What the Form Is For
The Texas Franchise Tax Report (Form 05-158) is the state's Long Form report used by businesses to calculate and pay franchise tax, which Texas calls a "privilege tax" for the right to conduct business in the state. Unlike income tax, franchise tax is based on a company's "margin"—essentially a measure of business activity rather than pure profit. The form comes in two pages (Form 05-158-A and 05-158-B) and collects detailed financial information to determine how much tax a business owes based on its revenue, deductions, and Texas business activity.
For the 2023 report year, any business entity that doesn't qualify to file a simpler No Tax Due Report (Form 05-163) or EZ Computation Report (Form 05-169) must use the Long Form. This includes corporations, limited liability companies, partnerships, professional associations, banks, trusts, and most other legal entities formed in Texas or doing business in Texas. The form requires businesses to report total revenue, choose a deduction method (cost of goods sold, compensation, or the standard 70 percent calculation), apportion their margin to Texas, and apply the appropriate tax rate. Retail and wholesale businesses pay 0.375 percent, while other businesses pay 0.75 percent on their taxable margin.
Most entities must also file an accompanying information report—either the Public Information Report (Form 05-102) for corporations, LLCs, professional associations, limited partnerships, and financial institutions, or the Ownership Information Report (Form 05-167) for associations, trusts, and other entity types. These information reports provide transparency about business ownership and operations but don't calculate tax liability.
When You’d Use Form 05-158
Standard Annual Filing
The Texas Franchise Tax Report is due every year on May 15 (or the next business day if May 15 falls on a weekend or holiday). The 2023 report covers your business's accounting period that ended in 2022. For example, if your company has a December 31 fiscal year end, your 2023 franchise tax report would be based on the period from January 1, 2022, through December 31, 2022. First-time filers became subject to franchise tax during calendar year 2022 and filed their first annual report on May 15, 2023.
Final Reports
If your business is closing, merging, converting, or ending its Texas presence, you must file a final report within 60 days after ceasing to do business in Texas. Mark the report "FINAL" and include it with your request for a Certificate of Account Status (Form 05-359) needed to terminate with the Texas Secretary of State.
Late Filing
If you miss the May 15 deadline, you should file as soon as possible. The state assesses a $50 late filing penalty automatically, even if you owe no tax. If you owe tax and pay 1–30 days late, add a 5 percent penalty; if you pay more than 30 days late, the penalty increases to 10 percent. Interest accrues on unpaid taxes starting 61 days after the due date.
Amended Returns
You can file an amended report to correct mathematical errors, change your deduction method, or support a refund claim. Entities that initially filed simpler forms can amend to the Long Form if they discover better deductions.
Extensions
You can request an extension by filing online through Webfile or submitting Form 05-164 with payment on or before May 15. Most entities receive an extension until November 15, with variations depending on prior payments.
Key Rules or Details for 2023
No Tax Due Threshold
For 2023 reports, if your annualized total revenue is $1,230,000 or less, you qualify to file the simpler No Tax Due Report.
EZ Computation Alternative
Entities with revenue of $20 million or less can use the EZ Computation method, though deductions and credits are limited.
The $1,000 Minimum
If your calculated tax is less than $1,000, you owe nothing—but must still file.
Combined Reporting
Affiliated businesses engaged in a unitary business must file a combined group report.
Electronic Filing Requirements
Certain thresholds require mandatory electronic filing and payment through Webfile or TEXNET.
Information Report Requirement
Most entities must file either Form 05-102 or 05-167 alongside the tax report.
Accounting Period Rules
Reports follow federal accounting periods, with special rules for short or initial periods.
Step-by-Step (High Level)
Step 1: Determine Your Filing Requirement
Calculate revenue and decide whether to use No Tax Due, EZ Computation, or Long Form.
Step 2: Gather Your Financial Information
Collect revenue, deductions, and apportionment data.
Step 3: Calculate Total Revenue
Use Form 05-158-A and apply allowable exclusions.
Step 4: Choose Your Deduction Method
Compare all margin calculation options and select the lowest.
Step 5: Apportion to Texas
Determine the portion of revenue attributable to Texas.
Step 6: Apply the Tax Rate
Use the correct rate based on your business type.
Step 7: Apply Any Credits
Subtract applicable credits using required forms.
Step 8: Calculate Final Tax and Penalties
Determine total owed and include penalties if late.
Step 9: Complete Required Supplemental Forms
Prepare all required additional reports and schedules.
Step 10: File and Pay
Submit via Webfile or mail and retain records.
Common Mistakes and How to Avoid Them
Missing the Information Report
Always file required information reports with your tax report.
Miscalculating Annualized Revenue
Use proper formulas—don’t estimate.
Exceeding the Compensation Limit
Apply the $400,000 cap per individual.
Choosing the Wrong Tax Rate
Ensure your business qualifies for retail/wholesale rates.
Filing Late Without an Extension
Even no-tax filers face penalties if late.
Incorrect Combined Reporting
Understand when combined reporting is required.
Using 1099 Payments in Compensation
Only include W-2 wages and eligible benefits.
What Happens After You File
Immediate Processing
Electronic filing provides instant confirmation; paper filing takes longer.
Payment Processing
Electronic payments post quickly; checks take weeks.
Account Updates
Monitor your status through the Comptroller’s system.
Notices and Audits
Respond promptly to any issues or audit requests.
Refunds
Refunds may take several months and require proper filing.
Next Year's Obligation
Franchise tax is annual—mark your calendar.
Certificate of Account Status
Required for business changes like dissolution or merger.
FAQs
If my business had no activity during the year, do I still need to file?
Yes. Most businesses must still file, even with zero activity.
Can I file an extension even if I don't owe any tax?
Yes, though payment requirements may apply depending on prior filings.
What's the difference between the Public Information Report and the Ownership Information Report?
Different entity types file different reports; one is public, the other confidential.
My company is owned by another company. Do we file separately or together?
It depends on whether you're part of a unitary business.
Can I switch from EZ Computation to the Long Form?
Yes, you can switch annually based on what benefits you most.
What if my accounting period changed?
You must follow federal changes and adjust your reporting period accordingly.
Can I get a penalty waiver?
Possibly, if you can show reasonable cause with documentation.
How long should I keep records?
At least four years, though longer retention is often recommended.
Sources
All information in this guide comes from the Texas Comptroller of Public Accounts, including official forms, instructions, and publications.
