Key figures
Texas accounting
2026, with sources
A margin tax, not an income tax
Texas taxes a company’s “taxable margin” through the franchise tax, administered by the Texas Comptroller. Margin is total revenue less the most favorable of four deductions, apportioned to Texas and taxed at 0.75%, or 0.375% for a company primarily in retail or wholesale. A company with $20 million or less in total revenue can instead use the EZ computation: 0.331% of apportioned revenue, with no deductions.
The franchise tax reads its revenue lines from the federal return, but Texas defines the Internal Revenue Code as the code in effect for federal tax years beginning January 1, 2007. Because margin starts from revenue and not from taxable income, the federal fights over Section 174 capitalization and bonus depreciation mostly don’t reach the Texas number; what reaches it is how revenue and cost of goods sold are defined.
- Total revenue × 70%
- Total revenue minus cost of goods sold
- Total revenue minus compensation (capped per person)
- Total revenue minus $1 million
Apportionment and combined groups
Texas apportions on a single gross receipts factor: Texas receipts over everywhere receipts. Services are sourced where they are performed, but the Comptroller’s apportionment rule (34 TAC §3.591) treats receipts from access to software as a service as internet hosting, sourced to where the customer is. For a SaaS company, that means Texas customers pull margin into Texas even if nobody on the team lives there.
Affiliated entities that form a unitary business file one combined report. For a Delaware parent with a single operating subsidiary that usually means one report covering both.
What it does to the books
Under the no-tax-due threshold, the provision is zero and the work is a Public Information Report. Above it, the franchise tax is generally accounted for as an income tax under ASC 740, so a Texas line appears in current tax expense, and differences between book revenue and the federal revenue lines Texas starts from can create deferred items. Because the report year runs on the prior year’s accounting period, the tax booked for 2026 is paid with the May 2027 report.
The federal baseline
This page covers what Texas adds. The federal rules underneath it apply here too.
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 the margin tax an income tax for the provision?
It usually is treated as one. Because the margin calculation deducts cost of goods sold, compensation or a flat 30% from revenue, the franchise tax is generally accounted for under ASC 740 as an income tax, so it belongs in the tax provision rather than in operating expenses. Confirm the treatment with whoever signs off your provision.
Accounting next door
- NMNew Mexico accountingA flat 5.9% corporate income tax from 2025, a $50 franchise tax per corporation, worldwide combined reporting by default and a three-factor apportionment formula.
- OKOklahoma accountingOklahoma taxes corporations at a flat 4%, apportions by three equal factors, repealed its franchise tax after 2023, and wants Form 512 30 days after the federal due date.
- ARArkansas accountingArkansas taxes corporate income on a graduated scale topping out at 4.3%, apportions by a single sales factor with market sourcing under Act 719, and allows no bonus depreciation.
- LALouisiana accountingLouisiana taxes corporate income at a flat 5.5% from 2025 and repealed its capital-based franchise tax for periods from 2026. The CIFT-620 is due May 15 for calendar-year companies.
Founder guides on this
- US GAAPUS GAAP for early-stage startups, in plain EnglishAccrual accounting, revenue recognition (ASC 606), leases (ASC 842), stock compensation and capitalized software: what each means for a small company.
- R&D taxThe R&D tax credit and Section 174A for startupsEngineering salaries can earn a federal R&D credit against payroll tax, and Section 174A lets you deduct US research again. What qualifies, what to track.
- FundraisingAudit-ready books before your Series AInvestors, lenders and auditors ask for the same things: accrual statements, reconciled accounts and support for every balance. How to be ready first.
More of the Texas guide
- ReceivablesReceivables and sales tax in TexasSales tax registration, economic nexus, whether SaaS is taxable, and collecting from customers
- PayablesPayables and contractors in TexasPaying vendors and contractors: 1099 filing, use tax, contractor tests and withholding
- PayrollPayroll taxes and employer rules in TexasWithholding, unemployment insurance, paid leave, minimum wage and the rules on paydays
- ComplianceCompliance and filings in TexasRegistering to do business, annual reports, franchise tax and the filing calendar
- AdvisoryAdvisory: credits and decisions in TexasCredits, incentives and the decisions that are cheaper to get right the first time
Sources
Checked against each agency’s own page on . Rates and thresholds change, usually on January 1.
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.