Texas LLC Taxes Explained: Franchise Tax, Federal Tax and Sales Tax
Texas LLC Taxes Explained: Franchise Tax, Federal Tax and Sales Tax
Texas LLC taxes are simpler than in most states in one important way: Texas has no personal income tax and no corporate income tax. That does not mean an LLC owes nothing. Most Texas LLCs deal with three separate tax systems. The first is the Texas franchise tax, administered by the Texas Comptroller of Public Accounts. The second is federal income tax, which the IRS handles through your owner's return or the LLC's own return, depending on how the LLC is classified. The third is sales tax, which applies only if you sell taxable goods or services.
This guide explains how each one works, what the deadlines are, and what to confirm before you file. This is informational content, not legal or tax advice. Your tax treatment depends on your facts, so talk with a qualified CPA or attorney before you make a tax election or a structuring decision.
Quick Answer: What a Texas LLC Owes
- State income tax: None. Texas does not tax personal or corporate income.
- Franchise tax: For the 2026 and 2027 report years, an LLC with total revenue at or below $2,650,000 owes no franchise tax. It still must file a Public Information Report every year.
- Federal tax: Depends on how many owners the LLC has and whether it elects corporate treatment.
- Sales tax: Required if the LLC sells taxable goods or services. The Comptroller issues the permit at no charge.
The Texas Franchise Tax for LLCs
The Texas franchise tax is a privilege tax for doing business in Texas. It is not a tax on profit in the usual sense. Because the calculation starts from total revenue and is not based on net income, an LLC with thin profits can still owe tax if its revenue is above the threshold. Searches for texas llc franchise tax and texas franchise tax llc usually come down to one question: does your LLC owe anything at all?
Who Owes Franchise Tax
Every Texas LLC is subject to the franchise tax. The no tax due threshold determines whether any tax is actually payable. For the 2026 and 2027 report years, that threshold is $2,650,000 in total revenue. An LLC at or below the threshold owes no tax but still files the required report. An LLC above it pays at the rates below.
| Entity type or method | Rate on taxable margin |
|---|---|
| Retail and wholesale | 0.375 percent |
| All other entities | 0.75 percent |
| EZ Computation (total revenue under $20 million) | 0.331 percent |
The EZ Computation is an alternative method for entities with total revenue under $20 million. Confirm your eligibility and how it applies to your report on the Comptroller's website before you choose it.
Texas defines total revenue for franchise tax purposes, and that figure is not always the same as gross receipts in your bookkeeping. If your revenue is close to $2,650,000, confirm the calculation with the Comptroller or a CPA before you assume you are under the line.
When the Franchise Tax Is Due
Franchise tax reports are due May 15 each year. The Public Information Report is due on the same date. A new LLC files its first report for the year after formation, so track the first deadline from the date your Certificate of Formation is filed.
The Public Information Report: Required Every Year
Even if your LLC owes zero franchise tax, you must file a Public Information Report (PIR) every year. The PIR is filed with the Texas Comptroller, not the Secretary of State. It is due May 15. It identifies the people who manage or control the entity.
Texas does not require a separate annual report with the Secretary of State for LLCs, and that filing carries no fee. Depending on your entity type and filing status, the Comptroller may instead require an Ownership Information Report. Confirm which one applies to your LLC on the Comptroller's site.
Skipping the PIR because you owe no tax is a common mistake. The no tax due threshold removes the payment, not the filing obligation.
Federal Tax: How the IRS Classifies Your LLC
Texas creates the LLC, but the IRS decides how it is taxed for federal purposes. By default, the classification depends on the number of owners. Your federal classification does not change your Texas franchise tax obligation. An LLC taxed as a sole proprietorship still files franchise tax if it is a Texas entity above the threshold.
Single-Member LLC
A single-member LLC is a disregarded entity by default. The LLC's income and expenses are reported on the owner's personal return using Schedule C. The owner also pays self-employment tax on the net earnings.
