Texas Franchise Tax Calculator

What is Texas franchise tax?

Texas franchise tax is a tax on certain entities doing business in Texas. It is based on a business’s taxable margin, not simply its profit. The Texas Franchise Tax Calculator estimates whether you may owe tax and compares the long-form margin calculation with the optional EZ computation.

For reports due in 2026 and 2027, the no-tax-due threshold is $2,650,000 in annualized total revenue. Entities at or below that threshold owe no tax, but must file the required Public Information Report or Ownership Information Report. Above the threshold, the long-form calculation uses the smallest of four amounts: 70% of total revenue, revenue minus cost of goods sold, revenue minus compensation, or revenue minus $1 million. The result is apportioned using Texas receipts and taxed at the applicable rate.

Why Texas franchise tax matters

A tax estimate helps you plan cash for a business expense and compare the effect of different calculation methods. It can also help you see whether changes in sales, payroll, sourcing, or purchasing could affect your next report. Do not treat a lower estimate as a reason to make a business decision that costs more than the tax savings.

The EZ computation may be available to entities with $20 million or less in revenue. It applies a 0.331% rate to apportioned revenue and does not allow deductions. The long-form method uses the smallest margin measure, then applies the relevant tax rate. Comparing both can show which method produces the lower estimate for your inputs.

The tax rate is 0.75% for most entities and 0.375% for retailers and wholesalers. If calculated tax is under $1,000, no tax is owed, but the report still must be filed. Your business may have reporting details the calculator cannot evaluate, so confirm your filing and tax position with a qualified tax professional.

How to use this Texas franchise tax calculator

1. Enter your annualized total revenue. This is the figure used to check whether you are at or below the $2,650,000 no-tax-due threshold. Use the appropriate figure for the report rather than relying on a partial-year total without annualizing it.
2. Enter Texas gross receipts and gross receipts everywhere. The calculator uses Texas receipts divided by receipts everywhere to estimate the apportionment percentage. Check that both figures cover comparable activity and periods.
3. Enter cost of goods sold and compensation information. Include wages and cash compensation, the number of people paid that compensation, and employee benefits as requested. The compensation calculation has a $480,000 per-person cap, with benefits included as described in the applicable calculation rules.
4. Review the long-form margin options and the EZ computation result. The calculator compares the methods using the information entered and identifies the lower estimated tax. Confirm the rate that applies to your entity; retailers and wholesalers have a different long-form rate.
5. Use the result for planning, then verify the report requirements and figures before filing. If your revenue is at or below the threshold, or your calculated tax is under $1,000, a filing may still be required.

Texas franchise tax calculator example

How to read your Texas franchise tax results

Start with the estimated tax due and the method named in the summary. The calculator’s long-form rows show how each margin option compares before apportionment and tax. The smallest eligible margin is the one used for the long-form estimate.

The apportionment row shows the share of receipts assigned to Texas for this estimate. A lower percentage reduces the apportioned margin or revenue, but only accurate receipts should be entered. The tax rate row identifies the rate used in the displayed calculation; confirm that the rate matches your business classification and filing situation.

How to improve your Texas franchise tax estimate

1. 01

   Keep revenue and receipt records consistent

   Reconcile annualized total revenue, Texas gross receipts, and receipts everywhere to your business records. Keep the period and definitions consistent so the threshold test and apportionment are based on useful figures.

2. 02

   Document cost of goods sold and compensation

   Keep supplier invoices, payroll records, and benefit records organized. Review how expenses are classified before entering them; do not assume that every operating expense counts as cost of goods sold or compensation for this calculation.

3. 03

   Compare methods before making business decisions

   Run the estimate with current, supportable figures and compare EZ computation with the long-form result. Consider the tax effect alongside operating costs when you set prices, plan hiring, or negotiate supplier terms. Ask a tax professional whether a proposed classification or reporting treatment is allowed.

Common Texas franchise tax calculator mistakes

• Using total revenue as Texas receipts

  Total revenue is used for the threshold and margin calculations, while Texas receipts help determine apportionment. Do not substitute one figure for the other unless your records support that they are equal.

• Forgetting the no-tax-due threshold is not a no-filing rule

  Entities at or below the $2,650,000 threshold owe no tax for the specified reports, but still file the required information report. A calculated tax under $1,000 also means no tax is owed, not that filing can be ignored.

• Treating the calculator as a filed report

  An estimate does not replace checking the report instructions or confirming entity-specific details. Review your inputs and filing obligations with a qualified tax professional when needed.

The texas franchise tax formula

Key terms

Annualized total revenue

Total revenue adjusted to an annual period for checking the applicable no-tax-due threshold.

Taxable margin

The margin amount used in the long-form calculation, determined by choosing the smallest of the eligible revenue-based options.

Apportionment

The process of applying the Texas share of receipts to the margin or revenue used in the tax calculation.

EZ computation

An optional calculation for qualifying entities that applies a 0.331% rate to apportioned revenue without deductions.