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How to calculate your Texas franchise tax

How to calculate your Texas franchise tax

02/28/2023
How to calculate your Texas franchise tax
Blake Anderson Blake Anderson

The Texas franchise tax is a tax imposed on each business entity operating in Texas. The amount of tax liability is based on the entity's total revenue for the year. The franchise tax rates range from 0.575% to 2.5%, with a maximum tax liability of $1,000,000.

To calculate your franchise tax liability, you will need to determine your entity's total revenue for the year. This can be done by reviewing your financial statements or by using your entity's gross receipts tax return. Once you have determined your total revenue, you will need to apply the appropriate franchise tax rate to that amount.

The franchise tax rates are as follows:

- 0.575% for businesses with total revenue of $10,000,000 or less

- 1.15% for businesses with total revenue of more than $10,000,000 but less than $20,000,000

- 1.725% for businesses with total revenue of more than $20,000,000 but less than $30,000,000

- 2.3% for businesses with total revenue of more than $30,000,000

- The maximum franchise tax liability is $1,000,000.

Once you have calculated your franchise tax liability, you will need to pay that amount to the Texas Comptroller of Public Accounts. The Comptroller's office provides a variety of payment options, including electronic payment, credit card payment, and check or money order payment.

If you have any questions about the franchise tax or how to calculate your franchise tax liability, you should contact a tax professional or the Texas Comptroller of Public Accounts.

Every business entity registered with the Texas Secretary of State must pay an annual franchise tax, unless they are exempt. The amount of tax due is based on the entity's total revenue for the year.

To calculate your franchise tax, first, determine your entity's total revenue for the year. This is your gross receipts plus any other income, minus any returns and allowances.

Next, find your entity's tax rate. The rates for most business entities are found in the Texas Franchise Tax Rate Tables. If your entity is not listed in the tables, it has a rate of 0.575% of total revenue.

Once you have your total revenue and tax rate, multiply them together to get your franchise tax liability.

For example, let's say your business had $100,000 in total revenue for the year and your tax rate is 0.5%. Your franchise tax liability would be $500 ($100,000 x 0.5%).

If you have any questions about calculating your franchise tax, or if you need help filing your tax return, please contact a tax professional.


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