Does your business have to file a Texas annual report and pay franchise tax? Report filing requirements in Texas vary according to the type of business entity, so the answer to that question is, “It depends.”

In this article, I’ll list the different annual reports that businesses may need to submit to the Texas Comptroller’s office by the May 15 deadline of each year. I’ll also cover the basics of the Texas franchise tax, which must also be reported and filed by May 15.

Please note that due to the coronavirus pandemic, Texas has extended the 2020 annual report and franchise tax filing due date to July 15, 2020, to be consistent with the IRS filing extensions. The extension is automatic and applies to all franchise taxpayers.

To ensure you understand your business’s specific obligations, I recommend talking with an attorney and tax professional.

Required Annual Reports in Texas

Most domestic entities (companies registered in Texas) and foreign entities (companies registered in a different home state but conducting business in Texas) need to file one of the following annual reports:

Public Information Reports

Businesses subject to the Texas franchise tax must file these reports with the Texas Comptroller of Public Accounts when paying their franchise tax. Among the entities required to submit Public Information Reports include:

Key company details that Texas businesses must provide in their Public Information Reports include:

  • Taxpayer information – The entity’s taxypayer name, tax ID number, and the Secretary of State File Number or Comptroller File Number)
  • Mailing address
  • Principal office where the entity’s records are maintained
  • Principal place of business where the entity carries out day-to-day operations
  • Names, titles, term dates, and addresses of the officers, directors, members, general partners, or managers of the entity
  • Owned entities – If the entity owns an interest of 10 percent or more in any subsidiaries
  • Owned by, corporation – Any parent entities that have an interest of 10 percent or more of the filing entity
  • Registered agent information

There is no fee from the Texas Comptroller’s office to file a Public Information Report.

Texas Ownership Information Reports

According to the Texas Comptroller’s website, “entities other than Corporations, Limited Liability Companies, Limited Partnerships, Professional Associations or Financial Institutions” must file an Ownership Information Report. For example, Limited Liability Partnerships (LPs that have registered as LLPs with the Secretary of State office) and Trusts must file this report.

Information requested on the form includes:

  • Taxpayer information – The entity’s taxypayer name, tax ID number, and the Secretary of State File Number or Comptroller File Number)
  • Mailing address
  • Owner Information for each partner (partnership), trustee (trust), and any other individual or entity that owns an interest of 10 percent or more in the entity – Names, mailing addresses, type of owner (general partner, limited partner, or other), federal tax ID
  • Owned entities – If the entity owns an interest of 10 percent or more in any subsidiaries or entities

There is no fee from the Texas Comptroller’s office to file an Ownership Information Report.

In addition to the Ownership Information Report to the Comptroller, LLPs must also submit an Annual Report to the Texas Secretary of State. That report is due by  June 1 of each year with a $200 per general partner filing fee.

Periodic Report of a Nonprofit Corporation

Tax-exempt nonprofit corporations must submit a Periodic Report to the Texas Secretary of State office, not more than once every four years. The State will send notice to the nonprofit’s registered agent to notify when the report is required. The state fee for filing this report is $5.

Also, limited partnerships that are not subject to franchise tax are required to file a periodic report. The filing fee for LPs is $50.

No Tax Due Information Report

A business can qualify to file the Texas Franchise Tax No Tax Due Report if any of the following statements are true:

  • The entity has annualized total revenues less than or equal to the State’s current “no tax due threshold.” For 2020, that revenue threshold is $1,180,000.
  • The entity has no Texas receipts.
  • The business is considered a “passive” entity (per Chapter 171 of the Texas Tax Code).
  • The business is a real estate investment trust.

There is no fee from the Texas Comptroller’s office to file a No Tax Due Information Report.

Texas Franchise Tax

Limited partnerships, limited liability partnerships, corporations, and limited liability companies in Texas are among the entities usually subject to franchise tax in Texas. Also, starting in 2020, the Comptroller’s office is requiring businesses with no physical presence in Texas to pay franchise tax. “A foreign taxable entity with no physical presence in Texas now has nexus if, during any federal accounting period ending in 2019 or later, it has gross receipts from business done in Texas of $500,000 or more.”

Sole proprietorships and general partnerships do not have to pay franchise tax in Texas.

For most entities, the franchise tax is .75 percent of taxable margin. For entities that primarily conduct retail or wholesale trade, the franchise tax is .375 percent of taxable margin if:

  1. The total revenue from retail or wholesale trade is greater than the business’s revenue from other activities.
  2. Less than half of the total revenue from its retail or wholesale trade comes from the sales of products the entity produces independently or as part of an affiliated group.
  3. The entity isn’t a utility company.

There are nuances and exceptions to these rules. Therefore, I encourage you to talk with a tax advisor who understands the complex Texas state tax code. Someone with that expertise can help you determine if your business owes franchise tax and determine what your tax liability is.

How and When to File Your Reports

To fully understand your business’s reporting and franchise tax responsibilities, talk with your attorney, accountant, or tax advisor for professional guidance.

New business entities must file their first annual report and pay franchise tax by May 15 of the year following their formation filing. For example, if a Texas LLC is formed in August of 2020, its first Public Information Report and franchise tax filing will be due by May 15, 2021.

As I mentioned earlier, the Texas Comptroller has extended its 2020 franchise report and tax due date from May 15 to July 15 to provide some relief during the coronavirus outbreak. That extension is automatic, requiring no special requests from businesses. Payments made after August 15 will be subject to penalty and interest. Businesses that need additional time can find information on the Comptroller’s website about how to request an extension.

Businesses can submit their annual reports and pay franchise taxes electronically through the Texas WebFile system. The State provides video tutorials of the process. However, filing reports and taxes in Texas can be confusing to those unfamiliar with the process.

Stay Compliant with CorpNet’s Help

To alleviate the stress of figuring out the paperwork on your own, ask my team of filing experts at CorpNet for assistance. CorpNet can ensure that you fulfill your obligations by helping you prepare and submit your filings.

We work with business owners in all 50 states to get their annual reports, franchise tax filings, and other compliance forms completed accurately and on-time.

Contact us to save time and get peace of mind!