What Form 05-158 Is For
Form 05-158 is the long form used to report and pay Texas franchise tax, which is essentially a privilege tax for doing business in Texas. Think of it as the state's way of collecting revenue from entities that operate within its borders or are formed under Texas law.
The franchise tax isn't based on your profits like traditional income tax. Instead, it's calculated on your business's "margin"—a measure that can be computed several different ways depending on what's most favorable for your situation. The form comes in two pages (05-158-A and 05-158-B) that work together to capture your revenue information, calculate your taxable margin, apply the appropriate tax rate, and determine what you owe.
Who Needs to File
Essentially, any taxable entity formed in or doing business in Texas must file, including:
- Corporations
- LLCs (including single-member LLCs)
- Partnerships
- Banks
- S corporations
- Professional associations
- Trusts
- Joint ventures
- Similar business entities
Exceptions
- Sole proprietorships (unless single-member LLCs)
- General partnerships owned entirely by natural persons
- Certain exempt nonprofit organizations
Important Update (2024+)
Entities with annualized total revenue at or below $2.47 million no longer need to file Form 05-158. However, they must still file:
- Public Information Report (Form 05-102), or
- Ownership Information Report (Form 05-167)
When You’d Use Form 05-158
Annual Filing
- Due date: May 15 each year
- Covers your previous fiscal year
- Moves to next business day if the deadline falls on a weekend/holiday
Late Filing
- $50 automatic penalty (even if no tax is owed)
- Additional penalties:
- 5% if 1–30 days late
- 10% if over 30 days late
- Interest accrues on unpaid taxes
Amended Returns
You can amend for:
- Math errors
- Incorrect margin calculation method
- Switching calculation methods
- Refund claims
Filing an Amended Return
- Write “AMENDED REFUND” at the top
- Include a signed explanation letter
- File within the statute of limitations
Extensions
- Must be requested before the deadline
- Grants more time to file—not to pay
Key Rules or Details for This Tax Year
No Tax Due Threshold
- $2.47 million (for 2025 reports)
- Below this:
- No tax owed
- No Form 05-158 filing required (starting 2024)
- Information report still required
Computing Your Margin
Choose the lowest tax result from:
- Total revenue × 70%
- Total revenue − cost of goods sold
- Total revenue − compensation
- Total revenue − $1 million
Apportionment
- Only Texas-based revenue is taxed
- Based on gross receipts sourced to Texas
Combined Reporting
Required if part of a unitary business group:
- One report filed for all entities
- Requires Form 05-166 (Affiliate Schedule)
Information Reports (Required)
- Form 05-102 → Corporations, LLCs, etc.
- Form 05-167 → Trusts and other entities
Step-by-Step (High Level)
Step 1: Gather Financial Information
- Federal income data
- Revenue records
- Compensation and COGS details
- Geographic revenue sources
Step 2: Determine Accounting Period
- Usually matches federal tax year
- Annualize if not a full 12-month period
Step 3: Calculate Total Revenue
Start with federal revenue and subtract allowable exclusions.
Step 4: Choose Margin Calculation Method
Test all methods and select the lowest tax result.
Step 5: Apportion to Texas
Calculate percentage of Texas-based receipts.
Step 6: Apply Tax Rate and Credits
- Standard rate: 0.75%
- Retail/wholesale: 0.375%
- Apply credits if applicable
Step 7: Verify the $1,000 Minimum
- If tax < $1,000 → no tax owed
- Still must file
Step 8: File Electronically or By Paper
- Webfile (recommended)
- Tax software
- Paper filing
Step 9: File Your Information Report
- Submit Form 05-102 or 05-167
Common Mistakes and How to Avoid Them
Filing Incomplete Reports
- Missing page 1 or 2
- Always submit both
Missing Supporting Schedules
- Required forms:
- Form 05-160 (credits)
- Form 05-166 (affiliates)
- Review requirements before filing
Forgetting the Information Report
- Leads to delinquency notices
- Include it in your checklist
Incorrect Entity Classification
- Wrong filing status or grouping
- Confirm if combined reporting applies
Wrong Accounting Period
- Misaligned dates affect calculations
- Match federal year when possible
Not Annualizing Short Periods
- Use formula:
- Revenue ÷ days × 365
Missing the Signature
- Required for paper filings
- Double-check before submission
What Happens After You File
Processing
- Reviewed by the Comptroller
- Faster if filed electronically
Account Update
- Status updated for compliance
- Required for legal operation
Payment Processing
- Applied to your account
- Electronic payments process faster
Potential Notices
Common issues:
- Missing forms
- Errors
- Incomplete data
Certificate of Account Status
- Form 05-359
- Required for:
- Closing business
- Proving good standing
Refund Processing
- Requires amended return
- Takes weeks or months
Audit Possibility
- Records may be reviewed
- Keep documentation organized
Annual Filing Cycle
- Repeats every year
- Due every May 15
FAQs
If my business made a profit but my calculated tax is under $1,000, do I still need to file?
Yes, if your annualized total revenue exceeds the no-tax-due threshold ($2.47 million for 2025), you must file Form 05-158 even if your calculated tax is under $1,000. The good news is you won't owe any tax—Texas has a minimum threshold where taxes under $1,000 aren't collected. But you still need to file the report to prove you qualify for the zero tax. You also must file your required information report.
Can I use the EZ Computation instead of the long form?
Possibly. For reports due in 2024 and later, entities with annualized total revenue of $20 million or less can elect to use Form 05-169 (EZ Computation). This simplified method multiplies your total revenue by your apportionment factor, then applies the tax rate directly. You give up the ability to deduct cost of goods sold, compensation, or claim credits, but the calculation is much simpler. It's worth running the numbers both ways to see which saves you more money.
What if I operate in multiple states—do I pay Texas tax on all my revenue?
No. Texas uses an apportionment formula based on gross receipts. You calculate what percentage of your receipts come from Texas sources, then apply that percentage to your taxable margin. This ensures you're only paying Texas franchise tax on the portion of your business activity that occurs in Texas. The instructions provide detailed sourcing rules for different types of receipts.
Do I need to make estimated quarterly payments like federal taxes?
No. Texas franchise tax doesn't require quarterly estimated payments. You file once per year and pay the full amount due with your annual report. This simplifies cash flow planning compared to federal taxes, though it also means you need to budget for a potentially large payment each May.
What happens if I miss the deadline entirely?
Missing the May 15 deadline triggers an automatic $50 late filing penalty, regardless of whether you owe tax. If you owe tax, additional penalties apply: 5% if you're 1-30 days late, 10% after 30 days. Interest also accrues on unpaid tax. More seriously, continued failure to file can result in forfeiture of your right to do business in Texas. The Comptroller will send notices of intent to forfeit, and eventually your entity can lose its legal standing. File as soon as possible, even if late, to minimize penalties and avoid forfeiture.
Can I amend my return if I discover an error after filing?
Yes. You can file an amended Form 05-158 to correct mathematical errors, change your margin computation method, add deductions you initially missed, or support a refund claim. Write “AMENDED REFUND” at the top if the amendment results in overpayment, and include a detailed letter explaining what you're correcting and why. Remember that amendments seeking refunds must be filed within the statute of limitations period to be valid.
My business closed mid-year—do I still have to file?
Yes. If your business closes, you need to file a final franchise tax report covering the period from your last accounting year-end through the date you ceased business. You'll also need to file any required annual reports you missed. Write “PREMATURE” across the top if you're closing in your first year before your normal accounting period ends. Additionally, file Form 05-359 (Certificate of Account Status) to officially terminate your franchise tax obligation and, if applicable, your registration with the Texas Secretary of State.
