What the Form Is For
The Texas Franchise Tax Report (Form 05-158) is used by businesses to report and pay franchise tax—a privilege tax imposed on each taxable entity that is either formed in Texas or conducts business within the state. This is not a tax on income but rather a tax for the privilege of doing business in Texas, calculated based on the entity's "margin."
The franchise tax applies to a broad range of business entities, including corporations, limited liability companies (including single-member LLCs and series LLCs), banks, savings and loan associations, partnerships (general, limited, and limited liability), trusts, professional associations, business associations, joint ventures, and S corporations. Essentially, if your business is legally organized and operates in Texas, you likely need to file.
However, not all entities are subject to this tax. Sole proprietorships (except single-member LLCs), general partnerships composed entirely of natural persons (except limited liability partnerships), and certain exempt entities under Texas Tax Code Chapter 171 don't need to file. Additionally, businesses with annualized total revenue at or below $2.47 million (for report years 2024-2025) qualify for the "no tax due threshold" and are not required to file a franchise tax report, though they must still file a Public Information Report or Ownership Information Report.
Form 05-158 is specifically the "Long Form" report, which consists of two pages (05-158-A and 05-158-B). This form is used by entities that don't qualify for or don't elect to use the simpler EZ Computation Report. The Long Form allows businesses to calculate their taxable margin using one of four methods: total revenue times 70 percent; total revenue minus cost of goods sold; total revenue minus compensation; or total revenue minus $1 million.
When You’d Use Form 05-158
Late Filings
The standard annual franchise tax report is due May 15 each year. If May 15 falls on a weekend or legal holiday, the next business day becomes the due date. The report covers your entity's accounting period, typically aligned with your federal tax year.
Life happens, and sometimes deadlines are missed. If you file your franchise tax report after the May 15 deadline, you'll face penalties:
- $50 penalty for any late report
- 5 percent penalty for payments 1–30 days late
- 10 percent penalty for payments over 30 days late
- Interest begins accruing after 61 days
To avoid penalties, you can request an extension:
- File Form 05-164 or submit an online extension payment by May 15
- Extended deadline becomes November 15
- Note: This extends filing time, not payment time
Amended Filings
Texas allows amended franchise tax reports to correct errors or update filings.
You can amend to:
- Correct errors
- Claim a refund
- Change margin calculation method
- Switch to COGS or compensation deductions
Requirements for Amendments
- Write "AMENDED REFUND" or "AMENDED RAR REFUND" on each page
- Include a signed explanation letter
- Attach Form 01-137 if using a representative
Mail to:
Texas Comptroller of Public Accounts
P.O. Box 149348
Austin, TX 78714-9348
Key Rules or Details
Tax Calculation
Franchise tax is based on "margin," calculated using one of four methods:
- Total revenue × 70%
- Total revenue – cost of goods sold
- Total revenue – compensation
- Total revenue – $1 million
Then apportion to Texas using gross receipts.
Tax Rates and Thresholds
- No tax due threshold: $2,470,000
- Retail/wholesale: 0.375%
- Other businesses: 0.75%
- Compensation deduction cap: $450,000 per person
EZ Computation Option
Eligible if revenue ≤ $20 million.
- Rate: 0.331%
- No deductions or credits allowed
Combined Reporting
Required for affiliated groups in a unitary business.
- File Form 05-166 (Affiliate Schedule)
- One reporting entity files for the group
Information Reports
Required alongside tax report:
- Form 05-102 (PIR) — public
- Form 05-167 (OIR) — confidential
Final Reports
Required when closing or ending Texas operations.
- File within 60 days
- Must obtain Certificate of Account Status (Form 05-359)
Step-by-Step (High Level)
Step 1: Gather Your Information
Collect:
- Federal tax return
- Payroll records
- Texas taxpayer number
- EIN
Step 2: Determine Total Revenue
Start with federal revenue and subtract allowed exclusions.
Step 3: Calculate Margin
Choose the lowest result from:
- 70% method
- COGS
- Compensation
- $1M deduction
Step 4: Apportion to Texas
Use:
Texas receipts ÷ total receipts
Step 5: Calculate Tax Due
Apply:
- 0.375% or 0.75%
Step 6: Apply Credits
Complete Form 05-160 if applicable.
Step 7: Complete Supporting Forms
- PIR or OIR
- Affiliate Schedule (if needed)
Step 8: File and Pay
Submit via:
- Webfile
- Software
- Paper
Common Mistakes and How to Avoid Them
Filing the Wrong Form
Compare Long Form vs EZ before filing.
Incorrect Revenue Annualization
Use:
(Total Revenue ÷ Days) × 365
Missing Information Reports
Always file PIR or OIR.
Forgetting Both Pages
Form 05-158 includes:
- Page A
- Page B
Compensation Deduction Errors
- Cap: $450,000 per person
- No 1099 deductions
Combined Reporting Confusion
Review rules before filing separate reports.
Missing Extension
File Form 05-164 by May 15 if needed.
What Happens After You File
Processing
Comptroller reviews your report and payment.
Account Status Update
Status updates to “active” if compliant.
Certificate of Account Status
Used for:
- Contracts
- Financing
- Business termination
Refund Processing
Refunds issued after review.
Audit or Review
Triggered by unusual activity.
Delinquency Notices
Sent for missing/incomplete filings.
Forfeiture and Reinstatement
Failure to file may result in forfeiture.
Next Year’s Filing
Maintain records for easier future filing.
FAQs
Do I need to file if my business made no profit or had a loss?
Yes. Franchise tax is based on revenue, not profit. If your revenue exceeds the threshold, you must file even if you had a loss.
Can I file my federal extension and use it for my Texas franchise tax report?
No. Texas requires a separate extension using Form 05-164.
Which is better for my business: the Long Form or the EZ Computation?
It depends. The Long Form allows deductions and credits, while EZ is simpler but more limited.
What if I filed separate reports but should have filed a combined report?
Contact the Comptroller immediately and correct the filing.
My entity just formed in Texas. When is my first report due?
May 15 of the following year after formation.
Can I get a refund if I overpaid my franchise tax?
Yes. File an amended report and include a detailed explanation.
What happens if I close my business mid-year?
You must file a final report within 60 days and settle all obligations.
