Other (Default)
Retail or Wholesale Trade
Utilities
Cable Television
Motor Carrier
Estimated Texas Franchise Tax:
$0.00
Understanding the Texas Franchise Tax Calculation
The Texas Franchise Tax is a tax on a business entity's privilege of doing business in Texas. It is generally due by May 15th each year. The tax is computed based on the entity's gross receipts or total revenue. However, the calculation method and tax rate depend on the entity's business type and whether it qualifies for certain deductions.
Key Components and Calculation Steps:
The primary calculation is based on **Taxable Margin**. For most businesses, the Taxable Margin is calculated as follows:
Taxable Margin = Total Revenue – (Cost of Goods Sold + Total Compensation)
However, there are important nuances:
Small Businesses: Businesses with total revenue of $1.17 million or less (as of the most recent legislative updates) are generally exempt from the franchise tax. This calculator assumes you are above this threshold unless your revenue is entered as $1.17 million or less.
Deductions: Cost of Goods Sold (COGS) and Compensation are allowable deductions, significantly reducing the Taxable Margin. The specific rules for what constitutes COGS and Compensation can be complex and are detailed by the Texas Comptroller's office.
Business Type and Rates: The tax rate applied to the Taxable Margin varies by industry. Common rates are:
Retail or Wholesale Trade: 0.75%
Utilities, Cable Television, Motor Carrier: 0.75%
Other: 1.00%
Minimum Tax: Even with deductions, a minimum tax of $0 may apply if the calculated tax is less than $0, but a flat $0 tax applies if the revenue is below the threshold. For entities owing tax, there's typically a minimum tax if no tax is due after deductions but revenue is above the threshold. This calculator focuses on the percentage calculation.
How This Calculator Works:
This calculator simplifies the process by allowing you to input your total revenue, cost of goods sold (if applicable), and total compensation (if applicable). It then applies the appropriate tax rate based on the selected business type to the calculated Taxable Margin.
Important Note: This calculator is for estimation purposes only. It does not account for all possible deductions, credits, or specific industry regulations. Always consult the official Texas Comptroller of Public Accounts website or a qualified tax professional for precise calculations and compliance.
Example Calculation:
Let's say a small software development company (classified as "Other" business type) has the following: