Texas LLC Taxes: Every Tax Your LLC May Owe in 2026

Texas LLC taxes fall into a few distinct buckets, and the good news is that Texas has no personal state income tax. Your LLC's profits pass through to your personal federal return by default, but you may still owe federal self-employment tax, Texas franchise tax, sales tax, and payroll taxes depending on what your business does. Missing a required filing — like the May 15 franchise tax report — can trigger penalties and even forfeiture, so it pays to know exactly what applies to you.

Disclaimer: This guide is for general informational purposes only and does not constitute legal or tax advice. Rules and dates change — always verify current requirements directly with the relevant agency before acting.

1. Federal income tax (pass-through)

By default, the IRS does not tax a Texas LLC as a separate taxpayer. Instead, the LLC is a pass-through entity, and its profits and losses "pass through" to the owners' personal federal income tax returns. How that works depends on ownership:

• Single-member LLC — treated as a disregarded entity. Business income is reported on the owner's Form 1040, usually on Schedule C.
• Multi-member LLC — treated as a partnership. The LLC files an informational return (Form 1065) and issues each member a Schedule K-1; members report their share on their personal returns.
• S-corporation election — an eligible LLC can elect to be taxed as an S corp (Form 2553), splitting income between a reasonable salary and distributions.

In all of these default cases there is no entity-level federal income tax — the business itself does not pay income tax on its profits; the owners do, at their individual rates. An LLC can also elect to be taxed as a C corporation, in which case the entity does pay federal corporate income tax, but this is uncommon for small LLCs.

Common mistake: Assuming "pass-through" means "tax-free." Pass-through only means the tax is paid on the owner's return instead of the entity's — the income is still fully taxable, and owners often owe federal quarterly estimated taxes throughout the year.

Choosing between default taxation and an S-corp election is a nuanced decision that depends on your profit level and payroll costs. Our comparison of a Texas LLC vs. S-corp for tax purposes covers the trade-offs, but you should confirm the right choice with a CPA.

2. No Texas state income tax

Texas is one of the few states with no personal state income tax, and it imposes no separate state income tax on LLC profits either. That means the pass-through income your LLC sends to your personal return is not taxed again at the Texas level.

This is a genuine advantage, but it does not mean your LLC is free of state obligations. Texas replaces an income tax with a franchise tax based on revenue (covered next) — a fundamentally different tax. Do not confuse the two: you can owe franchise tax, or at least have a franchise tax filing duty, even in a year with little or no profit.

3. Texas franchise tax

The franchise tax is the main state-level tax for Texas LLCs, administered by the Texas Comptroller of Public Accounts. It is a privilege tax based on your LLC's total revenue, not its profit, and every Texas LLC has a filing obligation each year.

• Due date: May 15 annually (rolls to the next business day if it falls on a weekend or holiday). An extension request filed by May 15 moves the report deadline to November 15.
• 2026 no-tax-due threshold: $2,650,000 in annualized total revenue. Below this, you owe $0 in tax.
• Rates on taxable margin: 0.375% for retail and wholesale businesses; 0.75% for all others. LLCs with revenue between $2.65M and $20M may use the EZ computation at 0.331% of total revenue (Form 05-169).
• Below the threshold: you still must file the Public Information Report (Form 05-102). The old No Tax Due Report (05-163) was discontinued in 2024.
• Penalty: a $50 late fee plus 5% (1–30 days late) or 10% (more than 30 days late) of any tax owed; interest begins 61 days after the due date.

Common mistake: Believing that owing $0 means you can skip filing. Even below-threshold LLCs must file the Public Information Report by May 15. An unfiled or unsigned PIR can trigger forfeiture of your LLC's right to transact business — and personal liability for members under Texas Tax Code sections 171.251, 171.252, and 171.255 — even if no tax was due.

You can file for free through the Comptroller's WebFile system. For a full breakdown of rates, thresholds, and forms, see what is Texas franchise tax.

4. Texas sales tax

If your LLC sells taxable goods or certain services in Texas, you must register for a sales tax permit with the Comptroller and collect sales tax from customers.

