Texas business taxes, explained for small business owners

This page is general information about Texas business taxes. It does not give advice for your business. The rules and amounts below were checked against the official pages on October 21, 2026. Tax years are named wherever a number or date can change.

Which Texas taxes can a small business face?

A Texas business can face four groups of taxes: franchise tax, sales and use tax, property tax, and payroll taxes. Texas has no state income tax, according to the Texas Comptroller. That fact does not mean Texas businesses pay little tax. It means the taxes arrive in other forms.

Each tax has its own agency, form and schedule. That is the main source of missed filings. The table gives the overview.

The rest of this page takes each one in turn. Your entity type shapes how several of them apply.

Who has to file the Texas franchise tax report?

Most entities formed in Texas or doing business in Texas must file it. The Comptroller calls the franchise tax “a privilege tax imposed on each taxable entity formed or organized in Texas or doing business in Texas.” LLCs, corporations and most partnerships are taxable entities.

Sole proprietorships are not subject to the tax. The Comptroller’s overview lists “sole proprietorships (except for single member LLCs)” as not subject. A single member LLC is therefore a taxable entity, even if it files like a sole proprietor for federal tax.

The annual report is due May 15. If that date falls on a weekend or holiday, it moves to the next business day. In 2027, May 15 is a Saturday, so the due date moves to Monday, May 17. An extension, if requested on time and paid correctly, moves the due date to November 15. The Texas franchise tax guide walks through the steps.

What is the no tax due threshold?

It is a revenue line. If your annualized total revenue is at or below it, you owe no franchise tax. The Comptroller sets it as $2.65 million for the 2026 report, and lists the same figure for 2027 reports.

Since reports due on or after January 1, 2024, a business at or below the threshold does not file a No Tax Due Report. It must still file a Public Information Report or an Ownership Information Report. Many owners miss this step because they think “no tax due” means “no filing.” The glossary explains the no tax due report and the Texas franchise tax.

The rate matters only above the threshold. For 2026 and 2027 reports, the Comptroller lists 0.75 percent for most businesses and 0.375 percent for retail or wholesale. The tax is not charged on all revenue. It is charged on a margin, and the margin rules are in the Comptroller’s instructions.

Do I need a Texas sales tax permit?

If you sell taxable goods or services in Texas, you generally need a permit before you collect the tax. Texas charges a state sales and use tax of 6.25 percent on most retail sales, leases and rentals of goods, plus taxable services. Cities, counties and special districts can add up to 2 percent. The maximum combined rate is 8.25 percent.

The Comptroller tells new permit holders by letter whether they file monthly, quarterly or yearly. Monthly filers report by the 20th of the following month. Quarterly filers report on April 20, July 20, October 20 and January 20. Yearly filers report on January 20.

Local rates depend on the address of the sale. Use the Comptroller’s Sales Tax Rate Locator rather than a rate you saw in an old post. Sales tax is not your money. You collect it for the state. Keep it in a separate account, so the cash is there on the 20th.

How does property tax reach a business?

Texas has no state property tax. The Comptroller says that “Property tax in Texas is locally assessed and locally administered.” The county appraisal district sets a value. Cities, counties, school districts and other taxing units set the rates.

Business owners often forget that equipment is taxable too. The Comptroller states that all real and tangible personal property is taxable in proportion to its appraised value, unless the Texas Constitution allows an exemption. Land, buildings, machinery, furniture and inventory can all appear on the roll.

You can protest a value. In Tarrant County, a protest goes first to the appraisal district and then, if needed, to the Appraisal Review Board. The board is, in the words of the Tarrant Appraisal District, “an independent board of citizens.” The steps and deadlines for Tarrant and Denton counties are in the property tax protest guide. The general deadline to apply for an exemption is before May 1, according to the Comptroller.

What payroll taxes does an employer owe?

