What the Form Is For
The Texas Franchise Tax Report (Form 05-158) is the state's way of collecting a privilege tax from businesses operating in or formed in Texas. Think of it as the price of doing business in the Lone Star State. This isn't an income tax—instead, it's based on your company's "margin," which is essentially your revenue minus certain deductions like cost of goods sold or compensation expenses.
Who Needs to File
Nearly every business entity formed in Texas or doing business here must file, including:
- Corporations
- Limited liability companies (LLCs)
- Partnerships
- Professional associations
- Banks
- Trusts
Exceptions
- Sole proprietorships (unless single-member LLCs)
- General partnerships where all owners are individuals
- Certain exempt nonprofit organizations
Types of Forms
- Long Form (05-158-A and 05-158-B)
- EZ Computation Report (Form 05-169)
Additional Required Reports
- Public Information Report (Form 05-102)
- Ownership Information Report (Form 05-167)
No Tax Due Threshold Update
As of 2024, businesses with annualized revenue at or below $2.47 million:
- Do not file a franchise tax report
- Only file the required information report
When You'd Use It
Annual Filing Deadline
- Due: May 15 each year
- Adjusted if it falls on a weekend or holiday
Late Filing
- $50 penalty (even if no tax due)
- 5% penalty (1–30 days late)
- 10% penalty (30+ days late)
- Interest accrues
Penalty Waivers
Possible for:
- Natural disasters
- Serious illness
- Incorrect official advice
Amended Reports
Used to:
- Correct errors
- Claim refunds
- Change margin calculation method
- Switch to deductions (COGS or compensation)
Final Reports
Required when:
- Business closes
- Entity merges or converts
- Operations cease
Deadline
- Within 60 days of termination
Additional Requirement
- Form 05-359 (Certificate of Account Status)
Key Rules or Details for 2024
How Taxable Margin Is Calculated
Choose the lowest of:
- Total revenue × 70%
- Revenue − cost of goods sold
- Revenue − compensation
- Revenue − $1 million
Apportionment Factor
- Texas gross receipts ÷ total gross receipts
No Tax Due Threshold
- $2.47 million (2024 onward)
Revenue Exclusions
Examples include:
- Federal obligation interest/dividends
- Certain flow-through funds
- Foreign royalties
Compensation Deduction Rules
Includes:
- W-2 wages
- Benefits (healthcare, retirement)
Excludes:
- 1099 labor
- Payroll taxes
Cost of Goods Sold (COGS)
Applies mainly to:
- Tangible goods
- Real property
Combined Group Reporting
Required for:
- Affiliated entities in a unitary business
Required Form
- Form 05-166 (Affiliate Schedule)
Step-by-Step (High Level)
Determine Your Filing Status
- Annualize revenue if needed
- Compare to threshold
Choose Your Form
- EZ Computation (≤ $20M revenue)
- Long Form (more detailed deductions)
Calculate Your Margin
- Apply all four methods
- Select lowest result
- Apply apportionment
Apply Tax Rates and Credits
- Multiply margin by tax rate
- Subtract credits
Supporting Forms
- Form 05-160
- Form 05-178
- Form 05-180
Complete Your Information Report
- Form 05-102 or 05-167
- Include ownership and business details
Submit and Pay
Filing Methods
- Webfile (online)
- Tax software
- Paper filing
Payment Methods
- Check
- Credit card
- EFT or TEXNET (depending on amount)
Common Mistakes and How to Avoid Them
Missing the $50 Late Filing Penalty
- Always file—even if no tax due
- Set reminders for May 15
Using the Wrong Information Report
- Verify entity type before filing
Incomplete Combined Group Filings
- Include all affiliates
- Ensure consistency across forms
Claiming Credits Without Documentation
- Always attach required forms
Forgetting Revenue Exclusions
- Review all eligible exclusions
Incorrect Apportionment Calculations
- Use correct Texas sourcing rules
Filing When You Don’t Need To
- Check threshold before filing
What Happens After You File
Processing Timeline
- Electronic: a few days
- Paper: several weeks
Account Status
- View via Webfile
- Confirm compliance
Certificates
- Request Certificate of Account Status anytime
Notices You May Receive
- Form 05-211 (Intent to Forfeit)
- Form 05-212 (Forfeiture Notice)
Consequences of Noncompliance
- Loss of business rights
- Loss of liability protection
- Public record issues
Audits
- Triggered by risk factors or randomly
What’s Reviewed
- Revenue calculations
- Deductions
- Apportionment
- Credits
Record Retention
- Keep documents for at least 4 years
After an Audit
- Receive adjustment notice
- Can request redetermination hearing
FAQs
I just formed my Texas LLC. When is my first franchise tax report due?
For entities formed on or after October 4, 2009, your first annual report is due on May 15 of the year following the year you became subject to the tax. The accounting period runs from formation through your federal accounting year-end within that calendar year.
Can I get an extension to file my franchise tax report?
Yes. File Form 05-164 by May 15. If approved, your deadline extends to November 15. You must still pay at least 90% of your estimated tax to avoid penalties.
My business closed. Do I still need to file?
Yes. You must file both a final report and any outstanding annual reports within 60 days. You’ll also need Form 05-359 to terminate your entity properly.
What if I already filed but made a mistake?
File an amended report. You can correct errors, change calculation methods, or request refunds. Refund claims must meet statute deadlines.
How do I know if I qualify for the EZ Computation?
If your annualized revenue is $20 million or less, you qualify. However, you give up deductions and credits. Always compare both methods before choosing.
What payment methods can I use?
Depends on prior payments:
- Under $10,000: check, card, or EFT
- $10K–$499K: electronic only
- $500K+: TEXNET required
My entity is part of a combined group. What do I file?
The reporting entity files the combined report and Form 05-166. Each member still files its own information report.
Sources
All information in this guide comes from official publications of the Texas Comptroller of Public Accounts, including Franchise Tax Overview (Publication 98-806), Texas Tax Code Chapter 171, Comptroller Rules, official form instructions, and Franchise Tax FAQ pages.
