and 2026 Compared
  4. Texas Franchise Tax Rates
  5. How Taxable Margin Is Calculated
  6. Public Information Report (PIR) Requirement
  7. Texas Franchise Tax Due Date and Extensions
  8. How to File the Texas Franchise Tax Report
  9. Penalties for Late or Missing Filings
  10. Foreign LLC Franchise Tax Rules
  11. Common Texas Franchise Tax Mistakes
  12. Frequently Asked Questions

What Is the Texas Franchise Tax?

The Texas franchise tax — officially called the "margin tax" — is an annual privilege tax imposed on every taxable entity formed in or doing business in Texas. It's based on your business's "taxable margin" (a modified revenue calculation), not on net profit or income. This is why Texas can have no state income tax but still tax businesses annually.

Franchise Tax vs. Income Tax Texas franchise tax ≠ Texas income tax. Texas has no personal or corporate income tax. The franchise tax is calculated from total revenue (with deductions) — not from profit. An LLC that had a bad year and lost money can still owe franchise tax if its total revenue exceeded the threshold.

The Texas franchise tax applies to virtually every structured business entity — LLCs, corporations, limited partnerships, and professional associations. The main exemptions are sole proprietorships and general partnerships composed entirely of natural persons. A Texas LLC franchise tax obligation exists from the first year the LLC is active in Texas — even if it never turns a profit.

For context on how this fits into your overall LLC costs, see the Texas LLC cost guide →

Do Texas LLCs Pay Franchise Tax?

Yes — all Texas LLCs are subject to the franchise tax, including single-member LLCs. But "subject to" and "owe money" are very different things. Most small Texas LLCs owe $0 because they fall below the no-tax-due threshold. The obligation to file, however, exists regardless of revenue.

Who Must File the Texas Franchise Tax Report
✓
All Texas LLCs (single-member and multi-member) Filing is required for every active LLC — regardless of revenue, profit, or activity level. An LLC that earned $0 still files an information report (PIR).
✓
S-Corps and corporations operating in Texas Texas does not recognize the federal S-Corp election for franchise tax purposes. S-Corps are taxed at the entity level the same as LLCs. Federal pass-through classification doesn't exempt you.
✓
Foreign LLCs registered to do business in Texas Out-of-state entities with Texas nexus — either physical presence or economic nexus — are subject to the same franchise tax rules as domestic Texas LLCs.
✗
Sole proprietorships (no filing required) Not subject to franchise tax. You pay personal income tax (federal) on business income instead. This is one reason some small business owners delay forming an LLC — but the liability protection is usually worth it.
✗
General partnerships owned entirely by natural persons Also exempt from franchise tax. However, GPs have no liability protection — so the tax exemption comes at significant risk to personal assets.

For a full overview of Texas business taxes and how they interact with your LLC structure, see our LLC taxes guide →

No-Tax-Due Threshold: 2024, 2025, and 2026 Compared

The Texas LLC franchise tax no-tax-due threshold has increased significantly over the past few years. Understanding this history matters because many LLC owners are still operating under outdated assumptions — particularly around the 2024 change that more than doubled the threshold overnight.

Report Year No-Tax-Due Threshold Change vs Prior Year What This Means
2022–2023 $1,230,000 — Most LLCs under $1.23M owed $0
2024 $2,470,000 +101% increase Texas SB 3 (2023) more than doubled the threshold
2025 $2,470,000 No change Same threshold as 2024
2026–2027 Current $2,650,000 +7.3% increase Inflation adjustment per §171.006
What This Means in Practice For the 2026 report year: if your Texas LLC had $2.65 million or less in annualized total revenue during your 2025 accounting period, you owe $0 in franchise tax. You still file a Public Information Report (PIR) by May 15, 2026 — but that's it. No tax calculation, no payment, no long form.

How the Threshold Actually Works

The threshold applies to annualized total revenue — not profit, not net income, not what you deposited in your bank account. "Annualized" means if your LLC operated for less than 12 months (common for new LLCs), you multiply your partial-year revenue to represent a full year before comparing it to the threshold.

New LLC Trap An LLC formed in October 2025 with $300,000 in revenue for the year sounds well below the $2.65M threshold — but annualized (÷ 3 months × 12), it projects to $1.2M annually. Still below the threshold in this case, but the annualization requirement catches many new business owners by surprise. Always annualize before determining if you're below the threshold.