Multi-Member LLC
A multi-member LLC is taxed as a partnership by default. The LLC files Form 1065, and each member receives a Schedule K-1 showing their share of income, deductions and credits. Each member reports that share on their own return.
Electing Corporate Treatment
Either type of LLC can elect to be taxed as a corporation. A Form 8832 changes how the LLC is classified for federal purposes, and an S corporation election is made on Form 2553. Choosing S or C corporation treatment changes how profit is taxed and can create payroll obligations, so make this decision with a CPA who has reviewed your numbers.
Sales Tax: When Your LLC Must Collect It
An LLC that sells taxable goods or services must hold a Texas sales and use tax permit. The Texas state sales tax rate is 6.25 percent. The permit itself is issued at no charge, but processing typically takes two to three weeks, so apply before your first taxable sale.
Sales tax is a separate obligation from the franchise tax. It has its own return and its own due dates, which are assigned when you register. Filing your franchise tax report does not satisfy your sales tax filings, and the reverse is also true. Our sales tax guide walks through registration, collection and filing steps in more detail.
What Texas Does Not Tax or License
- Personal income tax: None in Texas.
- Corporate income tax: None. The franchise tax is the business tax instead.
- State business license: Texas does not issue or require a general state business license. You still need to identify any industry-specific licenses or permits that apply to your activity at the federal, state and local level. The Texas Business Licenses and Permits Guide is the state's reference for that.
- Statewide contractor or roofing license: None.
- Newspaper publication: Texas does not require one.
Counties do not license general business activity. The one county filing most owners encounter is the assumed name certificate. An LLC operating under a name other than its registered name files that certificate with the Secretary of State for $25, not with the county clerk.
What Your Texas LLC Will Pay Along the Way
| Item | Agency | Cost |
|---|---|---|
| Certificate of Formation (Form 205) | Secretary of State | $300 |
| Assumed name certificate (Form 503) | Secretary of State | $25 |
| Public Information Report | Comptroller | No fee listed for the report itself |
| Annual report with Secretary of State | Secretary of State | None required for LLCs |
| Sales and use tax permit | Comptroller | No charge |
The franchise tax payment is separate from these filing costs and applies only above the threshold. Check the Comptroller's current tax rate and report instructions before you file, because the figures in this guide reflect the 2026 and 2027 report years.
Key Texas LLC Tax Deadlines
| Obligation | Who it applies to | Due date |
|---|---|---|
| Franchise tax report | Every Texas LLC files. Tax is owed only above $2,650,000 in total revenue (2026 and 2027 report years) | May 15 each year |
| Public Information Report | Every Texas LLC, including those with no tax due | May 15 each year, filed with the Comptroller |
| Federal income tax return | Depends on classification: Schedule C, Form 1065 or an S or C corporation return | Set by the IRS for your return type; confirm with your CPA |
| Sales tax | LLCs selling taxable goods or services | Assigned by the Comptroller when you register |
Questions to Bring to Your CPA
- Is our total revenue for franchise tax purposes above or below $2,650,000, and does the EZ Computation apply?
- Should we stay a disregarded entity or partnership, or elect corporate treatment on Form 8832 or an S election on Form 2553?
- Which of our sales are taxable, and how should we handle exempt sales to resellers or nonprofits?
- What payroll obligations come with an S corporation election?
- Are there any local or industry-specific taxes or licenses that apply to our activity?
Official Texas Resources
- Texas Comptroller of Public Accounts, taxes: https://comptroller.texas.gov/taxes/
- Sales and use tax permit: https://comptroller.texas.gov/taxes/permit/
- Texas Secretary of State, corporations: https://www.sos.state.tx.us/corp/index.shtml
- Texas Secretary of State business search: https://www.sos.state.tx.us/corp/searches.shtml
Disclaimer: This article is informational content about Texas business taxes. It is not legal, tax or accounting advice, and it does not create an advisory relationship. Rates, thresholds and deadlines can change, so confirm current figures with the Texas Comptroller and the IRS. For decisions about your LLC's structure, elections or tax position, consult a qualified CPA or attorney licensed to practice in Texas.