Texas Franchise Tax (Margin Tax): Complete Guide
Texas calls it 'franchise tax' but it functions as a gross-margin tax on every entity formed in or doing business in Texas. With a $2.47M no-tax-due threshold for 2024-2025, most small businesses owe nothing — but they still must file the Public Information Report, and missing it forfeits the entity's right to do business in Texas.
Texas franchise tax is a gross-margin tax (not income tax) on entities organized in or doing business in Texas. For reports due in 2024 and 2025, the no-tax-due threshold is $2.47 million in total revenue — meaning most small businesses owe $0 but must still file. Filing the No Tax Due Report (Form 05-163) and Public Information Report (Form 05-102 for corporations / 05-167 for LLCs) is mandatory by May 15. Missing the deadline triggers a $50 penalty plus 5%/10% tax penalty, and eventually forfeiture of the entity's right to transact business in Texas.
Who Owes It
- Every Texas-formed corporation, LLC, LP, LLP, PA, and professional corporation
- Every foreign (out-of-state) entity registered to do business in Texas
- Entities with $2.47M+ in total revenue (2024-2025 threshold) pay actual franchise tax
- Entities under the threshold still must file the No Tax Due Report and Public Information Report
- Sole proprietorships and most general partnerships are exempt
Filing Details
- Due date
- May 15 annually (for prior tax year). First report is due May 15 of the year after the entity was formed or registered.
- Minimum tax
- $0 if revenue is under $2.47M (2024-2025 threshold) — but the No Tax Due Report and PIR are still required.
- Maximum / rate
- 0.375% of taxable margin for wholesalers/retailers; 0.75% for other entities; 0.331% E-Z computation for entities under $20M revenue.
- How to file
- Texas Comptroller WebFile at comptroller.texas.gov.
- Payee
- Texas Comptroller of Public Accounts
Most Common Problems
The patterns we see most often when clients come to us with Texas Franchise Tax (Margin Tax) problems.
1. Your entity was forfeited for missing the Public Information Report
Even with $0 franchise tax owed, missing the Public Information Report leads the Comptroller to forfeit the entity's right to transact business in Texas. A forfeited entity cannot sue, defend lawsuits, sign contracts, or close transactions. Directors and officers can be held personally liable for debts incurred while the entity is forfeited (Tex. Tax Code § 171.255).
2. You're a remote/out-of-state business and didn't know Texas requires franchise tax filing
Texas considers entities to be 'doing business' in Texas if they have $500,000+ in Texas-source receipts (economic nexus standard adopted post-Wayfair). Many e-commerce and SaaS sellers discover years of unfiled Texas franchise tax during M&A diligence.
3. Personal liability under § 171.255
If a Texas corporation or LLC has its right to transact business forfeited, the directors and officers become personally liable for any debt the entity incurs after the forfeiture date — including unpaid franchise tax, vendor debts, and contractual obligations.
How to Fix It: Step-by-Step Resolution
The same playbook our attorneys use when a new client walks in with Texas Franchise Tax (Margin Tax) delinquency.
- 1
Check the entity's status with the Texas Comptroller and Secretary of State
Use the Comptroller's Taxable Entity Search at comptroller.texas.gov and the SOS SOSDirect search. Confirm whether the entity is Active, Not in Good Standing, or Forfeited.
- 2
File every missing No Tax Due Report and Public Information Report
File Form 05-163 (No Tax Due Report) and Form 05-102 or 05-167 (Public Information Report) for every delinquent year via WebFile. If revenue exceeded $2.47M in any year, file the long-form franchise tax report instead.
- 3
Pay any franchise tax, penalties, and interest owed
Late-file penalty: $50 flat. Late-pay penalty: 5% of tax due (10% if more than 30 days late). Interest: rate set annually by Comptroller. Payment via WebFile or check with voucher.
- 4
Request a Tax Clearance Letter and file for reinstatement
Submit Form 05-377 (Tax Clearance Letter Request) to the Comptroller. Once issued (usually 4-6 weeks), file Form 801 (Application for Reinstatement) with the Secretary of State along with the SOS reinstatement fee.