Texas Franchise Tax Rates (2024, 2025, 2026)

The Texas LLC franchise tax rate has remained unchanged across 2024, 2025, and 2026. There are three rate options depending on your business type and calculation method.

Texas Franchise Tax Rates — Current and Historical
Standard Rate (most LLCs)
0.75%
Retail/Wholesale Rate
0.375%
EZ Computation Rate
0.331%
Rate Change 2024–2026
None — stable
The Texas LLC franchise tax rate of 0.75% applies to taxable margin — not to total revenue. If your LLC had $3M in revenue and a taxable margin of $500,000, the tax would be $3,750 ($500,000 × 0.75%), not $22,500. The rate is applied to your margin after deductions. EZ Computation applies 0.331% directly to gross receipts — simpler but forfeits the ability to claim franchise tax credits.

Texas Franchise Tax Rate Comparison: EZ vs Long Form

EZ Computation vs. Long Form — Which Should You Use?
EZ Computation
Rate: 0.331% on Texas gross receipts
No deductions (COGS, compensation) allowed
Available if revenue ≤ $20 million
Simpler math — faster to complete
Forfeits all franchise tax credits
Best for: service LLCs with low COGS/payroll
VS
Long Form
Rate: 0.75% on lowest margin calculation
Allows COGS, compensation, $1M deduction methods
Available to all taxable entities
More complex but often lower tax
Eligible for all franchise tax credits
Best for: LLCs with high payroll or material costs
Run both calculations before filing — the "lower" rate of EZ often produces a higher tax bill for businesses with significant payroll or COGS

How Taxable Margin Is Calculated (Long Form)

If your LLC is above the no-tax-due threshold and you're using the Long Form, Texas gives you four methods to calculate taxable margin. You use whichever produces the lowest result — which means you're legally required to run all four.

Method Formula Best For 2026 Cap
1 — Revenue Only 70% of total revenue Baseline; applies to all No cap
2 — COGS Deduction Revenue minus cost of goods sold Product businesses, manufacturers No cap
3 — Compensation Deduction Revenue minus compensation paid Service businesses with payroll $480K per person
4 — Flat Deduction Revenue minus $1 million Simple low-revenue businesses No cap
The compensation deduction cap increased from $450,000 (2025) to $480,000 per person for the 2026 report year — an inflation adjustment. LLCs with high-paid executives or partners benefit most from tracking this cap change annually.
Example: Which Method Wins? An Austin consulting LLC has $3M in total revenue, $800K in payroll (2 employees at $400K each), and minimal COGS.

Method 1 (70%): $2.1M margin → $15,750 tax
Method 2 (COGS): $3M - ~$50K = $2.95M margin → $22,125 tax
Method 3 (Compensation): $3M - $800K = $2.2M margin → $16,500 tax
Method 4 (Flat $1M): $3M - $1M = $2M margin → $15,000 tax

→ Method 4 wins at $15,000. Running all four saves $7,125 vs the worst option.

For a deeper look at how franchise tax interacts with your overall LLC tax picture, see our LLC tax overview →

Public Information Report (PIR) — Annual Requirement

Regardless of franchise tax liability, every Texas LLC must file a Public Information Report (PIR) — Form 05-102 — with the Texas Comptroller by May 15 each year. This is the LLC's annual disclosure of officer/manager names and addresses. It's free to file and is submitted alongside (or instead of) the franchise tax report.

Critical rule since 2024: The old "No Tax Due Report" (Form 05-163) was permanently eliminated starting with 2024 report years. LLCs below the threshold no longer file that form — they file only the PIR. Don't try to file the discontinued form; use Webfile's PIR-only option instead.

The PIR requires: your LLC's taxpayer number, names and addresses of all officers/managers, your registered agent's current information, and an authorized signature. Data submitted on the PIR is forwarded to the Texas Secretary of State and becomes part of the public SOS database — which is why keeping your registered agent information accurate before filing is important. See Texas annual report (PIR) guide →

When Is Your First PIR Due? Your Texas LLC's first PIR is due May 15 of the year after formation — not the same year. An LLC formed in September 2025 doesn't file until May 15, 2026. An LLC formed in February 2026 doesn't file its first PIR until May 15, 2027.

Texas Franchise Tax Due Date and Extensions

The Texas LLC franchise tax due date is May 15 every year — fixed, universal, not tied to your LLC's formation anniversary. For 2026, May 15 falls on a Friday, so the deadline stands as-is.

January — April
Prepare and File
Gather total revenue figures for the prior accounting period. Determine which report to file (PIR only if ≤ $2.65M, or franchise tax report + PIR if above). File via Webfile — no mailing required for most LLCs.
May 15 — Deadline
File or Request Extension
Reports must be filed or extension payment made by May 15. For an extension to November 15, pay at least 90% of current year's estimated tax — or 100% of prior year's tax — by May 15.
November 15 (if extended)
Extended Filing Deadline
Extended filing window closes. Tax was still due May 15 — the extension only covers filing, not payment. Interest and penalties on unpaid amounts run from May 15 regardless.
Extension ≠ More Time to Pay A franchise tax extension gives you more time to file — not more time to pay. If your LLC owes franchise tax, the payment is still due May 15. Paying in November triggers interest from May 15 even if you technically filed on time. Many LLC owners miss this distinction and get surprised by interest charges.

Use our LLC Annual Report Tracker → to set your May 15 deadline reminder automatically.

How to File the Texas LLC Franchise Tax Report

The Texas LLC annual franchise tax report is filed online via the Texas Comptroller's Webfile system at comptroller.texas.gov. Filing is free. Most LLCs below the threshold complete their PIR-only filing in under 20 minutes.

1

Log Into Texas Comptroller Webfile

Access Webfile at comptroller.texas.gov. You'll need your 11-digit Texas taxpayer number, which appears on any prior Comptroller correspondence or can be found via the Texas Comptroller's entity search.

2

Determine Your Revenue vs. the 2026 Threshold

Calculate your annualized total revenue for your 2025 accounting period. If at or below $2.65 million: file PIR only — no tax form needed. If above $2.65M: file EZ Computation or Long Form alongside the PIR.

3

Select the Right Report Type

Under $2.65M: select "Public Information Report." Above $2.65M and revenue ≤ $20M: consider EZ Computation. Above $2.65M with significant COGS or payroll: run the Long Form margin calculation before deciding. The EZ's simplicity often costs more than the Long Form's math saves.

4

Complete and Submit the PIR

Enter officer/manager names and addresses, registered agent information, and your accounting period. Review for accuracy — particularly your registered agent details, which get forwarded to the SOS. Sign and submit electronically.

5

Save Your Confirmation

Webfile provides immediate electronic confirmation. Save it as proof of compliance. The Comptroller forwards your PIR data to the Texas Secretary of State within a few business days.

Official Filing Portal
Texas Comptroller — Franchise Tax Filing, Forms, and Webfile Access
↗

Penalties for Late or Missing Texas Franchise Tax Filings

The Texas LLC franchise tax penalty structure is the same whether you owe millions or zero dollars. A missed filing triggers consequences immediately — there's no grace period.

Timeline Penalty Type Amount Applies To
Day 1 after deadline Late filing penalty $50 flat All late reports — even $0 tax
Days 1–30 Late payment penalty 5% of unpaid tax Reports with tax owed
Day 31+ Additional late payment penalty +5% (total 10%) Reports with tax still unpaid
Day 61+ Interest begins accruing Statutory rate On unpaid tax only
After Notices Notice of Intent to Forfeit Warning Continued non-compliance
Final Action Forfeiture of right to operate Loss of LLC standing Prolonged non-filing
Forfeiture — What It Actually Means When the Texas Comptroller forfeits your LLC's standing, you lose the right to sue or defend in Texas courts. Every officer, manager, and member becomes personally liable for certain entity debts under Texas Tax Code §171.255. The liability protection that justified forming an LLC — gone. Reinstatement requires filing all delinquent reports, paying all accumulated penalties and interest, obtaining a Tax Clearance Letter, and filing reinstatement paperwork with the SOS. This process can take weeks and costs significantly more than simply filing on time.

