Texas Franchise Tax for 2026: the $2.65 Million No-Tax-Due Threshold, Why the No Tax Due Report Is Gone, and What Small LLCs Still File

2026-10-11 · RKube Services

Texas franchise tax for 2026: the $2.65 million no-tax-due threshold, why the No Tax Due Report is gone, and the PIR or OIR small LLCs still file by May 15.

Texas has no personal income tax, so a lot of new LLC owners in Houston, Dallas and Austin assume the state has nothing to collect from them. Then a letter arrives in July: Form 05-211, a Notice of Intent to Forfeit the right to do business. The business didn't owe any tax. It just didn't file.

That's the most common Texas franchise tax problem for small businesses, and it got easier to fall into in 2024, when the No Tax Due Report went away. This guide covers the 2026 and 2027 thresholds and rates, what a small LLC files instead, the May 15 deadline, how extensions work, and what to do if one of the forfeiture notices is already on your desk.

The 2026 and 2027 TX franchise tax numbers

The Texas Comptroller franchise tax page lists the rates and thresholds by report year:

The report year isn't the same as the year you earned the money. A 2027 report generally covers your 2026 accounting year. Both the 2026 and 2027 reports use the $2,650,000 threshold, so for planning purposes the number holds for income you earn this year and next.

The threshold is measured on annualized total revenue. A business that started in August and earned $1.2 million in five months is annualized, not measured on the $1.2 million alone.

Who has to deal with this at all

The franchise tax applies to "taxable entities," which includes corporations, LLCs, partnerships with limited liability, professional associations and similar entities that are formed in Texas or have nexus there.

Two points trip people up:

• A single-member LLC is a taxable entity, even if it files as a sole proprietor on Schedule C for federal tax. The Comptroller's taxable entities FAQ says so directly, citing Texas Tax Code 171.0002(d).
• A true sole proprietorship, one not organized in a way that limits liability, is not a taxable entity. If you operate under your own name or a DBA without an LLC, the franchise tax isn't your filing.

Out-of-state LLCs registered to do business in Texas, or with nexus there, are in the system too.

What small businesses file now that the No Tax Due Report is gone

Before 2024, a business under the threshold filed Form 05-163, the No Tax Due Report. For reports originally due on or after January 1, 2024, that form is no longer required.

What hasn't changed is the information report. Every taxable entity still files one of these each year, by the same May 15 due date:

• Form 05-102, Public Information Report (PIR) for corporations, LLCs, limited partnerships, professional associations and financial institutions. It lists officers, directors, managers or members, and it's signed by an authorized person. The Comptroller forwards it to the Secretary of State, and the officer and director information shows up in the public Taxable Entity Search.
• Form 05-167, Ownership Information Report (OIR) for other taxable entities, such as certain partnerships and trusts. Its information stays confidential.

The PIR and OIR page is clear on the important point: the PIR or OIR is due even if the entity doesn't have to file a franchise tax report because it's at or below the no-tax-due threshold.

So for most small Texas LLCs, the whole annual obligation is one short form. That's exactly why it gets missed. Owners hear "no tax due" and stop there.

The $1,000 rule above the threshold

If your annualized revenue is above $2,650,000 but the computed tax comes out under $1,000, you don't pay. But you do file the full report: Form 05-158 (the long form) or Form 05-169 (the EZ Computation), plus your PIR or OIR. The report is what shows the state that the tax is under $1,000.

Long form or EZ Computation?

If you're over the threshold, you choose how to compute the tax.

Long form (05-158). Your taxable margin is the smallest of:

1. 70% of total revenue,
2. total revenue minus cost of goods sold,
3. total revenue minus compensation (capped at $480,000 per person for 2026 and 2027 reports), or
4. total revenue minus $1 million.

Margin is apportioned to Texas, then taxed at 0.75%, or 0.375% for retailers and wholesalers.

EZ Computation (05-169). Available if total revenue is $20 million or less. The tax is 0.331% of apportioned total revenue, with no deductions at all.

The EZ form is simpler, but simpler isn't always cheaper.

A worked example: a Houston supply company

A Houston industrial supply LLC that isn't primarily a wholesaler has $3,100,000 of total revenue, all from Texas, and $1,900,000 of cost of goods sold. Its compensation is about $1,000,000.

