Texas Business Taxes at a Glance
Texas is often described as a "no income tax" state. That is true for individuals: Texas does not tax wages or other personal income. It is not true for most businesses. Corporations, LLCs, limited partnerships, and many other entities owe the Texas franchise tax, sellers must collect sales and use tax, and property tax is a major cost that is set locally. BOMCAS helps Texas owners keep these obligations organized and on schedule, alongside the federal returns that still apply to everyone.
The Texas Franchise Tax Is the Main Business Tax
The franchise tax is administered by the Texas Comptroller of Public Accounts. It applies to "taxable entities" doing business in Texas, which includes corporations, LLCs, limited partnerships, professional associations, and business trusts. Sole proprietorships and general partnerships owned directly by individuals are generally outside it.
The tax is calculated on margin rather than net income. An entity's margin is total revenue minus one of several allowed deductions, such as cost of goods sold or compensation, or a set percentage of revenue, subject to the rules on which method may be used. Retail and wholesale businesses qualify for a lower rate than other businesses, and smaller entities may be able to use the simpler EZ computation. Related businesses that operate as a unitary group generally file a combined report rather than separate ones.
Choosing a margin method is not a one-time decision. The best option can change from year to year as revenue, payroll, and costs shift, so we model the alternatives each year rather than repeating last year's approach.
Annual Reports, Even When No Tax Is Due
Reports are due each year, and the annual due date for most entities falls in May. Entities with revenue at or below the no-tax-due threshold no longer file a separate No Tax Due Report for report years 2024 and later, but they still must file a Public Information Report or Ownership Information Report, unless an exemption applies. Missing that information report can lead to forfeiture of the entity's right to transact business in Texas, which creates problems with banks, contracts, and lawsuits.
We track:
- The annual franchise tax report or the information report that replaces it
- Extensions and the payment rules that come with them
- Accounting period and revenue figures that tie back to the federal return
- Combined group membership when entities are added or sold
The no-tax-due threshold and rates are set and adjusted by law, so we confirm the current figures with the Comptroller before each filing.
Sales and Use Tax in Texas
Texas has a state sales and use tax of 6.25 percent, and cities, counties, transit authorities, and special purpose districts can add local taxes on top. The combined rate depends on where the sale is sourced, which differs for sellers with a place of business in Texas and sellers shipping from outside the state.
Any business selling taxable goods or taxable services in Texas needs a sales and use tax permit from the Comptroller. Texas taxes more services than many people expect, including data processing, information services, and certain repair, security, and building maintenance services. Remote sellers above the Comptroller's revenue threshold must also register, and they may be able to use the single local use tax rate instead of tracking every local rate.
Our sales tax work includes:
- Determining whether your products and services are taxable
- Registering for a permit and setting the right filing frequency
- Preparing monthly, quarterly, or annual returns
- Reconciling tax collected in your sales system to the general ledger
- Reviewing resale and exemption certificates before an audit asks for them
Use tax is the part businesses most often miss. When you buy taxable items from a vendor who did not charge Texas tax, the tax is usually owed by you directly. We look for this during bookkeeping so it does not build up.
Property Tax and Business Personal Property
With no personal income tax, Texas relies heavily on local property tax. Appraisal districts value property in each county, and taxing units such as school districts, cities, and counties set the rates. Businesses must render business personal property, such as equipment, furniture, and inventory, to the appraisal district.
Texas voters approved a constitutional amendment in November 2025 that exempts a larger amount of business personal property value starting with the 2026 tax year. Many small businesses will owe less, or nothing, on their equipment. Renditions and asset records still matter, because the appraisal district needs accurate information to apply the exemption. We keep your fixed asset register in a form that supports both the federal depreciation schedule and the rendition.
Payroll in a State Without Income Tax Withholding
Texas employers do not withhold a state income tax from wages. That simplifies payroll, but it does not remove state reporting. Employers register with the Texas Workforce Commission and file quarterly wage reports and state unemployment tax. New employers receive an assigned rate, and the rate later reflects the employer's own history.
Federal payroll obligations, including withholding, FICA, and federal unemployment tax, apply in full. We run payroll, file the quarterly reports, and reconcile wages between payroll, the general ledger, and year-end W-2s.
Energy, Construction, Logistics, and Health Care
Texas has a broad economy, and each sector brings its own tax questions:
- Energy and oilfield services: joint interest billing, severance taxes administered by the Comptroller, equipment-heavy fixed asset records, and sales tax questions on oilfield services
- Construction and trades: the difference between lump-sum and separated contracts for sales tax, job costing, and retainage tracking
- Logistics and wholesale trade: the retail and wholesale franchise tax rate, inventory accounting, and resale certificates
- Technology and professional services: taxable data processing and information services, revenue recognition, and multistate sales
- Real estate: property tax appeals support, entity structures, and rental income accounting
Arriving From California or Another Income-Tax State
People moving to Texas from California, New York, and other income-tax states should expect the former state to file a part-year return and sometimes to review the move. California, for example, may tax income sourced there after you leave, such as compensation earned while working there, rental income, or gain on property located there. We prepare the departure-year return and help you keep the records that show when the move happened.
Bookkeeping That Supports the Filings
Every Texas filing above depends on clean books. Franchise tax margin uses revenue and cost figures that should match your federal return. Sales tax returns should tie to recorded sales. Renditions should match the fixed asset register. BOMCAS provides monthly bookkeeping, account reconciliations, and year-end financial statements built to support these filings, so tax season is a review rather than a rebuild.
Working With BOMCAS in Texas
Entities filing franchise tax reports and PIR or OIR, sellers collecting local sales tax, and owners filing business personal property renditions can contact BOMCAS for a remote review. Local pages for Texas cities and services are planned under this section. Return to the BOMCAS home page or see our United States services. Use this page as general background, not as advice for your own situation.
Talk to BOMCAS About Your Texas Taxes
Have a question about your Texas filings, payroll or bookkeeping? Contact BOMCAS or use the contact form below, and we will get back to you as soon as possible. You can also browse all United States services.