An employer owes federal payroll taxes on wages and reports them on a schedule. The IRS states that every employer who pays employees must report wage payments and related employment taxes. The usual forms are the Form 941 each quarter and the Form W-2 each January.

Payroll tax includes income tax withheld from pay, plus Social Security and Medicare tax. The employer pays a share too. Late deposits create penalties fast, so most employers run payroll through a system that tracks deposits. Texas also has a state unemployment tax for employers. Check the Texas Workforce Commission for your account and rate. See the glossary entry on payroll tax for the plain definition.

A contractor is not an employee. Paying a contractor brings a different duty: you may need a Form W-9 on file and a Form 1099-NEC at year end. Calling someone a contractor does not make them one for tax purposes. The facts of the work decide it.

What about hotel occupancy tax and other taxes?

Some businesses owe taxes that do not apply to others. A lodging business, including some short-term rentals, may owe a hotel occupancy tax. Cities can add their own. A business with a vehicle fleet, alcohol sales or fuel sales may owe more again.

Do not assume your business is exempt because it is small. Check the Comptroller’s list of taxes and fees for your industry.

What should I do if I get a notice from the Comptroller?

Read it, find the form number, and answer by the date on it. The Comptroller’s notice page explains each form and how to resolve it. Franchise tax notices matter most because they can lead to the loss of the right to transact business.

Form 05-211 is a Notice of Intent to Forfeit Right to Transact Business. On the Comptroller’s front page, the agency describes it this way: if you receive it, “you failed to meet 2026 franchise tax filing requirements.” If you are at or below the no tax due threshold, the fix may be as simple as filing the information report. The Comptroller also states that there is no $50 penalty for late filing an information report.

Do not ignore a notice, and do not pay a bill you have not checked. Compare the notice with your own records. Our guide on what to do when you get an IRS notice uses the same steps for a federal letter.

Which dates should I put on the calendar?

Put the filing dates on one calendar, and set reminders two weeks early. The table lists the main dates for Texas businesses. It uses the 2026 and 2027 calendars. Dates that fall on a weekend move to the next business day.

Our tax due dates page keeps the federal and Texas dates in one place. The IRS dates for employers, such as Form 941, are on the IRS employment tax due dates page.

How can a CPA help with Texas business taxes?

A CPA can read your records, tell you which taxes apply to your entity, and set up a calendar. Whether a particular task is a fit depends on your business. Wallace CPA, PLLC lists small business accounting and payroll among its services, so the office is the right place to ask what help is on offer for franchise and sales tax reports.

Good records make all of this easier. Keep revenue, sales tax collected and payroll in separate lines. Bring your Secretary of State filing, your EIN letter and last year’s reports to the first meeting.

What records support these taxes?

Records are the proof behind every return. Keep sales records that show taxable and exempt sales, with the resale or exemption certificates you accepted. Keep payroll reports, deposit receipts and filed quarterly forms. Keep your franchise tax report, the confirmation page and the revenue figures you used. Keep property tax notices, value notices and any protest paperwork.

Store them in one place, by tax and by year. A folder per year with a short index sheet is enough. If a notice arrives, you can answer from the file instead of searching. The IRS and the Comptroller each have their own rules on how long to keep records, so check the agency page for each tax. Keep each record at least as long as the agency requires.

What are common mistakes with Texas business taxes?

Four mistakes come up often:

1. Treating “no tax due” as “no filing.” The information report is still required.
2. Spending collected sales tax. That money belongs to the state, so move it to its own account when you collect it.
3. Missing the equipment on the property tax roll, or failing to protest a high value in the short window each spring.
4. Treating a worker as a contractor without checking the facts, which can create payroll tax problems later.

Each of these is easier to fix early than late. A short review once a year, ideally in January, catches most of them.

Next step

If you want help with these filings, read about small business accounting, call Wallace CPA, PLLC at (877) 682-1171, or send a note through the contact form. This page is general information. Talk to a CPA about your own situation before you file or pay anything.