The long form saves about $1,261 here because cost of goods sold is a large share of revenue. A consulting firm with almost no COGS and modest payroll might find the EZ form wins instead. Run both.

Now drop that same company's revenue to $2,500,000. It's under $2,650,000, so it owes no tax and files only its PIR. No computation, no payment.

The May 15 deadline and extensions

The annual report is due May 15. If that date falls on a weekend or holiday, the next business day becomes the due date. May 15, 2027 is a Saturday, so the 2027 report is due Monday, May 17, 2027.

A newly formed entity files its first annual report on May 15 of the year after it became subject to the tax. An LLC formed in Austin in March 2026 has its first report, and its first PIR, due in May 2027.

Extensions are available, but they're payment-based. According to the Comptroller's extension page, an entity that isn't required to pay by electronic funds transfer can request an extension through Webfile or Form 05-164 by the original due date. To be valid, the extension payment must be at least 90% of the tax due with the report or 100% of the tax reported on the prior year's report. That pushes the filing to November 15. A brand-new entity can't use the 100% prior-year option for its first report.

Penalties and the forfeiture notices

The Comptroller lists the penalties on its franchise tax page:

• $50 for each report filed after the due date.
• 5% of the tax if it's paid 1 to 30 days late.
• 10% if it's paid more than 30 days late.
• Interest on past-due tax starting 61 days after the due date.

The bigger risk for a small LLC isn't the $50. It's forfeiture. In July and August 2026, the Comptroller mailed two notices:

• Form 05-211, Notice of Intent to Forfeit Right to Transact Business, to entities that missed 2026 filing requirements. The fix is to file and pay the 2026 report with penalties and interest, or, if you're at or below the threshold, simply file the 2026 PIR or OIR.
• Form 05-213, Notice of Forfeiture of Registration, to entities that missed 2025 requirements. The fix is the same idea for 2025: file the 2025 report and pay any tax, penalty and interest, or file the 2025 PIR or OIR if you were under the threshold.

An entity that has lost its right to transact business can't use Texas courts to enforce its contracts, and the officers and directors can become personally liable for certain company debts during the forfeiture. Those consequences are much bigger than the filing that would have prevented them.

A checklist for a small Texas (TX) LLC

1. Confirm the entity type: LLC, corporation or partnership means you're a taxable entity, even as a single-member LLC.
2. Estimate this year's annualized total revenue and compare it to $2,650,000.
3. If you're under it, put the PIR (05-102) or OIR (05-167) on the calendar for the May 15 date (May 17 in 2027).
4. If you're over it, run both the long form and the EZ Computation, and plan any extension payment at 90% or 100% of prior-year tax.
5. Look up your account status in the Comptroller's Taxable Entity Search after you file.
6. If a 05-211 or 05-213 arrived, file the missing PIR or report now rather than waiting for the next cycle.

Common questions about the Texas (TX) franchise tax

My Dallas LLC made $400,000. Do I really have to file anything? Yes. You owe no franchise tax, but you still file the Public Information Report by May 15.

I'm a single-member LLC that files Schedule C. Isn't my LLC ignored for tax? For federal income tax, yes. For the Texas franchise tax, no. The LLC is a taxable entity and files its own PIR.

Is the franchise tax the same as Texas sales tax? No. Sales tax is a separate permit and a separate return. The statewide rate is 6.25%, and local jurisdictions can add up to 2%.

What happened to the No Tax Due Report? It was eliminated for reports originally due on or after January 1, 2024. If you're under the threshold, you file only the PIR or OIR.

We're a Delaware C corporation with an office in Austin. Does this apply? If you have nexus in Texas, yes. File the report or the information report like any Texas entity.

This guide is general information based on the Comptroller's published guidance as of October 2026. Thresholds change every two years, so check the current numbers before you file.

Keep the Texas filing from becoming a forfeiture letter

RKube Services handles bookkeeping and tax prep for small businesses across the US and Canada, including LLCs and corporations in Houston, Dallas, Austin and San Antonio. We keep your books current, so you know which side of the $2.65 million threshold you're on well before May, and we track the PIR along with your federal deadlines. Start with a free scoping call and a 30-day trial: call (984) 234-7030 or reach us through rkubeservices.com.