You did not move to Texas to deal with annual filings. You moved for the lack of state income tax. So when a piece of mail from the Comptroller of Public Accounts lands in your office stamped "Notice of Intent to Forfeit," it tends to come as an unpleasant surprise — especially when you do not owe a dime in tax.
This is the paradox of the Texas franchise tax. The state collects no personal income tax, and the vast majority of small businesses owe zero franchise tax under the current $2.65 million revenue threshold. But "owe zero" is not the same as "do nothing." If you skip the annual Public Information Report, the state can strip your LLC of its right to do business in Texas, expose officers and managing members to personal liability for company debts, and lock you out of Texas courts. All for a form that takes about fifteen minutes to fill out.
This guide walks through what every small business with Texas nexus needs to know for the 2026 report year: who must file, what the threshold change means, how the margin tax actually works if you cross the line, and exactly how to handle the Public Information Report so the Comptroller never has a reason to send that ominous notice.
The Big Picture: A Franchise Tax That Most Small Businesses Do Not Pay
The Texas franchise tax is a privilege tax. Texas does not tax personal or corporate income, so the state instead charges entities for the privilege of doing business under its laws. It applies to corporations, limited liability companies (LLCs), limited partnerships, professional associations, and most financial institutions that are either formed in Texas or that have nexus in the state. Sole proprietorships and general partnerships owned only by natural persons are exempt — one of the reasons many freelancers in Texas never form an LLC at all.
For 2026 and 2027 reports, the no-tax-due threshold has climbed to $2.65 million in annualized total revenue. The previous threshold, in effect for 2024 and 2025 reports, was $2.47 million. The bump is significant: a business pulling in $2.5 million in revenue last year would have owed franchise tax under the 2024 rules but now drops back under the line. The Comptroller estimates that roughly nine out of ten Texas entities will fall under the threshold and owe nothing.
The catch is that "owing nothing" does not get you out of paperwork.
What Changed for 2026
Starting with reports due on or after January 1, 2024, the Comptroller eliminated the No Tax Due Report (Form 05-163) for entities at or below the threshold. Before that change, businesses had to affirmatively file a return saying "we owe nothing." Now, if your annualized total revenue is at or below $2.65 million, you skip the No Tax Due Report entirely.
But you still have to file an information report:
- Public Information Report (Form 05-102) if you are a corporation, LLC, limited partnership, professional association, or financial institution.
- Ownership Information Report (Form 05-167) for other taxable entities, such as trusts, partnerships of partnerships, and joint ventures.
Both forms contain similar information — officers, directors, managing members, registered agent, principal office address — but the PIR is published publicly on the Comptroller's Taxable Entity Search, while the OIR is confidential. Most small businesses file the PIR.
The deadline is unchanged: May 15 every year, or the next business day if May 15 falls on a weekend or holiday.
Step One: Figure Out Whether You Owe Tax
Even if you're confident you're under the threshold, run the numbers. "Annualized" matters: if your business was open only six months of the year, you do not get to compare your six-month revenue to $2.65 million — you annualize it first by dividing total revenue by days in your reporting period and multiplying by 365.
A boutique that opened July 1, 2025, and made $1.5 million in its first six months would annualize to roughly $3 million. That is over the threshold, even though the dollars in the bank tell a different story.
If you're under the threshold after annualizing: skip ahead to the Public Information Report section. If you're over, you need to actually compute the margin tax.
How the Margin Tax Works for Businesses Over the Threshold
Texas does not tax net income. It taxes "margin," which is calculated under whichever of four methods produces the lowest result:
- 70% of total revenue
- Total revenue minus cost of goods sold (COGS)
- Total revenue minus total compensation
- Total revenue minus $1 million
You pick the method that gives you the smallest taxable margin, then apply your apportionment factor (Texas gross receipts over total gross receipts) and multiply by the tax rate.