Foreign LLC Franchise Tax Requirements in Texas

A foreign LLC — one formed in another state but registered to do business in Texas — is subject to the same Texas franchise tax for LLC rules as domestic entities. The same thresholds, rates, deadlines, and PIR requirements apply. The key trigger is Texas nexus, not Texas formation.

Texas Nexus — What Counts A foreign LLC has Texas nexus if it: (1) maintains a physical office or employees in Texas, (2) has more than $500,000 in Texas-sourced gross receipts, (3) owns or uses property in Texas, or (4) performs services in Texas. Any of these creates an obligation to file franchise tax reports. Effective January 7, 2026, Texas updated its nexus rule (34 TAC § 3.586) with additional guidance on economic nexus for foreign entities.

Foreign LLCs that cease Texas business must file a final franchise tax report and pay any outstanding tax within 60 days of ending Texas nexus. This is separate from withdrawing registration with the Texas SOS. See our Texas foreign LLC guide →

Common Texas Franchise Tax Mistakes

  • Assuming $0 tax means no filing required. The most common mistake for LLCs below the threshold. The PIR is mandatory regardless of tax liability. The $50 penalty applies even when no franchise tax is owed — and forfeiture follows extended non-filing.
  • Using the wrong threshold for the report year. the state franchise tax threshold for 2024 and 2025 was $2.47M. For 2026–2027, it's $2.65M. Owners who remember the old $1.23M pre-2024 number, or who search for the state franchise tax threshold 2024, may be working with outdated information. Always verify the threshold for the specific report year you're filing.
  • Not annualizing revenue for a short accounting period. New LLCs and those that changed fiscal years must annualize their revenue before comparing to the threshold. A 4-month revenue figure of $700K annualizes to $2.1M — still below the 2026 threshold, but the calculation is required. Skipping it risks filing the wrong report type.
  • Choosing EZ Computation without running the Long Form first. The EZ Computation's lower headline rate (0.331%) often produces a higher actual tax bill than the Long Form (0.75% on margin after deductions). Any LLC with significant payroll or COGS should run both methods before filing. EZ also disqualifies you from franchise tax credits.
  • Treating the extension as a payment extension. An extension shifts the filing deadline to November 15. The payment deadline remains May 15. Owners who assume they have until November to pay often discover they've been accumulating interest since May 15.
  • Missing the updated total revenue rule for 2026. Effective March 1, 2026, Texas updated its total revenue rule (34 TAC § 3.587). Total revenue is now generally based on your current federal return rather than the 2007 IRC, with narrow exceptions for GILTI and FDII. This could affect LLCs with international operations or those that previously excluded certain items.

Texas Franchise Tax Compliance Checklist

Annual Compliance Checklist — Texas LLC Franchise Tax
Calculate your annualized total revenue vs the current threshold
For 2026: compare to $2.65M. For 2025: compare to $2.47M. Annualize if your accounting period was less than 12 months.
Required
File PIR by May 15 — even if your LLC owed $0 in franchise tax
Use the Texas Comptroller's Webfile system. Free to file. Confirm your registered agent details are current before submitting.
Required
If above threshold: run all 4 margin calculation methods
Always use the method producing the lowest taxable margin. Never default to one method without running the others. Consider professional tax help if above the threshold.
If Applicable
Use a registered agent service that sends May 15 reminders
A quality registered agent service includes compliance deadline alerts. This single feature prevents the most common and most costly Texas LLC mistake.
Strongly Recommended
Northwest Registered Agent — Fast Access to State Correspondence
Northwest scans and uploads state and legal documents received at your registered office, giving you faster access to important compliance correspondence, plus general compliance reminders. It does not prepare or file your Texas franchise tax return unless you purchase a separate filing service. $125/yr renewal after the first year.
3M+ businesses served
Get Started →

For registered agent comparison with compliance features, see our best registered agent services guide →

Texas Franchise Tax — Bottom Line

Every Texas LLC franchise tax obligation exists even if you owe $0. The 2026 no-tax-due threshold is $2.65 million in annualized total revenue — most small LLCs fall below it and pay nothing. But the PIR must be filed by May 15 every year. The 2024 change that eliminated the No Tax Due Report means you now file the PIR directly — no separate tax form needed if under the threshold. the state franchise tax rate of 0.75% is unchanged for 2024, 2025, and 2026. Miss May 15 and the $50 penalty hits immediately — then risks escalate fast toward forfeiture.