- 5
Address parallel federal corporate non-filing
Multi-year Texas franchise tax delinquency almost always pairs with multi-year federal Form 1120/1120-S non-filing. Resolve both in parallel.
Penalties & Consequences
$50 late-file penalty per report. 5% late-pay penalty (10% if over 30 days late). Interest at the rate set annually by the Comptroller. Forfeiture of the entity's right to do business in Texas after extended non-filing. Personal liability for officers and directors under Tex. Tax Code § 171.255 for debts incurred during forfeiture.
Why a Tax Attorney (Not Just Your Registered Agent)
Texas franchise tax forfeiture exposes officers and directors to personal liability for corporate debts under § 171.255. A tax attorney can sequence the reinstatement to minimize that liability window, coordinate with federal IRS corporate-tax resolution, and address any officer-level personal exposure before reinstatement.
Frequently Asked Questions
Do I have to file a Texas franchise tax return if I owe $0?+
Yes. Even entities under the $2.47 million no-tax-due threshold must file the No Tax Due Report (Form 05-163) and the Public Information Report (Form 05-102 or 05-167) annually by May 15. Failing to file forfeits the entity's right to do business in Texas.
What is the Texas franchise tax 'no tax due threshold'?+
For reports due in 2024 and 2025, an entity with total revenue of $2,470,000 or less owes no franchise tax. The threshold is indexed and the Comptroller publishes it annually. Filing is still required.
What does it mean if my Texas entity is 'forfeited'?+
Forfeiture means the entity has lost its right to transact business in Texas. It cannot sue, defend lawsuits, sign enforceable contracts, or close real-estate or M&A transactions. Worse, officers and directors are personally liable for debts the entity incurs after the forfeiture date under § 171.255.
How do I reinstate a forfeited Texas entity?+
File every missing No Tax Due Report and Public Information Report, pay all tax/penalty/interest, request a Tax Clearance Letter (Form 05-377) from the Comptroller, then file Application for Reinstatement (Form 801) with the Secretary of State. Total reinstatement typically takes 6-10 weeks.
Related Services
More State Business Tax Guides
Delaware Franchise Tax & Annual Report
Every Delaware corporation — even ones that never did business in Delaware — owes the Delaware annual franchise tax (often called DE franchise tax) plus an annual report. Miss it and you face penalties, interest, void status, and eventually personal liability for officers and directors.
California Franchise Tax & Annual LLC Fee
California's $800 minimum franchise tax hits every LLC, corporation, and LP doing business in California — even if you lost money, even if you only have one employee in California, even if you're a foreign entity that registered and forgot. Plus an additional gross-receipts-based LLC fee on top.
New York Corporate Franchise Tax (Article 9-A)
New York's corporate franchise tax (Article 9-A) hits every C-corp and S-corp doing business in New York with a tax based on the higher of: business income, business capital, or a fixed minimum dollar amount ranging from $25 to $200,000 based on receipts. New York City adds its own General Corporation Tax on top.
New Jersey Corporation Business Tax (CBT)
New Jersey's Corporation Business Tax (CBT) hits every corporation doing business in New Jersey at rates from 6.5% to 9% on allocated net income, with a minimum CBT ranging from $500 to $2,000. New Jersey LLCs taxed as corporations are subject too — and the state aggressively enforces nexus on out-of-state sellers.</
Tax Attorney | Civil and Criminal Tax Controversy & Litigation Specialist
Gregory McCauley Jr. is an experienced tax attorney who has personally represented more than 1,000 clients in matters ranging from civil tax controversy and IRS examinations to criminal tax defense, U.S. Tax Court litigation, and complex business disputes. His practice is built on a foundation his clients describe as rare in the tax resolution industry: genuine attention to detail, direct attorney access, and a willingness to litigate when the IRS refuses to be reasonable.
Don’t Overpay Texas. Don’t Wait for Forfeiture.
Our tax attorneys resolve Texas Franchise Tax (Margin Tax) delinquency, federal corporate tax exposure, and officer personal liability in one coordinated strategy.
Call (877) 829-5267