Introduction
Texas doesn’t tax personal income—but that doesn’t mean you owe nothing. Founders often confuse “no state income tax” with “no tax obligations.” In 2025, Texas-based entrepreneurs still face franchise tax, sales tax, local property taxes, and various regulatory fees.
Here’s what you need to know to stay compliant while leveraging the Lone Star State’s tax-friendly appeal.
Texas Tax Code & IRC References
- Texas Tax Code §171 – Franchise Tax
- Texas Tax Code §151 – Sales & Use Tax
- Texas Property Tax Code – Local business property taxation
- IRC §61 – Gross income definition (federal)
- IRS Form 1040 – Personal income tax return (federal only)
What Texas Doesn’t Tax (for Individuals)
- W-2 wages
- Capital gains
- Dividends and interest
- Business distributions (e.g., S Corp, LLC)
Texas does not require individuals to file a state income tax return. However, if you’re a founder, your business structure determines your exposure to other taxes.
What Founders Still Owe in Texas (2025)
- Franchise Tax (Margin Tax)
- Applies to LLCs, S Corps, C Corps, and limited partnerships
- Calculated on gross receipts minus COGS, compensation, or 30% standard deduction
- No-tax-due threshold: $2.47 million in annual revenue
- Sales & Use Tax
- 6.25% state rate + up to 2% local
- Applies to SaaS, digital goods, and tangible personal property
- Use tax owed on out-of-state purchases used in Texas
- Local Property Tax
- Taxed on business personal property like computers, inventory, and furniture
- Filed annually with county appraisal district
- Federal Income Tax
- All income, including business earnings, is reported on IRS Form 1040
- LLC income flows through; C-Corp income taxed separately
Example: Founder of a Texas-Based SaaS Startup
Example: Jason, a Texas resident, owns a profitable LLC with $3M in revenue. Here’s what he pays:
- $0 personal income tax in Texas
- Franchise tax on gross receipts above $2.47M
- Sales tax on B2C software subscriptions
- Business personal property tax on company laptops and desks
- Federal income tax on net LLC income (via Form 1040 Schedule C or K-1)
Step-by-Step Compliance for Texas Founders (2025)
- Check your gross revenue
If >$2.47M, file TX Franchise Tax Report using Webfile or Form 05-158. - Register for sales tax if selling taxable products or SaaS
Use Texas Comptroller eSystems portal. - File business property rendition by April 15
Submit to county appraisal district (Form 50-144). - Track all business income for federal return
Report via Form 1040 + Schedule C/K-1 depending on structure. - Renew all local and regulatory licenses annually
Check with city/county for occupation taxes or permits.
Conclusion
Texas offers a powerful tax advantage for individuals, but founders must still navigate a web of business-level taxes and federal obligations.
Know your structure. Plan ahead. And remember: “No income tax” doesn’t mean “no taxes at all.”
Call to Action
Are you a founder operating in Texas?
Book a consultation with Anshul Goyal, CPA, EA, FCA to:
- Navigate Texas Franchise and Sales Tax compliance
- Understand your federal filing obligations
- Strategize entity structures for tax efficiency
Texas may not tax your income—but mistakes can still cost you. Get compliant, stay profitable.
https://calendly.com/anshulcpa/
About Our CPA
Anshul Goyal, CPA, EA, FCA
Anshul brings 15+ years of U.S. and international tax experience. He specializes in helping online sellers, foreign founders, and U.S. residents with IRS and multi-state compliance. Known for his deep knowledge in Shopify and Amazon seller tax strategy, Anshul has helped hundreds of entrepreneurs minimize taxes and scale legally.
Disclaimer
This blog is for informational purposes only and does not constitute legal or tax advice. Please consult a qualified tax professional regarding your individual tax situation.
Top 5 High-Searched FAQs (2025)
1. Does Texas have personal income tax for founders?
No, Texas does not tax personal income.
2. What taxes do Texas-based LLCs owe?
Franchise tax, sales/use tax, and property tax if applicable.
3. Is SaaS taxable in Texas?
Yes, most SaaS offerings are subject to sales tax.
4. Do I need to file anything if under the no-tax-due threshold?
Yes, you must still file a no-tax-due report.
5. What’s the deadline for franchise tax filing in Texas?
Typically May 15 each year.