Texas Franchise Tax Calculator (Margin and No Tax Due Threshold)
Texas franchise tax is a margin tax, which means you pay on a portion of revenue instead of on profit. This calculator compares the four allowed margin methods, applies your Texas apportionment and checks the no tax due threshold so a controller can estimate the bill before the May filing.
Your numbers
Total revenue from the federal return lines used for the Texas report, for the whole combined group.
COGS as defined for Texas franchise tax. Enter 0 if you will not use this method.
Wages and cash compensation plus benefits, subject to the per-person cap. Enter 0 if you will not use this method.
Receipts sourced to Texas under the apportionment rules.
Verify the figure for your report year on the Texas Comptroller site. It has been adjusted for recent report years.
Your results
Estimate for planning only. Real reports involve combined group rules, the EZ computation option, per-person compensation caps, special COGS rules and annualization. Confirm with a Texas tax professional.
Franchise tax schedules from your ERP ledger
Optional: see how an ERP-connected assistant can prepare COGS and receipts schedules for review by your tax advisor.
Optional. The tool and every export work without this. No spam.
How to use the calculator
Enter total revenue for the combined group, then your COGS and compensation amounts. If you do not plan to use a method, leave the number at 0 and the calculator will treat it as the full revenue, which is harmless because another method will be lower. Enter Texas gross receipts and select the rate. The primary result shows the lowest margin you are allowed to use and the estimated tax after apportionment and the threshold test.
The four margin methods
Texas taxable margin is the lowest of four amounts. The first is 70 percent of total revenue. The second is total revenue less cost of goods sold. The third is total revenue less compensation. The fourth is total revenue less one million dollars. For manufacturers the COGS method is often the lowest because production labor, materials and some overhead qualify, but the compensation method wins in labor-heavy businesses with little material cost. Run both with realistic numbers before filing.
- 70 percent of total revenue
- Total revenue minus COGS
- Total revenue minus compensation
- Total revenue minus $1,000,000
Apportionment and the threshold
Taxable margin is multiplied by the ratio of Texas gross receipts to gross receipts everywhere. A plant that ships most of its product out of state pays tax on a smaller share. Separately, if total revenue is at or below the no tax due threshold, no tax is due even though a report may still be required. The threshold is adjusted periodically, so check the figure for your report year. Combined group reporting means affiliates under common control are measured together, which can push a small plant above the line.
Common mistakes
The usual errors are using book cost of sales instead of the Texas definition of COGS, ignoring the per-person cap on compensation, leaving out affiliates that belong in the combined group, and sourcing receipts by ship-from instead of the Texas rules. In your ERP, keep a mapping from general ledger accounts to the franchise tax COGS categories so the number is repeatable year over year instead of rebuilt in a spreadsheet each spring.
Frequently Asked Questions
What is the Texas no tax due threshold?
It is the revenue level at or below which a taxable entity owes no franchise tax. The amount is adjusted for different report years, so confirm the number for your year with the Texas Comptroller. You may still need to file a report even when no tax is due.
Which margin method is best for a manufacturer?
Whichever gives the lowest margin. Manufacturers with large material and production labor costs often get the lowest margin from the COGS method, but run all four. Texas lets you choose the method each year, so the best option can change as your cost structure changes.
Does this include the EZ computation?
No. The EZ computation uses a lower rate on total revenue with no deductions and is limited to entities under a revenue cap. If your revenue is modest and your deductions are small, compare it against this result in the Comptroller's own forms.
Do I owe tax if revenue is below the threshold?
No tax is due, but you may still have to file a No Tax Due Report or an Information Report. Missing a required report can lead to penalties or loss of good standing, so file even when the amount owed is zero.
If year-end tax work still means exporting trial balances into spreadsheets, Netray can connect an assistant to your ERP general ledger to prepare the COGS and receipts schedules for your tax advisor.
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