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Tag: Form 05-158-A
Texas Gross Receipts Tax Myths (Hint: It’s the Franchise Tax)
Many founders and out-of-state business owners believe Texas has a gross-receipts tax. While technically false, this myth exists because the Texas Franchise Tax – also known as the margin tax – functions similarly by taxing total revenue with limited deductions. Let’s debunk this and explain what Texas actually taxes in 2025. Is There a Gross-Receipts […]
Texas Franchise Tax vs Sales Tax: Which One Hits You First?
Starting a business in Texas? You’ll likely face two major state-level taxes: the Franchise Tax and the Sales and Use Tax. But which one applies first? Which one costs more? This guide will break down how each tax works, when it kicks in, and what startups, e-commerce sellers, and service providers need to prioritize in […]
Asset vs Stock Sale Exit: Margin-Tax on Built-In Gain in Texas
Whether you sell your business via an asset sale or a stock sale, Texas may tax the gain , but how and when depends on the deal structure. Unlike federal capital gains, Texas imposes a Franchise (margin) tax on certain receipts, including built-in gain from asset sales. Here’s how to structure exits in 2025 to […]
Texas Unitary Group Rules Explained
If your business operates multiple entities under common control, Texas may require you to file a combined Franchise Tax Report as a unitary group. Ignoring this rule could lead to underreporting, penalties, and even forfeiture. Here’s what every holding company, affiliate group, and multi-LLC structure must know in 2025. What Is a Unitary Group? Under […]
Arm’s-Length for Margin Tax Purposes in Texas
If you operate multiple business entities , especially across states or internationally , and charge management fees between them, Texas wants to ensure these are arm’s-length and not being used to reduce Franchise Tax improperly. Here’s how to structure intercompany fees to withstand scrutiny from the Texas Comptroller in 2025. What Are Intercompany Management Fees? […]
Cost of Goods Sold for Software
Texas allows businesses to reduce their Franchise Tax by deducting Cost of Goods Sold (COGS) , but what counts as COGS for software developers, SaaS firms, and digital product sellers? The answer lies in Texas Administrative Code Rule 3.588, which offers specific guidance for tech-based companies. Here’s how to apply it in 2025. What Is […]
Compensation Deduction Cap ($370K) for 2025
Texas Franchise Tax law allows a deduction for compensation paid to employees , but it’s capped. For 2025, the maximum deduction per person is $370,000. For founders and key employees, smart planning around this cap can reduce your Texas Franchise Tax without triggering IRS or state-level scrutiny. What Is the Compensation Deduction Cap? Under Texas […]