The Texas franchise tax is a privilege tax on each taxable entity formed or organized in Texas or doing business in Texas. For 2026 and 2027 reports, an entity with revenue at or below $2,650,000 owes no tax, but it still has to file a report every year.
All of this comes from the Texas Comptroller's franchise tax pages, checked in October 2026. The bit that catches small business owners isn't the rate, it's the filing: "no tax due" doesn't mean "nothing to file", and the Comptroller is sending forfeiture notices to entities that missed that.
Franchise tax rates and thresholds for 2026 and 2027
| Item | Amount (as of October 2026) |
|---|---|
| No tax due threshold | $2,650,000 |
| Tax rate, retail or wholesale | 0.375% |
| Tax rate, other businesses | 0.75% |
| Compensation deduction limit | $480,000 |
| EZ computation total revenue threshold | $20 million |
| EZ computation rate | 0.331% |
The Comptroller is clear that rates, thresholds and deduction limits vary by report year, so use the figures for the year you're filing. For the reports before 2026, the no tax due threshold was $2,470,000.
Who has to file
Every taxable entity formed or organized in Texas, or doing business in Texas, is subject to the tax. That includes Texas LLCs, so if you've formed one, this is on your list every year. My guide to forming a Texas LLC covers the set-up side.
If your revenue is at or below the no tax due threshold, you don't pay tax, but you do file. The Comptroller's notices put it simply: if you're at or below the threshold, file your Public Information Report or Ownership Report. Skipping that is how entities end up with forfeiture notices.
The notices going out in 2026
| Notice | What it means | What to do |
|---|---|---|
| Form 05-211, Notice of Intent to Forfeit Right to Transact Business | You didn't meet the 2026 filing requirements | File and pay the 2026 report with late penalties and interest, or file the 2026 information report if you're at or below the threshold |
| Form 05-213, Notice of Forfeiture of Registration | You didn't meet the 2025 filing requirements | File the 2025 report and pay any tax, penalty and interest, or file the 2025 information report if you're at or below the threshold |
The Comptroller also sends courtesy "File Now" emails before some statutory notices go out. Treat those as your last friendly warning.
Penalties and interest
- A $50 penalty on each report filed after the due date.
- A five percent penalty if tax is paid 1 to 30 days late.
- A ten percent penalty if tax is paid more than 30 days late.
- Interest on past due tax starting 61 days after the due date.
That $50 applies to each late report, even when no tax is due. It's the cheapest bill you'll ever avoid by filing on time.
How to get an extension
- Request it on or before the original due date, online through Webfile or with Form 05-164, Texas Franchise Tax Extension Request.
- Pay enough with the request: generally at least ninety percent of the tax due with this year's report, or one hundred percent of the tax paid in the prior year.
- For entities not paying by electronic funds transfer, the extended report is due on or before Nov. 15.
- If you paid $10,000 or more in franchise tax in the previous state fiscal year, you must pay by electronic funds transfer, and a second extension runs to Aug. 15 before the Nov. 15 date.
- New entities can't use the prior year payment option for their first annual report.
If a due date falls on a weekend or legal holiday, the next working day becomes the due date.
Bigger payers and final reports
Entities that paid $500,000 or more in franchise tax in the previous state fiscal year have to pay through TEXNET, and they request an extension by making a timely TEXNET payment rather than filing Form 05-164. For a final report, the extended due date is 45 days after the original due date, and the extension payment still has to be at least ninety percent of the tax that will be due.
If you've not filed all required reports, the Comptroller may estimate what you owe. Paying that estimate doesn't fix the delinquency: you still have to file the missing reports.
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Closing or leaving Texas
Before you terminate, convert, merge or withdraw a registration, you need a Certificate of Account Status. A Texas entity has to file its final report and pay any tax due in the year it plans to terminate. An out-of-state entity ending its nexus in Texas has to file its final report within 60 days of ceasing to have nexus.
What a small Texas business should do
- Diary the report every year, even if you're far below the threshold.
- File the Public Information Report or Ownership Report if you're at or below $2,650,000.
- Keep your registered agent and address details current so notices reach you.
- Check the rate that applies: 0.375% for retail or wholesale, 0.75% for other businesses.
- Ask an accountant about the EZ computation if your revenue is under $20 million.
My verdict
Most small Texas businesses will never pay a cent of franchise tax, because they're under the $2,650,000 threshold. But every one of them has to file. Put it in the calendar the day you form your entity, file the information report every year, and you'll never see a forfeiture notice.
Frequently asked questions
What is the Texas franchise tax?
It's a privilege tax on each taxable entity formed or organized in Texas or doing business in Texas, administered by the Texas Comptroller.
What is the no tax due threshold for Texas franchise tax?
It's $2,650,000 for 2026 and 2027 reports, as of October 2026.
Does an entity that owes no franchise tax still file?
Yes. Entities at or below the threshold still file a Public Information Report or Ownership Report.
What are the Texas franchise tax rates?
0.375% for retail or wholesale businesses and 0.75% for other businesses, with an EZ computation rate of 0.331% for qualifying entities.
Can I get an extension on Texas franchise tax?
Yes. Request it by the original due date through Webfile or Form 05-164 with the required payment, and the report moves to Nov. 15 for entities not paying by electronic funds transfer.
What's the penalty for filing the Texas franchise tax report late?
A $50 penalty applies to each report filed after the due date, plus penalties on late tax and interest from 61 days after the due date.
