Taxes

Income Tax

Texas has no state income tax.

Property Tax*

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*Accurate as of October 9, 2009

Sales Tax

8.25%

The Texas franchise tax is a privilege tax imposed on each taxable entity chartered/organized in Texas or doing business in Texas. The Texas Legislature made significant revisions to the tax during the 79th Third called session and the 80th regular session.

For detailed information visit the Texas Comptroller's website.

The franchise tax rates are:

• 1.0% (.01) for most entities

• 0.5% (.005) for qualifying wholesalers and retailers*

• 0.575% for those entities with $10 million or less in Total Revenue (annualized per 12 month period on which the report is based) electing the E-Z Computation

Taxable entities with total revenue (annualized per 12-month period on which the report is based) of $300,000 or less will owe no tax. Taxable entities with tax due of less than $1,000 will owe no tax. Exception: If the entity is a tiered partnership, the calculated amount of tax is due, even if it is less than $1,000. (NOTE: ALL taxable entities, including those that will owe no tax, must file a report.)

Qualification for 0.5% Tax Rate

Taxable Entities primarily engaged in retail or wholesale trades qualify to use the 0.5% tax rate.

Retail Trade: means the activities described in Division G of the 1987 Standard Industrial Classification Manual published by the federal Office of Management and Budget.

Wholesale Trade: means the activities described in Division F of the 1987 Standard Industrial Classification Manual published by the federal Office of Management and Budget.

A taxable entity is primarily engaged in retail or wholesale trade only if:

1. the total revenue from its activities in retail or wholesale trade is greater than the total revenue from its activities in trades other than the retail and wholesale trades;
2. less than 50 percent of the total revenue from activities in retail or wholesale trade comes from the sale of products it produces or products produced by an entity that is part of an affiliated group to which the taxable entity also belongs (this does not apply to Eating & Drinking Places described in Major Group 58 of Division G); and
3. the taxable entity does not provide retail or wholesale utilities, including telecommunications services, electricity or gas.

Unemployment Insurance

If your business has at least one employee it may be subject to Unemployment Insurance.

For detailed information visit the Texas Workforce Commission's Website. 

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Workers Compensation

Texas employers, except for public entities, can choose whether or not to provide workers' compensation insurance coverage for their employees. Workers' compensation provides covered employees with income and medical benefits if they are injured on the job or have a work-related injury or illness. Workers' compensation is regulated by the Texas Department of Insurance, Division of Workers' Compensation (TDI-DWC).

Participation in the workers' compensation system in Texas is voluntary for most employers. Employers who choose to have workers' compensation insurance may:

• purchase a workers' compensation insurance policy from a private insurance company;
• self-insure, if the employer can meet the requirements to self-insure under the Texas Workers' Compensation Act (the Act) and is certified through TDI-DWC;
• self -insure through the Texas Department of Insurance with a group of same or similar private employers; or.
• if a governmental entity, purchase a workers' compensation policy from a private insurance company, or self-insure either individually or as a group

With few exceptions, workers' compensation insurance limits the employer's liability for the work-related injury or death sustained by the worker.

Workers Compensation Frequently Asked Questions.