Texas Corporation Taxes: What You Need to Know
Texas corporations pay franchise tax, sales and use tax, and federal taxes — but no state income tax. Learn the rates, thresholds, and filing deadlines for TX C Corps and S Corps.
Bizee Editorial Staff
Editorial Team
Texas corporation tax at a glance
Filing fee: Franchise tax: 0.75% of taxable margin (standard); 0.331% via E-Z Computation for revenue under $20M
Processing time: Franchise tax reports due May 15 each year
State agency: Texas Comptroller of Public Accounts
Annual report due: May 15 (Franchise Tax Report filed annually)
State tax rate: No state income tax; franchise tax no-tax-due threshold: $2.47M annualized revenue (2024)
Texas tax overview for corporations
Texas corporations don't pay state income tax — Texas is one of nine states with none. What they do pay is the Texas franchise tax, sales and use tax on applicable transactions, and federal taxes. Whether you've formed a C Corp or an S Corp, the state-level tax obligations are the same.
No Texas state income tax for corporations or individuals
Franchise tax applies to all taxable entities doing business in Texas, including C Corps and S Corps
Sales and use tax applies if your corporation sells taxable goods or services
Federal income tax, payroll tax, and estimated tax obligations apply regardless of state
Texas franchise tax
The Texas franchise tax is the main state-level tax your corporation will deal with. It applies to all taxable entities doing business in Texas — C Corps and S Corps alike. The tax is based on your corporation's taxable margin, not its net income, which catches some business owners off guard.
If your corporation's annualized total revenue is $2.47 million or less (the 2024 no-tax-due threshold), you owe no franchise tax. You still need to file a No Tax Due Information Report with the Texas Comptroller by May 15 each year.
Franchise tax rates
Revenue under $2.47M (annualized): no tax due, but a report is still required
Revenue between $2.47M and $20M: 0.331% using the E-Z Computation method, or 0.75% of taxable margin using the standard method
Revenue over $20M: 0.75% of taxable margin using the standard method
Taxable margin is calculated as total revenue minus the largest of 4 deductions: cost of goods sold, compensation, 30% of total revenue, or $1 million. A tax professional can help you figure out which deduction produces the lowest tax bill for your corporation.
Filing the franchise tax report
Franchise tax reports are due May 15 each year. Your corporation files with the Texas Comptroller of Public Accounts using your Texas Taxpayer Number (TTN). Even if you owe nothing, you need to file — skipping the report puts your corporation's good standing at risk.
Texas sales and use tax
Texas has a state sales tax rate of 6.25%, and local jurisdictions can add up to 2% on top of that — bringing the combined rate to as high as 8.25% in some areas. If your corporation sells taxable goods or certain services, you're responsible for collecting and remitting sales tax to the Texas Comptroller.
Sales tax
Sales tax applies to the sale of most physical products — things like electronics, furniture, raw materials, and appliances — and to certain services. If your corporation makes taxable sales in Texas, you need to register with the Texas Comptroller, collect the tax at the point of sale, and file returns on a schedule the Comptroller assigns based on your sales volume.
Use tax
Use tax is the counterpart to sales tax. If your corporation buys taxable goods from an out-of-state seller who doesn't charge Texas sales tax, and you bring those goods into Texas for business use, you owe use tax on that purchase. The rate is the same as the sales tax rate that would have applied.
Federal taxes for Texas corporations
Federal tax obligations depend on whether your corporation is taxed as a C Corp or an S Corp — and this is where the two structures diverge. Texas doesn't have a state income tax, so the federal level is where the income tax difference actually shows up.
C Corp federal taxes
A C Corp pays federal corporate income tax at a flat 21% rate on its net income. If the corporation then distributes profits to shareholders as dividends, those shareholders pay personal income tax on the dividends — this is the double taxation that C Corps are known for. C Corps also need to pay estimated federal taxes quarterly if they expect to owe $500 or more for the year.
S Corp federal taxes
An S Corp is a pass-through entity for federal tax purposes. The corporation itself doesn't pay federal income tax. Instead, profits and losses pass through to shareholders, who report them on their personal returns. Shareholders who work in the business must pay themselves a reasonable salary and pay payroll taxes on that salary. A tax professional can help you figure out what counts as reasonable for your situation.
Payroll taxes
If your corporation has employees — including owner-employees in an S Corp — you're responsible for withholding and remitting federal payroll taxes. That includes Social Security and Medicare (FICA), federal income tax withholding, and federal unemployment tax (FUTA). Texas has no state income tax withholding requirement, which simplifies the payroll side compared to most states.
Other taxes and duties
Depending on your industry and how your corporation operates, you may owe additional taxes beyond franchise, sales, and federal income tax. Texas doesn't have a personal property tax at the state level, but counties do assess business personal property tax on equipment, inventory, and other tangible assets your corporation owns.
Industries like oil and gas, alcohol, tobacco, and motor fuels face additional state excise taxes administered by the Texas Comptroller. If your corporation operates in a regulated industry, talk to a tax professional to make sure you've identified every applicable obligation.
Business personal property tax: assessed by county appraisal districts, due January 31 each year
Motor fuels tax: applies to corporations that sell or distribute motor fuel in Texas
Mixed beverage tax: applies to corporations licensed to sell alcoholic beverages
Hotel occupancy tax: applies to corporations operating lodging businesses in Texas
FAQ
It depends on your revenue. Texas doesn't have a corporate income tax. Instead, corporations pay the franchise tax — 0.75% of taxable margin for most corporations, or 0.331% using the E-Z Computation method for corporations with revenue under $20 million. Corporations with annualized total revenue of $2.47 million or less owe no franchise tax at all, though they still need to file a report.
At the state level, S Corps pay the same Texas franchise tax as C Corps — 0.75% of taxable margin (or 0.331% via E-Z Computation for revenue under $20 million), with no tax due if annualized revenue is $2.47 million or less. At the federal level, S Corps don't pay corporate income tax. Profits pass through to shareholders, who report them on their personal returns.
No. Texas has no state income tax — for corporations or individuals. It's one of nine states with no income tax. Texas corporations still pay the franchise tax, which is based on revenue margin rather than income, plus sales and use tax on applicable transactions.
It depends on revenue, structure, and industry. A Texas corporation with annualized revenue under $2.47 million owes no franchise tax. Above that threshold, the franchise tax rate is 0.75% of taxable margin for most corporations. Add sales tax obligations if you sell taxable goods or services, plus federal income and payroll taxes. There's no state income tax, which keeps the overall state tax burden lower than in most states.
Every Texas corporation must file a Franchise Tax Report with the Texas Comptroller by May 15 each year, regardless of whether any tax is owed. Corporations below the $2.47 million no-tax-due threshold file a No Tax Due Information Report. Corporations above the threshold file a standard or E-Z Computation report and pay the tax due. You'll need your Texas Taxpayer Number (TTN) to file.
Yes, if your corporation sells taxable goods or certain services in Texas. The state sales tax rate is 6.25%, and local jurisdictions can add up to 2% more. Use tax applies when you buy taxable goods from an out-of-state seller who doesn't charge Texas sales tax and bring those goods into Texas for business use. Both are administered by the Texas Comptroller of Public Accounts.
Yes, in most cases. C Corps that expect to owe $500 or more in federal income tax for the year need to pay estimated taxes quarterly. S Corp shareholders who receive pass-through income generally need to pay estimated personal income taxes quarterly as well. Texas has no state income tax, so there are no state estimated tax payments — only federal.