• Permit: free to apply (Form AP-201).
• Rate: 6.25% state rate plus up to 2% local, for a maximum of 8.25%.
• Returns: due the 20th of the month after each reporting period; the Comptroller assigns your filing frequency (monthly, quarterly, or annual).
• Zero-dollar returns: you must file even in periods with no taxable sales.
• Penalty: $50 per late return plus 5%/10% on tax owed.

Not everything is taxable — digital goods are not taxable in Texas, and groceries and prescription drugs are exempt.

Common mistake: Stopping your filings during a slow season. Once you hold a permit, you must file zero-dollar returns for every assigned period until you formally close the permit. See our guide to the Texas LLC sales tax permit for how to register and file.

5. Payroll and unemployment (UI) tax

If your LLC has W-2 employees, you take on employer tax duties. The main state piece is unemployment insurance (UI) tax, administered by the Texas Workforce Commission.

• Quarterly wage report + UI tax (Form C-3): due April 30, July 31, October 31, and January 31.
• New-employer rate: approximately 2.7%, adjusted over time based on your experience rating.
• No state withholding: because Texas has no state income tax, there is no state income tax to withhold from employee paychecks.

On the federal side, employers still withhold and remit federal income tax, Social Security, and Medicare, and pay federal unemployment (FUTA) tax. Texas also requires new hire reporting to the Attorney General within 20 days of each hire. Our guide to Texas unemployment insurance tax for LLCs walks through the quarterly process.

6. Self-employment tax

Owners of a default-taxed Texas LLC (disregarded entity or partnership) are generally not employees of the business. Instead, they pay federal self-employment tax on their share of the LLC's net earnings — currently 15.3%, covering the Social Security and Medicare contributions that an employer and employee would otherwise split.

This is a federal tax, so Texas's lack of a state income tax does not reduce it. An S-corporation election can change the picture: an owner-employee takes a reasonable salary subject to payroll taxes, while remaining profit distributions may not be subject to self-employment tax. Whether that saves money depends on your numbers — a decision worth reviewing with a CPA. For multi-owner situations, see Texas multi-member LLC taxes.

Quick reference

FAQ

How is a Texas LLC taxed?

By default a Texas LLC is a pass-through entity, so it pays no entity-level federal income tax — profits flow to the owners' personal returns instead. Texas has no personal state income tax, so that profit is not taxed again at the state level. The LLC may still owe federal self-employment tax, Texas franchise tax, sales tax, and payroll taxes depending on what it does.

Does a Texas LLC pay state income tax?

No. Texas is one of a handful of states with no personal state income tax, and it has no separate state income tax on LLC profits. Texas instead levies a revenue-based franchise tax, which is a different kind of tax. Always confirm current rules with the Texas Comptroller.

Do Texas LLCs pay self-employment tax?

Owners of a default-taxed Texas LLC generally pay federal self-employment tax — currently 15.3% for Social Security and Medicare — on their share of net earnings. An S-corporation election can change how much income is subject to it. A CPA can help you decide whether that election makes sense for your business.

What happens if a Texas LLC doesn't file its franchise tax report?

Missing the May 15 franchise tax and Public Information Report deadline triggers a $50 late fee immediately, plus 5% to 10% of any tax owed. Continued non-filing can lead to forfeiture of the LLC's right to transact business in Texas. After forfeiture, members can become personally liable for the entity's debts under Texas Tax Code sections 171.251 through 171.255.

Does a single-member Texas LLC need to file taxes separately?

A single-member LLC taxed as a disregarded entity reports its income on the owner's federal return, usually on Schedule C, so there's no separate federal income tax return for the LLC by default. The LLC still has its own Texas franchise tax and Public Information Report obligations, plus any sales or payroll tax filings. Consult a CPA for your specific circumstances.

Not sure what else your Texas LLC owes?

Most business owners are surprised by how many filing obligations they have. Ortholo's free compliance checker shows you everything you owe, when it's due, and what happens if you miss it — personalized to your entity.

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Last verified: 2026-08-04

Sources: Texas Comptroller — Franchise Tax | Texas Comptroller — Sales Tax | Texas Workforce Commission | IRS — LLC Filing as a Corporation or Partnership | Texas Tax Code §§ 171.251–171.255