The rates for 2026:
- 0.375% for entities primarily engaged in retail or wholesale trade
- 0.75% for all other taxable entities
There is also a simplified election called the EZ Computation available to entities with annualized total revenue of $20 million or less. Under the EZ method, you skip the four-method margin analysis entirely and just multiply apportioned total revenue by 0.331%. The tradeoff: you lose the COGS deduction, the compensation deduction, and any credits. For some businesses — typically service-heavy firms with low COGS and low payroll — the EZ Computation actually wins. For others, the standard margin calculation saves real money.
Practical rule: if your revenue is between $2.65 million and $5 million, run the calculation under EZ and at least one standard method. The difference can be several thousand dollars one way or the other.
The Public Information Report: What It Asks and How to File
The PIR is short, but pay attention because it becomes part of the public record. Information requested includes:
- The entity's legal name, Texas taxpayer number, and Federal Employer Identification Number
- Principal office and principal place of business addresses
- The name and mailing address of each officer, director, member, or manager
- The name of any entity that owns 10% or more of the filing entity
- Each subsidiary in which the filing entity owns a 10% or greater interest
- The name and address of the registered agent
If nothing has changed since last year, you can confirm the prior year's information and move on. If officers have changed, members have come and gone, or you have moved offices, this is your chance to update the record.
Filing electronically through Webfile is the path of least resistance. The basic flow:
- Go to the Texas Comptroller's Webfile portal and either log in or create a new profile using your 11-digit Texas taxpayer number.
- From your dashboard, find the entity under "My Taxpayer Accounts" and click into it.
- In the "Pay Taxes/Fees" column, choose File a Public/Ownership Information Report.
- Review or update officer, director, and ownership information.
- Submit. Webfile returns a confirmation number — save it.
Filings submitted electronically must be in by 11:59 p.m. Central Time on the due date. The portal closes briefly during late-night maintenance windows, so do not wait until 11:50 p.m. on May 15.
What If You Miss the Deadline
The penalty regime distinguishes between the franchise tax and the information report:
- For the franchise tax itself: 5% penalty if you file within 30 days of the due date, 10% penalty after 30 days, plus interest at the federal short-term rate plus 4.25% (adjusted annually).
- For the PIR or OIR: no automatic late-filing penalty. There is no $50 late fee here, contrary to what some older guides still claim.
The bigger problem with a late PIR is not a dollar penalty. It is forfeiture.
Forfeiture: How the State Punishes Non-Filers
If you fail to file or fail to pay, the Comptroller mails a Notice of Intent to Forfeit. You have 45 days from the date of that notice to fix the problem. If you do not, the Comptroller forfeits your corporate privileges. Two months later, the issue is escalated to the Secretary of State, which can forfeit your charter or certificate of authority entirely.
The consequences are serious:
- Your entity loses the right to transact business in Texas. Contracts you sign during forfeiture may be unenforceable, and any party you do business with can challenge the relationship.
- You lose the right to sue or defend in Texas courts. If a customer stiffs you or someone sues your business, you literally cannot show up. This is by design — the state wants you to fix the problem so badly that it removes your courtroom shield.
- Officers, directors, and managing members become personally liable for debts the entity incurs during the forfeiture period. The liability protection you formed the LLC for in the first place evaporates.
- The entity's name becomes available for someone else to claim after charter forfeiture, which can cause real problems if anyone is paying attention to your brand.
A small contractor in Houston who skipped two consecutive PIR filings discovered the personal liability rule the hard way during a lawsuit over an unpaid subcontractor invoice. The court allowed the plaintiff to pursue the owner's personal assets for debts the LLC incurred while it was forfeited. There was no franchise tax owed; just a missed form.
Reinstating a Forfeited Entity
Reinstatement is doable but tedious. The process generally runs:
- File all delinquent reports — franchise tax returns and PIRs/OIRs for every missed year.
- Pay any tax, penalty, and interest that has accrued.
- Request a Tax Clearance Letter from the Comptroller by filing Form 05-391. The Comptroller verifies you are current and issues the letter, usually within several weeks.
- File Form 801 (Application for Reinstatement and Request to Set Aside Tax Forfeiture) with the Texas Secretary of State, attaching the Tax Clearance Letter and the $75 filing fee.
