What is the Texas franchise tax threshold and do I still need to file if I'm under it?
The Texas franchise tax no-tax-due threshold is currently $2.47 million in annualized total revenue. This was doubled from $1.23 million starting with reports due in 2024 after the legislature passed HB 1195. If your business’s total revenue falls below that amount, you won’t owe any franchise tax. But you still have to file.
This is where a lot of Texas business owners get tripped up. They hear “no tax due” and assume that means they don’t need to do anything. That’s not how it works. Every LLC, corporation, limited partnership, and professional association doing business in Texas must file a franchise tax report each year by May 15th. If you’re under the threshold, you file what’s called the No Tax Due Report (Form 05-163). It’s a short form, but it has to be submitted.
The consequences of not filing are more serious than most people realize. The Texas Comptroller can forfeit your entity’s right to transact business in the state. Once that happens, your business loses its good standing status. That affects your ability to enter contracts, obtain financing, renew licenses, and more. Reinstating a forfeited entity means paying penalties, filing all missing reports, and sometimes going through additional paperwork with the Secretary of State. It creates a mess that costs more time and money than just filing the report would have.
Total revenue for franchise tax purposes is not the same as gross income on your federal return. Texas uses a specific calculation based on your federal return that starts with total revenue and allows certain exclusions like cost of goods sold or compensation. The rules depend on whether you file as a partnership, S-corp, or C-corp at the federal level, so the number that matters isn’t always obvious.
Sole proprietorships and general partnerships where all partners are natural persons (individuals) are generally not subject to the franchise tax. If your business is structured as an LLC, though, even a single-member LLC, you’re required to file regardless of revenue.
One thing worth noting is that even if you owe no tax, failing to file can also delay or complicate your business tax return process. CPAs and tax preparers sometimes discover missing franchise tax reports when working on federal returns, and sorting it out at that point adds unnecessary stress during an already busy season.
If you’ve missed franchise tax filings in previous years, the best move is to get caught up as soon as possible. The longer you wait, the more likely the Comptroller’s office is to take action. A Houston bookkeeping partner who understands Texas requirements can help you file what’s missing, confirm your entity is in good standing, and set up a reminder system so you never miss the May 15th deadline again.
The bottom line is simple. Under the threshold means you don’t owe money. It does not mean you don’t owe a filing. Treat the No Tax Due Report like any other required filing and get it submitted on time every year.
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