Texas has no income tax but it has a margin tax (franchise tax). In 2026 the no-tax threshold is $2.47 million in annualized revenue and the E-Z computation is available up to $20 million — picking the wrong one costs real money.
Two Thresholds, Three Paths
- Under $2.47M annualized revenue: No tax due. You still file a No Tax Due report — the threshold is not an exemption from filing.
- $2.47M–$20M: You may elect E-Z computation: 0.331% × apportioned revenue (vs. 0.75% for most entities or 0.375% for wholesalers/retailers on margin). E-Z is revenue × rate with no COGS or compensation deduction — simpler but sometimes more expensive.
- Over $20M: Full margin: the lesser of 70% of revenue, revenue minus COGS, or revenue minus compensation, apportioned to Texas.
The Election That Matters
A service business with thin COGS and high compensation often pays less on full margin (revenue minus compensation) than on E-Z, even though E-Z's 0.331% looks lower. A high-COGS wholesaler with $8M in revenue may pay less on E-Z than on 0.375% of margin. Model both before electing — the election is annual.
Keep Your Finances Organized From Day One
Texas margin rewards the business that can produce COGS and compensation by year-end, apportioned correctly, on demand.
Beancount.io keeps revenue, COGS, and compensation in a ledger that computes margin under both methods before the report is due. Get started for free and make the threshold a modeled election, not a surprise filing.