Texas franchise tax calculator
Texas does not tax corporate income — it taxes margin. The calculation is a set of three subtractions and the least of the results wins, which is why two businesses with the same revenue can owe very different amounts.
For 2026 reports, total revenue at or below $2,650,000 means no franchise tax is due — you file the No Tax Due Report. Above it, the rate is 0.375% for retail and wholesale, 0.75% for everything else, applied to the lowest of the three margins.
The three margins, and why the smallest wins
Taxable margin is the lowest of: total revenue minus cost of goods sold; total revenue minus compensation; or 70% of total revenue. The 70% floor exists so that a business with almost no deductible cost cannot report near-zero margin. In the calculator above, the compensation subtraction usually wins for service companies and the COGS subtraction usually wins for inventory businesses.
| Item | Amount |
|---|---|
| No Tax Due Threshold | $2,650,000 |
| Tax rate — retail or wholesale | 0.375% |
| Tax rate — other than retail or wholesale | 0.75% |
| Compensation deduction limit | $480,000 |
| EZ Computation total revenue threshold | $20 million |
| EZ Computation rate | 0.331% |
Who files, and who files nothing
The franchise tax is a privilege tax on the right to do business in Texas. Corporations, limited liability companies, partnerships, trusts and associations generally owe a report, including in years when no tax is due. Sole proprietorships and general partnerships owned entirely by natural persons are not taxable entities, and some passive entities are exempt.
Common questions
What is the franchise tax due date?
May 15. Reports are due for the accounting period that ends in the prior calendar year — a calendar-year taxpayer files the 2026 report by May 15, 2026. An extension of time to file does not extend the time to pay.
Is the EZ computation always cheaper?
No. It caps the bill at 0.331% of total revenue, so it helps when margin is high relative to revenue. When margin is already small, the standard computation produces the lower number and the EZ election, once made, carries lock-in conditions.
Does the $2,650,000 threshold mean I am exempt?
No — it means no tax is due. The entity is still a taxable entity, still files annually, and still owes the tax if revenue rises above the threshold in a later period.