Texas has no corporate income tax, but its franchise (margin) tax reaches out-of-state companies with $500,000 or more of Texas gross receipts, even with no presence there, and the federal protection for sellers of goods doesn’t apply to it. No tax is due when total revenue is $2.65 million or less (2026 and 2027 reports), but you still file a report by May 15.
Texas at a glance
- Business tax: Franchise (margin) tax
- Bright-line economic nexus test: $500,000 in sales
- P.L. 86-272 protection for sellers of goods: Does not apply to this tax
- Notes: No corporate income tax. No franchise tax is due if total revenue is at or below $2.65 million (2026 and 2027 reports).
Checked against state guidance in October 2026. Compare every state
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Check your Texas income tax nexus
See where your company may owe state income, franchise or gross receipts tax, based on each state’s bright-line test, your physical presence and what you sell.
Your activity by state, for the tax year
Standards last reviewed September 2026. Many states have no bright-line test and decide nexus from your activities; local taxes, pass-through entity rules and withholding for remote employees are not covered. Results are estimates for general information only, not legal, tax or financial advice. Confirm them with your own CPA, tax adviser or attorney before making decisions. Using this tool does not create a client relationship with Catching Numbers Inc.
Who has to pay Texas franchise tax?
Corporations, LLCs (including single-member LLCs), S corporations, limited partnerships, professional associations and most other entities with liability protection. Sole proprietors, and general partnerships owned directly by individuals, are not subject to it.
What is the Texas franchise tax nexus threshold?
An out-of-state company has nexus once it has $500,000 or more of gross receipts from business done in Texas in a year, even with no office, staff or property there. A physical presence, such as employees or inventory in Texas, creates nexus whatever your receipts.
Does P.L. 86-272 protect me from Texas franchise tax?
No. Texas rules state that P.L. 86-272 does not apply to the franchise tax, because it is not an income tax. Sellers of physical goods that are protected from income tax in other states can still have Texas franchise tax nexus.
How much is Texas franchise tax?
If your total revenue is $2.65 million or less, no tax is due for the 2026 and 2027 reports. Above that, the rate is 0.75% of your taxable margin, or 0.375% for qualifying retailers and wholesalers. Companies with total revenue up to $20 million can choose the EZ computation instead, at 0.331% of revenue apportioned to Texas.
What do I have to file if I owe nothing?
Texas no longer requires a No Tax Due Report, but corporations and LLCs with nexus must still file a Public Information Report (other entities file an Ownership Information Report) by May 15 each year. Missing it can lead to forfeiture of your right to do business in Texas and personal liability for officers.
Do I also need to collect Texas sales tax?
That is a separate test with the same dollar figure: $500,000 of Texas revenue in the previous 12 months, including marketplace sales. SaaS is taxable in Texas on 80% of the price. See our Texas sales tax nexus guide.
Frequently asked questions
When is the Texas franchise tax report due?
May 15 each year, or the next business day if May 15 falls on a weekend or holiday.
Does a single-member LLC owe Texas franchise tax?
A single-member LLC is a taxable entity for Texas franchise tax, even though it is ignored for federal income tax. It owes tax only if its total revenue is above the no-tax-due threshold, but it still files a Public Information Report if it has nexus.
Does Amazon FBA inventory in Texas create franchise tax nexus?
Yes. Inventory in Texas is a physical presence, so it creates nexus whatever your receipts. You would still owe tax only if your total revenue is above $2.65 million, but you would need to file a report.
Is Texas franchise tax based on profit?
It is based on taxable margin, which you choose as the lowest of revenue minus cost of goods sold, revenue minus compensation, 70% of revenue, or revenue minus $1 million. The EZ computation uses revenue instead.
Selling into Texas from another state?
We keep your books with revenue tracked by state every month, so you and your tax CPA can see where you have nexus and have clean numbers ready for each state return.
General information for remote sellers, checked against state guidance in October 2026. Texas rules change and depend on your facts, so confirm your situation with the state or a tax advisor before registering or filing. We don’t prepare sales or income tax returns.