At a glance
- Corporate tax
- Franchise tax 0.75% of margin
- Tax on wages
- None
- Sales tax
- 6.25% + up to 2% local
- Economic nexus
- $500,000 in Texas revenue
- Minimum wage
- $7.25/hr
- UI wage base
- $9,000
- New-employer UI rate
- 2.7% (or industry average, if higher)
- Paid leave program
- None
- Annual report
- May 15 — Public Information Report, no fee
2026 figures, each explained with its source on the area’s page. On top of the federal baseline.
Setup, in order
Register the corporation with the Secretary of State
Before doing business in Texas — usually the first hire or officeFile Form 301, Application for Registration of a Foreign For-Profit Corporation, with the Secretary of State, and appoint a registered agent with a Texas street address.
Expect the franchise tax account
After registrationThe Comptroller sets up the franchise tax account from the registration. The first report is due May 15 of the following year.
Register with the Texas Workforce Commission
When you first pay wages in TexasOpen an unemployment tax account with TWC through Unemployment Tax Services and file Form C-3 each quarter.
Report new hires
Within 20 days of each hireReport each new or rehired employee to the Attorney General’s Employer New Hire Reporting program.
Decide on workers’ compensation
Before the first employee startsBuy a workers’ compensation policy, or opt out as a non-subscriber by filing a notice with the Division of Workers’ Compensation and telling employees in writing.
Get a sales and use tax permit
On physical presence, or at $500,000 of Texas revenue in 12 monthsApply for a sales and use tax permit with the Comptroller. Remote sellers can elect the 1.75% single local use tax rate on the application.
Post the required notices
Before the first paydayPost the Payday Law notice of paydays and the other TWC workplace posters.
The six areas
- AccountingAccounting and state tax in TexasTexas has no corporate income tax. It taxes a company’s margin through the franchise tax, at 0.75%, and nothing is due below $2,650,000 of revenue for 2026 and 2027 reports.Franchise tax rate0.75%
- ReceivablesReceivables and sales tax in TexasTexas taxes SaaS as a data processing service on 80% of the charge, at 6.25% plus up to 2% local. Remote sellers register at $500,000 of Texas revenue.State sales tax6.25%
- PayablesPayables and contractors in TexasNo state 1099s and no contractor withholding. What Texas does reach in payables is use tax on untaxed software and TWC’s direction-or-control test for contractors.State 1099 filingNone
- PayrollPayroll taxes and employer rules in TexasNo wage tax and no paid leave program. A Texas hire means a TWC unemployment account on a $9,000 wage base, new-hire reporting and the Payday Law’s final-pay deadlines.State income tax withholdingNone
- ComplianceCompliance and filings in TexasRegister on Form 301 with the Secretary of State, then file a franchise tax report or Public Information Report with the Comptroller every May 15, even when no tax is due.Foreign registration$750
- AdvisoryAdvisory: credits and decisions in TexasFrom 2026 Texas has a new R&D credit, refundable to companies under the no-tax-due threshold. With no personal income tax, QSBS and PTE elections are federal questions.R&D credit rate8.722%
Who you register with
- Texas Comptroller of Public AccountsFranchise tax, sales and use tax permits, unclaimed property
- Texas Workforce Commission (TWC)Unemployment tax account, quarterly wage reports, Payday Law
- Texas Secretary of StateForeign registration (Form 301) and registered agent changes
- Office of the Attorney General — Child Support DivisionNew-hire reporting
- Texas Department of Insurance — Division of Workers’ CompensationWorkers’ compensation coverage and non-subscriber notices
Hiring across the border
An employee who lives in one state and works in another is the most common way a startup ends up registered in two. These are Texas’s neighbors.
- NMNew MexicoA gross receipts tax on services, a flat 5.9% corporate rate and combined returns
- OKOklahomaFlat 4% corporate tax, no franchise tax since 2024, but three-factor apportionment
- ARArkansas4.3% top corporate rate, an annual franchise tax, and an $11.00 minimum wage
- LALouisianaFlat 5.5% corporate tax, no franchise tax from 2026, and SaaS taxed by state and parish
Common questions
Does Texas have a corporate income tax?
Not in the usual sense. Texas has no corporate income tax; its franchise tax is a tax on “margin”, which starts from total revenue rather than taxable income. A company under the no-tax-due threshold owes nothing but still files a Public Information Report every year.
Is SaaS taxable in Texas?
Yes. The Comptroller treats SaaS and application service providers as data processing services. Twenty percent of the charge is exempt, so tax is collected on the other 80%, at the state rate plus the local rate.
Do we owe use tax on our software subscriptions?
Yes, if the seller didn’t charge Texas tax. A data processing service like SaaS is taxable in Texas, so software subscriptions bought from an out-of-state vendor that doesn’t collect owe use tax on 80% of the charge, reported on the company’s sales tax return or, without a permit, on a use tax return.
Is there any state or local withholding in Texas?
No. Texas doesn’t tax wages and has no city or county payroll taxes, so a Texas employee adds only a TWC unemployment account and a new-hire report to the federal payroll setup.
When is our first Texas franchise tax report due?
The first report is due May 15 of the year after the company became subject to the tax in Texas, usually the year after it registered. It covers the period from that start date to the end of the prior accounting year.
We’re pre-revenue. Can the Texas R&D credit pay us?
Possibly. From 2026 the Subchapter T credit is refundable to a company that owes no franchise tax because its annualized revenue is at or below the no-tax-due threshold or its tax is under $1,000, or because it is a qualified new veteran-owned business. A company using the EZ computation can’t take the refund. The company must have filed IRS Form 6765 for the year, and the Comptroller wants a copy with the refund claim.
Sources
Checked against each agency’s own page on . Rates and thresholds change, usually on January 1.
- Texas Comptroller — Franchise Tax
- Texas Comptroller — Subchapter T R&D credit
- Texas Legislature — SB 2206 (89R), enrolled text
- Texas Comptroller — Sales and Use Tax
- Texas Comptroller — Remote Sellers
- Texas Comptroller — Taxable Services (Pub. 96-259)
- Texas Workforce Commission — Tax Rates
- Texas Workforce Commission — Unemployment Tax
- Texas Workforce Commission — Texas Payday Law
- Texas Workforce Commission — Texas Minimum Wage Act
- Texas Attorney General — Employer New Hire Reporting
- Texas Department of Insurance — Division of Workers’ Compensation
- Texas Secretary of State — Business Organizations forms
- Texas Comptroller — Unclaimed Property: How to File
- Texas Workforce Commission — New Texas employers
- Texas Register, Dec 26, 2025 — Comptroller notice of the 2026 single local use tax rate
General information for US companies, not tax, legal or accounting advice for yours. Rules and thresholds change; confirm the specifics with a CPA or the agency before you act on them.