If the entity has been forfeited for more than three years, additional procedures apply, and you may need to re-form an entity entirely to clear up title to assets that were in the forfeited company's name. Banks, vendors, and title companies tend to discover these problems at the worst possible moment, like the day before a closing.
The cost of reinstatement — fees, penalties, accountant time, and lost business hours — typically runs many multiples of what filing the PIR on time would have cost. Treat the May 15 deadline as immovable.
Special Situations Worth Flagging
A few scenarios trip up small businesses regularly:
You formed an LLC last year but had no revenue. You still file. An LLC with no operations files a PIR with zero revenue. The state cares that you exist, not that you did anything.
You are a Texas LLC living in another state. Domicile in Delaware, operations in California, but you are still a Texas-formed entity? You file. The PIR obligation follows the entity that exists under Texas law, regardless of where you actually operate.
You are an out-of-state entity with Texas customers. Economic nexus rules apply. If you have a physical presence in Texas, employees in Texas, or meaningful Texas gross receipts, you likely need to register and file annually. The $500,000 economic nexus threshold for franchise tax purposes applies to the gross receipts test; consult a Texas tax advisor if you are close.
You ended your business mid-year. Texas requires a Final Report due 45 days after the entity ceases doing business in Texas. Do not assume the obligation ends when you stop operating. File the final report, the PIR, and a request for a Certificate of Account Status before the Secretary of State will accept your dissolution paperwork.
You filed an extension. Standard entities can extend to November 15 by filing Form 05-164 and paying either 100% of last year's tax or 90% of this year's estimate by May 15. Entities that pay franchise tax electronically (EFT) get a slightly different schedule: an automatic extension to August 15 and a second extension to November 15. The PIR is due with the original report on the extended date — there is no separate PIR extension.
Common Errors That Cost Businesses Real Money
The mistakes that trip up the most filers are not exotic:
- Wrong taxpayer number. Texas issues an 11-digit taxpayer number that is not your EIN. Mixing them up locks you out of Webfile and is a top driver of "lost" returns.
- Missing officer updates. If a manager left two years ago and you have been silently confirming the same form every year, you are publishing inaccurate public records. Update before submitting.
- Apportionment errors. Calculating Texas gross receipts incorrectly is the most common source of franchise tax assessments on audit, especially for service businesses that deliver work remotely. The sourcing rules changed materially in 2021 and again in 2023.
- Confusing accounting period vs. report period. The 2026 report uses financial information from your 2025 fiscal year. Filing 2026 numbers on a 2026 report is one of the more painful errors to unwind.
- Assuming TurboTax handles it. Most consumer tax software does not file Texas franchise tax reports. Even small business software often handles the federal return but skips Texas. Check explicitly.
Building a Simple Annual Compliance Routine
Texas franchise tax is not complicated for most small businesses, but it is unforgiving. A simple compliance calendar handles 95% of the risk:
- Each January, pull together your prior-year revenue figure and verify whether you are over or under the threshold. Snapshot it.
- Each March, log into Webfile and confirm the entity, officer, and registered agent information you intend to file.
- Each April, run the margin calculation if you are over the threshold. If you are close, run it both standard and EZ.
- Each May 1, file the PIR (and the franchise tax return if owed). Two weeks of cushion before May 15 lets you handle Webfile issues without panic.
- Each May 16, save the confirmation number and a PDF of the filed return to your records folder. Audit notices that arrive years later are much easier to respond to with a contemporaneous file.
For multi-entity small businesses — say, a real estate operator with a separate LLC for each property — multiply this by the number of entities and never let it slide. Each LLC is its own filer.
Keep Your Finances Organized So Compliance Is Boring
A lot of the friction around Texas franchise tax compliance comes down to one thing: not having clean books. If your revenue total for the year is something you have to reconstruct from bank statements every April, you are working harder than you need to and you are also more likely to file something wrong.
Beancount.io offers plain-text accounting that gives you complete transparency and version control over your financial data — every entry is a readable text file, every change is tracked in git, and there is no black-box software to wonder about when the Comptroller asks how you computed your annualized total revenue. Get started for free and turn the annual scramble into a calendar reminder.