Texas Form 05-158: Franchise Tax Report – A Comprehensive Guide 2013

What Form 05-158 Is For

Form 05-158, officially titled the "Texas Franchise Tax Report," is used by taxable entities to report their annual franchise tax liability to the Texas Comptroller of Public Accounts. The Texas franchise tax is not based on net income like federal income tax. Instead, it's based on an entity's "taxable margin"—a figure derived from various calculations involving total revenue, deductions, and apportionment to Texas.

This form serves entities that must file the "Long Form" version of the franchise tax report. According to the Texas Comptroller's publications, virtually every business entity formed in Texas or doing business in Texas must file and pay franchise tax. This includes corporations, limited liability companies (LLCs), partnerships, professional associations, S corporations, banks, trusts, joint ventures, and most other legal entities. Notable exceptions include sole proprietorships (unless they're single-member LLCs), general partnerships composed entirely of natural persons, and certain exempt or passive entities.

The Long Form (Form 05-158) consists of two pages—05-158-A and 05-158-B—and requires detailed calculations of total revenue, allowable deductions (either cost of goods sold or compensation), apportionment factors, and applicable credits. Entities with annualized total revenue above the no tax due threshold ($2,650,000 for 2025) that don't qualify for or choose not to use the simpler EZ Computation Report typically use this form.

When You’d Use Form 05-158

Filing Deadlines

Understanding when to file is crucial for compliance. The annual franchise tax report is due May 15 each year. If May 15 falls on a weekend or holiday, the due date shifts to the next business day. This deadline applies regardless of whether you owe tax—even entities owing zero tax must file if their revenue exceeds the threshold.

Late Filing

If you miss the May 15 deadline, you'll face a mandatory $50 late filing penalty, even if no tax is due. If you're paying tax 1–30 days late, add a 5 percent penalty to the tax amount. If you're more than 30 days late, the penalty increases to 10 percent. Interest also accrues on unpaid tax amounts.

Extensions

You can request an extension of time to file by submitting Form 05-164 or filing online through Webfile on or before the original May 15 due date. To obtain a valid extension, you must pay either:

• 90 percent of the current year's tax liability
• 100 percent of the prior year's tax

The extension moves the deadline to November 15. Some entities required to pay by Electronic Funds Transfer (EFT) may qualify for:

• First extension: August 15
• Second extension: November 15

Amended Returns

You may file an amended Form 05-158 to:

• Correct mathematical errors
• Change your method of computing margin
• Support a refund claim

Entities that initially filed the EZ Computation or No Tax Due Report can amend to the Long Form if they want to claim deductions that reduce their liability.

Final Reports

If your entity is terminating, merging, or withdrawing from Texas, you must file a final report within 60 days after ceasing business operations, along with:

• Required information reports
• Form 05-359 (Certificate of Account Status request)

Key Rules or Details for 2025

Filing Requirements

The filing requirement applies to virtually all business entities doing business in Texas or formed in Texas, regardless of profitability.

No Tax Due Threshold

For 2025:

• Threshold: $2,650,000
• Below threshold: no tax report required, but must file PIR or OIR
• Tax under $1,000: no payment required, but filing still required

Tax Calculation Methods

Choose the method that results in the lowest tax:

1. Total revenue × 70%
2. Total revenue − cost of goods sold (COGS)
3. Total revenue − compensation
4. Total revenue − $1 million

Deductions

• COGS applies mainly to tangible property
• Compensation includes wages and benefits (with limits)
• Excludes contractor payments and payroll taxes

Apportionment

• Based on gross receipts
• Formula: Texas receipts ÷ total receipts
• Applies to taxable margin

Tax Rates

• 0.375% — retail/wholesale
• 0.75% — other entities

Required Information Reports

All entities must file:

• Form 05-102 (PIR) OR
• Form 05-167 (OIR)

Step-by-Step (High Level)

Step 1: Determine Filing Requirement

Calculate your annualized revenue to determine whether:

• You exceed the threshold
• You qualify for EZ Computation or Long Form

Step 2: Gather Financial Information

Collect:

• Federal income tax data
• Revenue details
• COGS documentation
• Compensation records
• Gross receipts by location

Step 3: Calculate Taxable Margin

• Report revenue on Form 05-158-A
• Calculate margin on Form 05-158-B
• Select lowest calculation method
• Apply apportionment

Step 4: Apply Tax Rate and Credits

• Multiply margin by applicable rate
• Subtract eligible credits

Step 5: Complete Information Report

• File PIR or OIR
• Include ownership and contact details

Step 6: File and Pay

Submit via:

• Webfile
• Tax software
• Mail

Payment required unless tax is under $1,000.

Common Mistakes and How to Avoid Them

Filing Incomplete Reports

Missing:

• Form 05-158-A or B
• Required schedules

Incorrect Annualization

Use correct formula:

• (Total revenue ÷ days in period) × 365

Misunderstanding Deductions

• COGS often not valid for service businesses
• Compensation has limits and exclusions

Apportionment Errors

• Use gross receipts (not net)
• Apply proper sourcing rules

Missing Registered Agent

• Must list a Texas resident agent

Forgetting Information Reports

• PIR or OIR is always required

Incorrect Entity Status

• Combined group errors can cause issues

What Happens After You File

Processing and Confirmation

• Electronic filing = immediate confirmation
• Paper filing = slower processing

Compliance Status

If correct:

• Entity remains in good standing

Notices and Issues

If errors occur, you may receive:

• Notice of Intent to Forfeit
• Notice of Forfeiture
• Missing information notices

Audits

Auditors may:

• Review calculations
• Request documentation
• Issue adjustments

Final Reports and Closure

After filing final report:

• Receive Certificate of Account Status
• Submit to Secretary of State

Extensions and Deadlines

Missing extended deadlines still results in penalties.

FAQs

What if my business had no Texas revenue?

Yes, you may still need to file. If your revenue is below the threshold, you only need to submit an information report (PIR or OIR). Entities with zero Texas receipts may still file to document zero liability.

Can I make estimated franchise tax payments?

No. Texas does not require quarterly estimated payments. You pay once annually with your report.

What’s the difference between Long Form and EZ Computation?

EZ Computation simplifies calculation but limits deductions and credits. The Long Form is more complex but can reduce tax liability through deductions.

Do I need to attach my federal tax return?

No. However, your report must be based on federal figures, and you should retain documentation for audits.

Can I amend if I filed the wrong report?

Yes. You can amend to correct errors or switch methods. If it reduces your tax, it may be treated as a refund claim.

How do I know if I qualify as a passive entity?

Passive entities earn only passive income and do not actively conduct business. However, they still must file a report to document status.

What happens if I forget to file a final report?

Your entity remains active and may accumulate penalties. You must file all required reports before officially closing your business.

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