1. Franchise Tax Report
2. How to File a Franchise Tax Report
3. Deadlines and Penalties
4. Cost of a Franchise Tax Report
5. Special Status and Tax Reports

Franchise Tax Report

Every business in the United States operating to generate revenue needs to pay a franchise tax and file a franchise tax report. The amount of tax due is based on the annual taxable income and profits of the company, as well as the worth of the entity. In Texas, all legal entities need to pay a franchise tax.

The rates of franchise tax differ in each state. As an example, in Texas, the franchise tax applies to businesses operating in or chartered in the state.

There are some types of legal entities that are exempt from paying franchise tax, such as:

  • Sole proprietors (except single-owner LLCs)

  • Various partnership forms

  • Different trusts that have an exempt status based on the federal or state law

To determine whether or not you need to pay franchise tax, you should get in touch with a professional business attorney, or call the Taxpayer Services Line Monday through Friday between 8 a.m. and 5 p.m. at 1-800-252-1381.

How to File a Franchise Tax Report

There are different ways you can report your taxes and make payments depending on which state you operate in. In Texas, you can use the following ways of filing a tax report:

  • Approved Electronic Submission Software Providers

  • WebFile application

  • Mail

WebFile is an electronic service that automatically calculates your taxes and submits your reports on the internet directly to the tax office.

To file your tax report online, you first need to get a WebFile ID number.

If you want to file and report your taxes via post in Texas, you have to write to the following address:
Texas Comptroller of Public Accounts
P.O. Box 149348
Austin, TX 78714-9348

It is possible that when you file your franchise tax report you will need help from a professional business law advisor to help you calculate your interests, losses, receipts, and taxable franchise income.

Deadlines and Penalties

Generally, the due date for filing your franchise tax is May 1st each year following the tax year. If the date falls on a Sunday, the due date will be the following Monday. You can file your franchise tax report as early as January 1.

In Texas, you need to file your first franchise tax report by May 15th the year after you started operating in the state. As an example, if you started your business in 2016, you have to file your first annual franchise tax report on May 15, 2017.

Failing to comply with your tax reporting liabilities carries a penalty fee. Even if your business did not conduct any business in the state, you need to file the annual Franchise Tax Report.

In Arkansas, the deadline for filing your franchise tax report is May 1st. If you fail to keep the deadline, you will have to pay a fee of $25, and the state might shut down your business if you still don't comply with the requirements.  After late fees are applied to your account, you will be liable to paying interest on a daily basis.

Cost of a Franchise Tax Report

In Texas, the franchise tax rate is determined as follows:

  • For Corporations, LLCs, PLLCs, and LLPs, you will need to pay 1 percent of the gross profits over $1,000,000.

  • Wholesalers pay 0.5 percent on all gross receipts

  • Businesses with an annual revenue of $10 million or lower need to pay 0.575 percent of their income. Texas Franchise Tax rate wholesalers and retailers is 0.5 percent of gross receipts.

  • Charities need to pay a Periodic Report renewal fee of $50.

If you would like to calculate how much tax you need to pay in Texas, you will need to use the online calculator on the Texas Comptroller of Public Accounts website.

Special Status and Tax Reports

  • In Texas, domestic and foreign nonprofit organizations and LPs need to submit a Periodic Report in duplicate and enclose a filing fee.

  • In Arkansas, all LLCs need to file an annual report and pay a fee of $150 tax, also known as the Annual LLC Franchise Tax Report.

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