If you’re a small business owner in Texas, it’s important to understand the Texas Franchise Tax, a state-imposed tax on certain business entities for the right to conduct business within the state. Unlike a personal or corporate income tax, the franchise tax is based on a business’s gross receipts, or “margin,” rather than its net income. Most entities formed or operating in Texas are subject to this tax. However, if your total annual revenue is under the “no tax due” threshold, you are still required to file a No Tax Due Report each year, even though you won’t owe any tax.
Where to File:
Business owners must file and pay the franchise tax through the Texas Comptroller of Public Accounts, which manages the tax reporting and payment system. The annual report and tax payment are both due by May 15th of each year. To file, you’ll need to use the Comptroller’s Webfile system at https://comptroller.texas.gov/taxes/franchise/, using your Webfile number provided when you registered your business.
What if I don’t file or Pay?
Failing to file or pay the Texas Franchise Tax can lead to significant penalties. If you submit your report or payment late, you’ll be assessed a 5% penalty on the unpaid tax if it’s up to 30 days late, which increases to 10% if the delay exceeds 30 days. Interest begins to accrue on unpaid amounts 60 days after the due date. In addition to financial penalties, failing to comply can result in the forfeiture of your entity’s right to conduct business in Texas. If your business privileges are forfeited, owners and officers may become personally liable for debts incurred during that time, and reinstatement will require the payment of outstanding amounts, penalties, interest, and reinstatement fees.
Do I need a Lawyer or Accountant to File?
No, although it is always recommended to consult both financial and legal professionals to ensure all your documentation is completed correctly and in a timely manner. If your entity is not in good standing or you are unsure who has the power (or duty) to file these reports on behalf of your documents, the Lawyers at The South Texas Business Lawyers specialize in corporate transactional law and can help you ensure you remain in compliance.
Contact The South Texas Business Lawyers today to learn more!