Texas annual report (PIR) guide →  |  Estimate your costs →  |  Texas LLC hub →

LLC Taxes in Other States
Florida
No franchise tax
Annual report: $138/yr
Wyoming
No income/franchise tax
~$62/yr annual report
Delaware
$400/yr franchise tax
All LLCs — every year

Frequently Asked Questions

Do Texas LLCs pay franchise tax?

Yes — all Texas LLCs are subject to the Texas franchise tax for LLC entities. However, most small LLCs owe $0 because their revenue falls below the no-tax-due threshold ($2.65M for the 2026 report year). Even when no tax is owed, every LLC must file a Public Information Report (PIR) by May 15 annually. Filing is mandatory; paying is conditional on revenue.

What is the state franchise tax threshold for 2026?

the state franchise tax threshold for 2026 is $2,650,000 in annualized total revenue. This increased from $2,470,000 for the 2024 and 2025 report years (after Texas SB 3 more than doubled the threshold in 2023). LLCs at or below $2.65M in annualized total revenue owe $0 in franchise tax for the 2026 report year.

What was the state franchise tax threshold in 2024?

the state franchise tax no-tax-due threshold for 2024 was $2,470,000 — a massive jump from $1,230,000 in 2022–2023. This change came from Texas Senate Bill 3 (2023), which more than doubled the threshold effective January 1, 2024. The same $2.47M threshold applied to 2025 reports; it increased to $2.65M for 2026.

What is the Texas franchise tax rate for LLCs?

The standard Texas LLC franchise tax rate is 0.75% on taxable margin. Retail and wholesale businesses qualify for a reduced rate of 0.375%. The EZ Computation method applies a rate of 0.331% directly on gross receipts (no deductions). All three rates have remained unchanged for 2024, 2025, and 2026.

When is the Texas franchise tax due date?

the state franchise tax due date is May 15 every year — fixed, not based on your LLC's formation date. For 2026, May 15 falls on a Friday. An extension to November 15 is available if you pay at least 90% of current-year estimated tax (or 100% of prior-year tax) by May 15. The extension covers filing only — tax payment is still due May 15.

Do I need to file a Texas franchise tax report if my LLC made no money?

Yes. Every active Texas LLC must file a PIR by May 15 annually — regardless of revenue, profit, or activity. Zero-income LLCs are below the no-tax-due threshold and owe $0 in franchise tax, but the PIR is still mandatory. Missing it triggers a $50 penalty and can ultimately lead to forfeiture of your LLC's right to do business in Texas.

What is the Texas LLC annual franchise tax report?

The Texas LLC annual franchise tax report is the annual filing submitted to the Texas Comptroller. For LLCs below the $2.65M threshold (2026), it consists of just the PIR — no separate tax form required since the No Tax Due Report was eliminated in 2024. For LLCs above the threshold, it includes a franchise tax report (EZ Computation or Long Form) plus the PIR, due together by May 15.

What are the Texas franchise tax filing requirements for an LLC?

the state franchise tax filing requirements are: (1) file annually by May 15, (2) file via the Texas Comptroller's Webfile system, (3) submit a PIR (Form 05-102) regardless of revenue, (4) submit a franchise tax report (EZ or Long Form) if revenue exceeds the no-tax-due threshold, and (5) use your 11-digit taxpayer number to access Webfile. There is no annual filing fee — filing is free.

What happens if I don't file my Texas franchise tax return?

Missing the May 15 deadline triggers: a $50 late filing penalty immediately (even at $0 tax owed); 5% penalty on unpaid tax within 30 days; 10% penalty + interest after 30 days. Extended non-compliance leads to a Notice of Intent to Forfeit, then forfeiture of your LLC's right to transact business in Texas — with members becoming personally liable for certain entity debts under Texas Tax Code §171.255.

Is the Texas franchise tax the same as an annual report?

Related, but different. Texas doesn't have a traditional annual report filed with the Secretary of State. Instead, the annual compliance obligation is the PIR + franchise tax report filed with the Texas Comptroller by May 15. The PIR is often called Texas's "annual report equivalent" — but it goes to the Comptroller, not the SOS, and it's free to file. See the full Texas annual report guide →

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