When Are Franchise Taxes Due in Texas?
For Texas businesses: demystify franchise tax reporting. Learn critical timelines and ensure full compliance with state obligations.
The Texas franchise tax is a privilege tax imposed on certain entities for the opportunity of doing business in Texas. It is distinct from sales tax or personal income tax, functioning more like a corporate income tax. Businesses operating in the state must understand their obligations to ensure compliance.
Entities Subject to the Tax
Most business entities formed or organized in Texas, or those doing business within the state, are subject to the Texas franchise tax. This includes corporations, limited liability companies (LLCs), partnerships, professional associations, and joint ventures. Single-member LLCs and S corporations are included.
Certain entities are not subject to the tax. Sole proprietorships and general partnerships composed entirely of natural persons, where liability is not limited, do not file or pay this tax. Some entities with total revenue below a specific threshold qualify for a “no tax due” status. These entities often still have reporting requirements.
Annual Filing Deadlines
The annual Texas Franchise Tax Report and the Public Information Report (PIR) or Ownership Information Report (OIR) are due on May 15th each year. These reports cover the entity’s financial activity for the preceding calendar year. If May 15th falls on a weekend or a legal holiday, the due date shifts to the next business day.
Businesses that qualify for the “no tax due” threshold are not required to file a Franchise Tax Report but must still submit an information report by the May 15th deadline. The Public Information Report provides updated details about the business’s ownership, officers, and registered agent. Filing these reports ensures the entity maintains good standing with the state.
Extension Requests
Businesses unable to meet the May 15th deadline can request an extension to file their Texas franchise tax report. An automatic extension is granted upon timely submission of an extension request. This initial extension moves the filing deadline to August 15th.
An extension grants additional time to file the report but does not extend the time to pay any tax owed. Any estimated tax payment is still due by the original May 15th deadline to avoid penalties and interest. A second extension may be available, pushing the final filing deadline to November 15th, provided the request is timely and any required payment is submitted.
Penalties for Non-Compliance
Failing to meet the filing and payment deadlines for the Texas franchise tax can result in penalties. A $50 penalty is assessed for each report filed after the due date, even if no tax is owed. If tax is due, additional penalties apply for late payment. A 5% penalty is assessed if the tax is paid 1-30 days after the due date, increasing to 10% if paid over 30 days late. Interest also begins to accrue on past due taxes, starting 61 days after the original due date.
Non-compliance can lead to severe consequences, including the forfeiture of an entity’s right to do business in Texas. This forfeiture can occur if reports or payments are not submitted within 45 days of a notice of forfeiture being mailed. When an entity’s privileges are forfeited, it loses the ability to sue or defend itself in court, and its officers and directors may become personally liable for the entity’s debts incurred during the forfeiture period. Reinstatement requires filing all overdue reports, paying all outstanding taxes, penalties, and interest, and obtaining a tax clearance letter from the Comptroller’s office.