What the Form Is For
Texas Form 05-158 is the annual franchise tax report that certain businesses must file with the Texas Comptroller of Public Accounts. Think of the franchise tax as a "privilege tax" – it's what Texas charges companies for the right to operate as a legal entity in the state. Despite its name, this tax applies to far more than just franchises. It covers most corporations, LLCs (including single-member LLCs), partnerships, professional associations, and other business entities formed in Texas or doing business in the state.
The form comes in two parts:
Form Structure
- Form 05-158-A (page 1) focuses on calculating your revenue and margin
- Form 05-158-B (page 2) determines your actual tax liability
This isn't an income tax based on profits – instead, it's based on your business's "taxable margin," which you calculate using one of several methods depending on what's most favorable for your company.
Required Additional Reports
You'll also need to file an information report alongside the tax report:
- Public Information Report
- Ownership Information Report
These provide details about your company's officers, directors, and owners.
Who Does Not Need to File
Importantly, not every business entity owes this tax. The following generally do not file:
- Sole proprietorships (except single-member LLCs)
- General partnerships where all owners are individuals (except LLPs)
- Certain exempt organizations
For the 2019 report year, if your business had total revenue of $1,130,000 or less when annualized, you qualified to file a simpler "No Tax Due Report" instead of the full Form 05-158.
When You’d Use It – Late and Amended Filing
You'll file Form 05-158 annually by May 15 each year.
Filing Timeline
The 2019 report covers your accounting period that ended in 2018. For example:
- Fiscal year ended Dec 31, 2018 → Report due May 15, 2019
- If May 15 falls on a weekend/holiday → Moves to next business day
Amended Filing
Sometimes you'll need to file an amended report after your original filing. You can amend to:
- Correct mathematical errors
- Fix reporting mistakes
- Support a refund claim
- Adjust for IRS changes
How to File an Amended Report
- Write "AMENDED REFUND" at the top of each page (if applicable)
- Complete corrected Form 05-158
- Include a signed explanation letter
- Attach supporting documentation
Late Filing Penalties
Late filing carries consequences:
- $50 penalty for late filing (even if no tax is due)
- 5% penalty if paid 1–30 days late
- Higher penalties beyond 30 days
Extensions
- Request before original due date
- Gives more time to file, not to pay
- Payment must still be made by May 15
Final Reports
You may also file a final report if your business:
- Terminates
- Merges
- Converts entity type
- Withdraws from Texas
Key Rules or Details for 2019
Taxable Margin Basics
The franchise tax is based on "taxable margin," not net profit.
Margin Calculation Methods
You can choose the lowest result from:
- Total revenue × 70%
- Total revenue − cost of goods sold
- Total revenue − compensation
- Total revenue − $1 million
No Tax Due Threshold
- $1,130,000 (2019 report year)
- Below this → No Tax Due Report allowed
EZ Computation Eligibility
Available if:
- Revenue ≤ $20 million
Calculation:
- Total revenue × apportionment % × 0.331%
Limitations:
- No deductions allowed
Tax Rates
- Standard: 1%
- Retail/Wholesale: 0.375%
Apportionment Rule
- Based on Texas vs. total receipts
- Only Texas portion is taxed
Compensation Deduction Rules
Includes:
- W-2 wages
- Officer compensation
- Certain benefits
Excludes:
- 1099 contractors
- Payroll taxes
Step-by-Step (High Level)
Step 1: Determine Filing Requirement
- Confirm entity type
- Check Texas activity
- Compare revenue to threshold
Step 2: Gather Financial Records
- Federal tax returns
- Revenue statements
- Payroll records
- COGS documentation
Step 3: Determine Accounting Period
- Based on prior federal tax period
- Must align with reporting rules
Step 4: Choose Margin Method
- Calculate all options
- Select lowest tax outcome
Step 5: Complete Form 05-158-A
- Report income categories
- Calculate total revenue
- Apply deductions
Step 6: Complete Form 05-158-B
- Apply apportionment
- Calculate tax rate
- Subtract credits
Step 7: Prepare Information Report
- Form 05-102 (PIR) or
- Form 05-167 (OIR)
Step 8: File and Pay
- Webfile (preferred)
- Tax software
- PDF/mail
Payment rules:
- < $10,000 → flexible payment options
- ≥ $10,000 → TEXNET required
Common Mistakes and How to Avoid Them
Missing the Deadline
- Filing is required even if no tax is due
- Late penalty applies regardless
Incorrect Accounting Dates
- Must match federal period
- First-time filers must adjust carefully
Wrong Margin Method
- Always compare all methods
- Do not reuse last year blindly
Compensation Errors
Common issues:
- Including 1099 payments
- Including payroll taxes
- Ignoring per-person limits
Apportionment Errors
- Reporting total margin instead of Texas portion
- Miscalculating percentage
Missing Required Reports
- PIR or OIR must be included
- Combined groups require Form 05-166
What Happens After You File
Processing and Confirmation
- Electronic → Immediate confirmation
- Mail → Several weeks
Review by Comptroller
They check for:
- Math errors
- Missing data
- Inconsistencies
Notices and Corrections
Common notices include:
- Missing forms
- Clarification requests
- Deduction verification
Refunds
To request:
- File amended report
- Include explanation
- Submit within 4 years
Audits
If selected:
- Provide documentation
- Review federal returns and records
- Possible additional tax, penalties, interest
Compliance Impact
Your filing status affects:
- Business licenses
- Certificates of account status
FAQs
What’s the difference between the Long Form and the EZ Computation Report?
The Long Form (Form 05-158) allows you to use all four margin calculation methods and claim deductions, while the EZ Computation (Form 05-169) simplifies the process using a flat calculation. The EZ method does not allow deductions, so businesses should calculate both options to determine which results in lower tax.
Do I need to file if my business had no activity or was losing money?
Yes. If your entity is taxable in Texas, you must file regardless of activity or profit. If revenue is below $1,130,000, you can file a No Tax Due Report. Failing to file due to inactivity is a common mistake that leads to penalties.
Can I get an extension to file my franchise tax report?
Yes, if requested by May 15. However, extensions only apply to filing—not payment. You must still estimate and pay any tax owed by the original deadline to avoid penalties.
What happens if I forget to file and realize it months later?
File immediately. You’ll incur a $50 penalty and possibly additional penalties and interest. First-time offenders may request a penalty waiver with reasonable cause.
I’m part of a combined group – does that change how I file?
Yes. Combined groups must file a single report including all members. One entity files on behalf of the group, and Form 05-166 must be included. The revenue threshold applies to the entire group, not individual entities.
How do I know which tax rate applies to my business?
Most businesses pay 1%. If over 50% of revenue comes from retail or wholesale, you may qualify for the 0.375% rate. Classification depends on business activity and industry codes.
What credits can I claim to reduce my franchise tax?
Available credits may include:
- Business loss carryforward
- Research & development credit
- Historic structure rehabilitation credit
Each credit has specific eligibility requirements and may require additional forms.
Note: This guide summarizes Texas franchise tax requirements for the 2019 report year based on information from the Texas Comptroller of Public Accounts. Tax laws and thresholds change periodically, so always verify current requirements when filing for report years other than 2019.
