Texas Franchise Tax: What Founders Must File by May 15v

Introduction

Texas imposes a franchise tax on most entities “doing business” in the state. Under Texas Tax Code §171.002, any corporation, LLC, or other taxable entity with revenue above the no-tax-due threshold must file an annual franchise tax report and Public Information Report by May 15, 2025. Founders should understand what forms are required, how to calculate their liability, and the steps to stay in good standing.

Applicable Tax Authority & Code References

• The Texas franchise tax is imposed under Texas Tax Code Chapter 171 as a privilege tax on entities formed or doing business in Texas.
• Privilege periods and annual filing obligations are defined in Tex. Tax Code § 171.151.
• For report years on or after January 1, 2024, the “no-tax-due” threshold is $2.47 million of annualized total revenue; entities at or below this threshold are exempt from tax but still must file information reports.

Forms to File by May 15, 2025

1. Franchise Tax Report (Long-Form) – Form 05-158-A/B 
2. Public Information Report – Form 05-102 (or, for ownership disclosures, Form 05-167) 
3. Payment Voucher – Form 05-170 (if any tax is due) 
4. Extension Request – Form 05-164 (to extend filing to November 15) 

Due Date Reminder:
All reports, payments, Public Information or Ownership Reports, and extension requests must be filed or postmarked by May 15, 2025 (or the next business day if May 15 falls on a weekend/holiday) .

Detailed Example

Scenario:
TechCo, LLC, a Texas-registered SaaS startup, has 2024 total revenue of $3,500,000 and opts to compute its margin using the Cost-of-Goods-Sold deduction.

1. Total Revenue: $3,500,000
2. COGS Deduction: $1,400,000
3. Apportioned Margin: ($3,500,000 − $1,400,000) × apportionment factor (100%) = $2,100,000
4. Tax Rate: 0.375% (since margin > $1,230,000)
5. Franchise Tax Due: $2,100,000 × 0.00375 = $7,875

TechCo will complete Form 05-158, attach Form 05-170 with a payment of $7,875, and file Form 05-102 to satisfy its Public Information reporting requirement.

Step-by-Step Compliance Guide

1. Gather Information
   • Use your federal return (Form 1120, 1120-S or 1065) to determine total revenue.
2. Choose Margin Method
   • Options: total revenue × 0.75; or total revenue − COGS; or total revenue − compensation; or EZ Computation (0.331%).
3. Calculate Tax
   • Apply the applicable tax rate (0.375% standard or 0.75% for wholesale/retail) to your margin.
4. Complete Forms
   • Fill out Form 05-158-A/B and prepare Form 05-102 (or 05-167 if required).
5. File Electronically or by Mail
   • Use WebFile for fastest processing or mail to the Texas Comptroller.
6. Pay or Extend
   • If tax due: attach Form 05-170 and payment.
   • To extend: submit Form 05-164 by May 15 (no fee) to push deadline to November 15.
7. Confirm Compliance
   • Retain your WebFile confirmation or USPS certified mail receipt.

Conclusion

Founders must ensure all Texas franchise tax reports, Public Information Reports, payments, or extension requests are filed by May 15, 2025, to avoid penalties and maintain good standing with the Texas Comptroller’s office. Early preparation—including selecting your margin method and gathering federal revenue data—will streamline compliance and reduce late-filing risk.

Schedule a Meeting to discuss your Texas franchise tax obligations in detail.

About Our CPA
Anshul Goyal, CPA, EA, FCA, is a licensed Certified Public Accountant in the United States and admitted to practice before the IRS as an Enrolled Agent. He represents clients in tax litigation, specializes in cross-border tax compliance for U.S. businesses and Indian nationals residing in the U.S., and delivers tailored tax planning strategies.

Disclaimer
This blog is provided for general informational purposes only and does not constitute tax, legal, or accounting advice. You should consult a qualified professional regarding your specific situation before taking any action. Anshul Goyal, CPA, EA, FCA, and Kewal Krishan & Co. disclaim any liability for actions taken based on this information.

FAQs

1. What entities are subject to Texas franchise tax?
All corporations, LLCs, professional associations, and partnerships formed or doing business in Texas, except passive entities and REITs under the no-tax-due threshold.

2. What is the 2025 no-tax-due threshold?
Annualized total revenue of $2.47 million or less; such entities still file a Public Information Report but owe no tax.

3. How do I request an extension?
File Form 05-164 (Extension Request) by May 15, with no extra fee, to extend filing to November 15.

4. Are estimated tax payments required?
No. Texas franchise tax is due annually; no quarterly estimates are required.

5. What penalties apply for late filing/payment?
Interest accrues at 1% per month; penalties start at 5% of tax due if filed 30 days late and increase up to 10%.