Texas LLC Franchise Tax

Texas Franchise Tax Returns are only required for larger businesses with revenue in the millions.

Calculating how much your LLC owes can be complex, and it varies widely between businesses. This is because there are different calculation methods and tax rates depending on your business activities and industry.

For these reasons, this article is just an overview of Texas Franchise Tax, and we recommend hiring an accountant.

Does my LLC need to file a Franchise Tax Return?

Whether or not you’re required to file a Franchise Tax Return depends on how much your Texas LLC makes per year.

(As per the Texas Tax Code: Section 171.006, this number is adjusted every 2 years.)

And here are the latest numbers:

If your LLC makes more than more than $2.47 million per year, then your LLC needs to:

• file a Franchise Tax Return,
• pay any applicable Franchise Taxes, and
• file a Public Information Report.

If your LLC makes less than $2.47 million per year, then your LLC:

• doesn’t need to file a Franchise Tax Return,
• doesn’t need to pay any Franchise Taxes, but
• you still need to file a Public Information Report.

When are Franchise Tax Returns due?

Your Texas LLC Franchise Tax Return (and your Public Information Report) are due by May 15th every year.

When is my first Texas Franchise Tax Return due?

Your first Franchise Tax Return is due the year after your LLC was approved.

For example: If your Texas LLC was approved in February 2025, then your first Franchise Tax Return is due by May 15th 2026.

Reminder notices for Texas Franchise Tax

Reminder notices are sent out between January and March.

If the Texas Comptroller has an email on file for your LLC, you may receive an email reminder instead of a physical mail reminder.

If the Texas Comptroller doesn’t have an email on file for your LLC, then you’ll get a Franchise Tax “Reminder Notice” mailed to your LLC.

Are there penalties for not filing a Texas Franchise Tax Return?

Yes, if your Texas LLC fails to file a Franchise Tax Return:

• the Comptroller has the power to forfeit the right of your LLC to transact business in this state (as per Section 171.251 and Section 171.252 of the Texas Tax Code),
• each LLC Member and/or Manager may become personally liable for the LLC’s debts and taxes owed to the state (as per Section 171.255),
• your LLC will be charged with penalties and interest,
• your LLC can be denied the right to sue or defend itself in a Texas court,
• your LLC won’t be awarded a contract by any state agency, and
• your LLC won’t be granted a permit or license from any state agency.

For more information, please see Texas Comptroller: Penalties for past due franchise taxes.

What happens if I file my Texas Franchise Tax Return late?

Texas law requires that the Comptroller’s Office gives your LLC at least 45 days grace period before forfeiting your LLC’s right to do business.

That 45-day grace period starts after you receive the “Notice of Intent to Forfeit Right to Transact Business“.

If your LLC doesn’t take care of its Franchise Tax obligation within that 45-day grace period, your LLC will forfeit its right to do business in the state, and the above penalties will apply.

How much is the Texas Franchise Tax for LLCs?

The amount of tax an LLC owes is based on the LLC’s annualized total revenue multiplied by a specific tax rate. This tax rate depends on the type of business and/or industry.

As per the Texas Tax Code: Section 171.002, the Franchise Tax rate is either:

• 0.375% of taxable margin for wholesalers and retailers,
• 0.75% of taxable margin for all other companies, or
• 0.331% of total revenue (for companies using the EZ computation method)

Pro Tip: You’ll need your LLC’s SIC code and NAICS code when filing your Franchise Tax Return. These numbers help identify your LLC’s industry and business activity. If you leave your SIC code blank on the filing, you won’t get a reduced tax rate of 0.375%. Instead, you’ll be charged the 0.75% rate. This is especially important for retailers and wholesalers.

Complete the Franchise Tax Questionnaire

In order to complete your Franchise Tax Return, you’ll need to get an XT Number (via the Texas Franchise Tax Questionnaire).

Once completed, the state will send you an Annual Report Reminder Notice. This notice will arrive 6 weeks before your Franchise Tax Return is due.

At the top of the Reminder Notice, you’ll see your XT Number (which is one of your LLC’s Texas WebFile Numbers.)

However, if you need your XT Number sooner, you can call the Comptroller’s office.

Our Recommendation

We’re unable to walk you through filing the Franchise Tax Return due to its complexity.

For that reason, we recommend hiring an accountant to file your LLC’s Franchise Tax Return.

They’ll calculate your LLC’s:

• taxable margin
• annualized total revenue
• percent of revenue apportioned to Texas
• Cost of Goods Sold (COGS) deductions
• Combined Reporting requirements (if applicable)
• Tiered Partnership election (if applicable)

Then, tax preparers will use one of the following forms based on your LLC’s annualized total revenue:

• Long Form
• EZ Computation Form

Texas Comptroller Contact Info

If you have any questions about Texas Franchise Tax, you can contact the Texas Comptroller at 512-463-4402.

Their office hours are Monday through Friday, 8am to 5pm Central Time.

Texas Franchise Tax FAQs

Matt Horwitz

Founder & Educator, LLC University®

Matt Horwitz is the leading expert on LLC education, and has been teaching for 15 years. He founded LLC University in 2010 after realizing people needed simple and actionable instructions to start an LLC. He's cited by Entrepreneur Magazine, Yahoo Finance, and the US Chamber of Commerce, and was featured by CNBC and InventRight.
 
Matt holds a Bachelor's Degree in business from Drexel University with a concentration in business law. He performs extensive research and analysis to convert state laws into simple instructions anyone can follow to form their LLC - all for free! Read more about Matt Horwitz and LLC University.