B
Business Formation Guide
taxesUpdated 2026-03-31

Texas LLC Taxes: What You Owe

What taxes does an LLC pay in Texas?

Texas LLCs pay no state income tax. However, they owe franchise tax (0.75% of taxable margin under Tex. Tax Code Ch. 171) if annual revenue exceeds $2,650,000, plus sales tax (6.25% state + up to 2% local) on taxable sales. Federal self-employment and income taxes also apply based on the LLC's federal tax classification.

Franchise Tax Requirements

Texas imposes a franchise tax on LLCs doing business in the state at 0.75% of taxable margin (standard rate). Alternative rates apply: 0.375% for retail and wholesale businesses, or 0.331% using the EZ computation method under Tex. Tax Code Ch. 171.

No franchise tax is due if annualized total revenue does not exceed $2,650,000 (2026 threshold).

File franchise tax returns with the Texas Comptroller of Public Accounts by May 15 annually. Late payments incur a 5% penalty (1–30 days late) or 10% penalty (over 30 days), plus interest after 61 days. Non-payment results in forfeiture of the right to transact business and potential involuntary dissolution by the Secretary of State.

Sales Tax & Federal Obligations

LLCs must register for Texas sales tax (6.25% state rate plus up to 2% local tax, maximum 8.25% combined) if they sell taxable goods or services. Register at https://comptroller.texas.gov/taxes/sales/.

Federal taxes depend on the LLC's elected classification:

  • Single-member LLCs default to disregarded entity status (Schedule C); self-employment tax applies
  • Multi-member LLCs default to partnership status (Form 1065); self-employment tax applies
  • LLCs may elect S-corp or C-corp status for different tax treatment

Estimated federal tax payments are due April 15, June 15, September 15, and January 15.

Annual Reporting & Compliance

LLCs must file an annual Public Information Report (PIR) or Ownership Information Report (OIR) with the Texas Comptroller by May 15 (no filing fee). The first report is due May 15 of the year following formation. Late filing incurs a $50 penalty and may result in involuntary dissolution.

If your LLC is forfeited for tax non-compliance, reinstatement requires filing all delinquent reports, paying all taxes and penalties, obtaining tax clearance from the Comptroller, and filing reinstatement with the Secretary of State for $75.

For detailed guidance, visit the Texas Comptroller of Public Accounts at https://comptroller.texas.gov.

This is general information, not legal advice.