The Texas franchise tax is a privilege tax imposed on each taxable entity formed or organized in Texas or doing business in Texas.
What does an entity file if it is ending its existence or no longer has nexus?
An entity ending its existence that is not part of a combined group must file
its annual report for the current privilege period,
a final report,
any tax, penalty or interest due,
the appropriate information report, and
Form 05-359, Request for Certificate of Account Status to Terminate a Taxable Entity’s Existence in Texas, if needed to terminate the entity with the Secretary of State.
To determine whether you should file Form 05-102, Texas Franchise Tax Public Information Report (PDF), or Form 05-167, Texas Franchise Tax Ownership Information Report (PDF), see this question below: Which entities file Form 05-102, Texas Franchise Tax Public Information Report(PDF), and which entities file Form 05-167, Texas Franchise Tax Ownership Information Report (PDF)?
If your entity is a member of a combined group, see Rule 3.590(k), Margin: Combined Reporting to determine whether you are required to file a final report in addition to the annual report and appropriate information report.
If tax due is more than $1,000, but annualized total revenue is less than the no tax due threshold amount, do I owe the tax?
A taxable entity will owe no tax based on the following criteria. Note that the reporting requirements are different for each scenario.
If annualized total revenue is less than the no tax due threshold amount, then the taxable entity files Form 05-163, Texas Franchise Tax No Tax Due Report (PDF).
If the tax due is less than $1,000, but annualized total revenue is greater than the no tax due threshold amount, then a No Tax Due Report cannot be filed. A franchise tax report supporting the amount of tax due (Form 05-158, Texas Franchise Tax Report (PDF), or Form 05-169, Texas Franchise Tax EZ Computation Report (PDF)) must be filed. Thus, when the amount of tax due shown on these forms is less than $1,000, the entity files the report but does not owe any tax.
Learn about the no tax due threshold amounts for each report year by reading this question below: How much is the no tax due threshold amount?
Filing for each of these two scenarios must include the appropriate information report (Form 05-102, Texas Franchise Tax Public Information Report (PDF), or Form 05-167, Texas Franchise Tax Ownership Information Report (PDF)) based on entity type. For entities electing to report using the tiered partnership provision, read more about tiered partnership provisions and their no tax due qualification requirements.
What is the E-Z Computation, and who is eligible for it?
For reports originally due on or after Jan. 1, 2016, a taxable entity with annualized total revenue of $20 million or less can elect to compute the franchise tax by multiplying total revenue by the apportionment factor and then multiplying the apportioned total revenue by a tax rate of 0.331 percent.
For reports originally due on or before Dec. 31, 2015, a taxable entity with annualized total revenue of $10 million or less can elect to compute the franchise tax by multiplying total revenue by the apportionment factor and then multiplying the apportioned total revenue by a tax rate of 0.575 percent.
A taxable entity that elects to use the E-Z Computation is not eligible for the cost of goods sold (COGS), compensation or other margin deductions and may not claim any credits (Texas Tax Code (TTC) 171.1016).
Are quarterly estimated payments required?
No.
Do I need to send a copy of my federal return?
No.
If the accounting period on my franchise tax report is not 12 months, how do I annualize total revenue to determine my eligibility for the no tax due threshold and qualification for the E-Z Computation?