Texas LLC Business Tax Requirements
Learn what taxes a Texas LLC owes: franchise tax, sales and use tax, federal pass-through taxes, and the annual Public Information Report. No state income tax — but the franchise tax still applies.
Bizee Editorial Staff
Editorial Team
Texas tax snapshot
Filing fee: No state income tax. Franchise tax rate: 0.375% (retail and wholesale) or 0.75% (most other businesses) of taxable margin. No-tax-due threshold applies — check the Texas Comptroller for the current year's revenue limit.
Processing time: Franchise tax reports due May 15 each year (or next business day if May 15 falls on a weekend or holiday)
State agency: Texas Comptroller of Public Accounts (franchise tax, sales tax, Public Information Report)
Annual report due: No traditional annual report filed with the Secretary of State. Annual franchise tax report and Public Information Report due May 15 with the Texas Comptroller.
State tax rate: No state personal income tax. No state corporate income tax. Franchise tax based on taxable margin. State sales tax: 6.25% (local jurisdictions may add up to 2%, for a maximum combined rate of 8.25%).
How Texas taxes your LLC
Texas LLCs don't pay state income tax — Texas has no personal or corporate income tax. But that doesn't mean no state tax obligations. Most Texas LLCs owe the franchise tax, must file an annual Public Information Report, and may need to collect and remit sales tax depending on what they sell.
On top of state obligations, LLC owners pay federal taxes based on how the IRS classifies their business — as a sole proprietorship, partnership, C Corporation, or S Corporation. The no-income-tax advantage is real, but the franchise tax catches a lot of new owners off guard.
- No Texas state personal or corporate income tax
- Franchise tax applies to most LLCs doing business in Texas — due May 15 annually
- Public Information Report required each year alongside the franchise tax filing
- Sales and use tax permit required if you sell taxable goods or services in Texas
- Federal taxes apply based on your LLC's IRS classification
Texas franchise tax
Texas imposes a franchise tax on every LLC formed in Texas or doing business in Texas. It's a privilege tax — you pay it for the right to operate as a legal entity in the state — and it's separate from any federal income tax your LLC owes.
The tax is based on your LLC's taxable margin, not net income. You can calculate margin using one of 4 methods: 70% of total revenue, total revenue minus cost of goods sold, total revenue minus compensation, or total revenue minus a statutory dollar deduction. Most LLCs use whichever method produces the lowest result.
If your LLC's total annualized revenue falls at or below the no-tax-due threshold for the report year, you owe no franchise tax. But you still need to file a no-tax-due report. The threshold is indexed and changes by year, so check the Texas Comptroller's website for the current figure before you file.
Texas sales and use tax
Texas charges a state sales and use tax of 6.25% on most retail sales, leases, and rentals of tangible personal property, and on most taxable services. Local jurisdictions can add up to 2% on top of that, bringing the maximum combined rate to 8.25%.
If your LLC sells taxable goods or services in Texas, you need to register for a sales tax permit with the Texas Comptroller before you start collecting. You need a separate permit for each physical location where you operate as a seller. Out-of-state LLCs with sufficient nexus in Texas — through employees, inventory, or economic presence — also need to register and remit use tax.
Federal taxes for Texas LLCs
How your Texas LLC is taxed at the federal level depends on how the IRS classifies it. By default, a single-member LLC is a disregarded entity — the owner reports business income on Schedule C of Form 1040. A multi-member LLC is taxed as a partnership by default, with each member reporting their share of income from Schedule K-1 (Form 1065).
You can change the default classification. Filing IRS Form 8832 elects C Corporation treatment. Filing IRS Form 2553 — after first being treated as a corporation — elects S Corporation status, if your LLC meets the eligibility requirements. Each election changes how profits are taxed and how owners pay themselves, so a tax professional can help you figure out which classification fits your situation.
Self-employment and payroll taxes
If your Texas LLC is taxed as a sole proprietorship or partnership, you pay self-employment tax on your share of the LLC's net earnings. The federal self-employment tax rate is 15.3% — 12.4% for Social Security (up to the annual wage base) and 2.9% for Medicare — plus an additional 0.9% Medicare tax on earnings above certain thresholds. You report and pay this on Schedule SE attached to Form 1040.
If your LLC has employees, you're responsible for withholding and remitting federal payroll taxes — including the employer's share of Social Security and Medicare — and filing Form 941 quarterly. Texas has no state income tax withholding requirement, but state unemployment tax obligations through the Texas Workforce Commission may apply.
Annual reporting requirements
Texas doesn't require LLCs to file a traditional annual report with the Secretary of State. Instead, most Texas LLCs file an annual franchise tax report and a Public Information Report (PIR) with the Texas Comptroller by May 15 each year.
The Public Information Report updates the state on your LLC's ownership and management. You need to file it every year even if nothing has changed. Missing the May 15 deadline — even when no tax is owed — can put your LLC out of good standing with the state.
FAQ
No. Texas has no state personal income tax and no state corporate income tax. LLC owners don't pay Texas income tax on pass-through business income at the owner level. Texas does impose a franchise tax on LLCs doing business in the state, which is separate from income tax and based on taxable margin.
It depends on your LLC's activities and structure. Most Texas LLCs owe the state franchise tax and must file an annual Public Information Report. If you sell taxable goods or services, you'll also collect and remit Texas sales tax. At the federal level, LLC owners pay income tax and self-employment tax based on their IRS classification — sole proprietorship, partnership, C Corporation, or S Corporation.
It depends on your revenue and business type. The standard rate is 0.75% of taxable margin for most businesses, or 0.375% for retail and wholesale businesses. If your LLC's total annualized revenue falls at or below the no-tax-due threshold for the report year, you owe no franchise tax — but you still need to file a no-tax-due report. The threshold changes by year, so check the Texas Comptroller's website for the current figure.
Yes. Texas LLCs must file an annual franchise tax report by May 15 each year, even when no tax is owed. If your revenue is below the no-tax-due threshold, you file a no-tax-due report instead of a full return. Skipping the filing — even at zero tax — can put your LLC out of good standing with the state.
Yes. Texas charges a state sales tax of 6.25% on most retail sales of tangible personal property and taxable services. Local jurisdictions can add up to 2% on top of that, for a maximum combined rate of 8.25%. If your LLC sells taxable goods or services in Texas, you need to register for a sales tax permit with the Texas Comptroller before you start collecting.
Yes, in most cases. If your LLC is taxed as a sole proprietorship or partnership, you'll owe self-employment tax and federal income tax on your share of the LLC's net earnings. Because no employer withholds these taxes for you, the IRS generally requires you to make quarterly estimated tax payments throughout the year. A tax professional can help you figure out the right payment schedule for your situation.
The Public Information Report (PIR) is a filing Texas LLCs submit annually to the Texas Comptroller alongside their franchise tax report. It updates the state on your LLC's ownership and management information. You need to file it every year by May 15, even if nothing about your LLC has changed. It's not the same as an annual report filed with the Secretary of State — Texas doesn't require that.
It varies. Texas has no state income tax, which is a real advantage for LLC owners. The main state-level cost is the franchise tax — 0.75% of taxable margin for most businesses, or 0.375% for retail and wholesale — though many small LLCs fall below the no-tax-due threshold and owe nothing. Add federal self-employment tax at 15.3% of net earnings, federal income tax at your individual rate, and sales tax obligations if applicable, and the total picture depends heavily on your revenue, structure, and deductions.
