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Franchise tax is based on a taxable entitys margin. Unless a taxable entity qualifies and chooses to file using the EZ computation, the tax base is the taxable entitys margin and is computed in one of the following ways: total revenue times 70 percent; total revenue minus cost of goods sold (COGS);
If you are a taxable entity that conducts business within the State of Texas that has an annual revenue of over $1,230,000, you will probably have to pay franchise taxes. The types of entities that must pay this tax in Texas include: Corporations. Limited liability companies or limited liability corporations (LLCs)
In fact, most corporations, partnerships, and limited liability companies (LLCs) are subject to it. Franchise tax is a business tax charged by many states or cities for the privilege of doing business within their borders. Its often referred to as a privilege tax for this very reason.
Each taxable entity formed in Texas or doing business in Texas must file and pay franchise tax.
The tax is not imposed on: sole proprietorships (except for single member LLCs); general partnerships where direct ownership is composed entirely of natural persons (except for limited liability partnerships); entities exempt under Subchapter B of Chapter 171, Tax Code; certain unincorporated passive entities;
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The Texas Franchise Tax Affiliate Schedule Form 05-166 serves as a critical tool for businesses with affiliate entities operating in Texas. Its primary purpose is to ensure that all required information regarding affiliates is accurately reported to the Texas Comptrollers office.
The Comptrollers office sends a letter or an email to all franchise taxpayers as a reminder that May 15 is the due date for franchise tax reports, extension requests, payments and/or Public or Ownership Information reports. See our Franchise Tax webpage for more information about franchise tax.
If your business earns more than $1,230,000 in revenue per year, you must pay a franchise tax to the Texas government. An experienced attorney can help calculate your rate and determine how much franchise tax you must pay.

form 05 166