What Taxes Does a Texas LLC Pay? The 2024–2025 "Post-SB 3" Guide

Disclaimer This article provides general information for educational purposes only. It is not legal advice, does not create an attorney-client relationship, and should not be relied upon as a substitute for consultation with a qualified attorney. Laws vary by state, and individualized guidance is recommended.

Texas does not impose an individual state income tax, but that does not mean a Texas LLC has no tax or reporting obligations.

Depending on its activities and federal tax classification, an LLC may need to address:

• Federal income and employment taxes
• Texas franchise tax reporting
• Public Information Reports
• Sales and use tax
• Texas unemployment tax

Does a Texas LLC Pay State Income Tax?

Texas does not impose a general individual state income tax.

Therefore, income passed through from a disregarded LLC, partnership, or S corporation is generally not subject to a separate Texas individual income tax return.

The owners may still owe federal income tax, self-employment tax, payroll tax, or other federal taxes.

Texas instead imposes a franchise tax on many entities doing business in the state.

The 2026 Texas Franchise Tax Threshold

For the 2026 franchise tax report year, the no-tax-due threshold is $2.65 million in annualized total revenue. (⁠Texas Comptroller)

An entity at or below the applicable threshold generally owes no franchise tax.

Businesses above the threshold may use the EZ Computation or regular margin method when eligible. The appropriate calculation depends on revenue, deductions, business classification, and Texas apportionment.

The No Tax Due Report Was Eliminated

For reports due on or after January 1, 2024, entities at or below the no-tax-due threshold no longer file Form 05-163, the No Tax Due Report.

However, they must still file the applicable:

• Public Information Report; or
• Ownership Information Report.

(⁠Texas Comptroller)

Public Information Report

Texas LLCs and corporations generally file Form 05-102, the Public Information Report.

The PIR reports information such as:

• Managers or members
• Officers or directors
• Mailing addresses
• Registered-agent information
• Other management details

The report is generally due on May 15. If May 15 falls on a weekend or legal holiday, the deadline moves to the next business day. (⁠Texas Comptroller)

Is There a $50 PIR Penalty?

The Comptroller currently states that there is no $50 penalty for filing only a PIR or OIR late.

A $50 penalty may apply to other required franchise tax reports filed after the deadline. (⁠Texas Comptroller)

Failure to file the PIR can still lead to delinquency notices and eventual forfeiture if the issue remains unresolved.

Texas Sales Tax

Texas imposes a state sales and use tax rate of 6.25% on taxable sales. Local jurisdictions may impose up to an additional 2%, producing a maximum combined rate of 8.25%. (⁠Texas Comptroller)

An LLC may need a sales tax permit if it sells taxable goods or services and has sufficient Texas nexus.

Physical Nexus

Physical nexus may arise from activities such as:

• Maintaining an office or store
• Having employees in Texas
• Storing inventory in Texas
• Providing taxable services in the state

Economic Nexus

A remote seller whose only connection to Texas is remote sales generally falls within the safe harbor when its total Texas revenue is below $500,000 during the preceding 12 calendar months.

A remote seller exceeding that threshold generally must obtain a permit and collect Texas sales and use tax. (⁠Texas Comptroller)

Marketplace providers commonly collect and remit the tax on sales made through their platforms, although sellers may retain separate obligations for direct sales. (⁠Texas Comptroller)

Employees and Texas Unemployment Tax

A Texas LLC with employees may need to register with the Texas Workforce Commission and pay state unemployment tax.

The rate depends on factors such as:

• Whether the employer is new
• The employer’s unemployment-claim history
• Annual taxable wage limits
• The applicable year’s rates

Federal payroll-tax and withholding requirements also apply.

Electing S Corporation Tax Treatment

An eligible LLC may elect to be taxed federally as an S corporation.

The election is generally made using IRS Form 2553. Form 8832 is used to elect treatment as a corporation, partnership, or disregarded entity, but a separate Form 8832 is generally unnecessary when a qualifying entity makes a timely S corporation election. (⁠IRS)

An S corporation owner who performs services for the company must generally receive reasonable compensation through payroll before taking additional distributions.

An S election may reduce employment taxes in suitable circumstances, but it also adds:

• Payroll requirements
• Corporate tax filings
• Bookkeeping costs
• Reasonable-compensation obligations
• Potential late-election issues

It should not be assumed that every profitable LLC will benefit from the election.

Is BOI Reporting Required?

As of 2026, entities created in the United States—including Texas LLCs—are exempt from federal Beneficial Ownership Information reporting under FinCEN’s current rules.

The remaining reporting rules generally apply only to certain entities formed under foreign law and registered to do business in the United States. (⁠FinCEN.gov)

Because federal regulations may change, businesses should confirm the current FinCEN rules rather than relying on older guidance.

2026 Texas LLC Tax Checklist

• Determine the LLC’s federal tax classification.
• Confirm whether revenue exceeds the $2.65 million threshold.
• File the PIR by May 15.
• File a franchise tax calculation report if required.
• Review sales tax nexus and taxable products or services.
• Register for unemployment tax if the LLC has employees.
• Evaluate an S corporation election with a tax professional.
• Maintain federal and state filing confirmations.
• Confirm current BOI requirements through FinCEN.

Final Takeaway

Most small Texas LLCs owe no franchise tax for the 2026 report year because the no-tax-due threshold is $2.65 million.

However, an LLC may still need to file a Public Information Report and comply with sales tax, payroll tax, and federal income tax requirements. The correct obligations depend on the company’s revenue, owners, employees, activities, and federal tax classification.

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