Texas Franchise Tax Forms 05-158 and 05-164: A 2026 Guide for Startups

Texas Form 05-158 is the Franchise Tax Report long form, a two-page report made up of Form 05-158-A (page 1) and Form 05-158-B (page 2). Form 05-164 is the Franchise Tax Extension Request, which you file (or pay through WebFile) by May 15 to push the report deadline back.

You only need Form 05-158 if your annualized total revenue is above the no-tax-due threshold, which is $2,650,000 for reports due in 2026 and 2027, and you either can't or don't want to use the shorter EZ Computation Report (Form 05-169). Page 1 (05-158-A) carries total revenue, the margin method you chose, apportionment and the tax due. Page 2 (05-158-B) carries the supporting detail: cost of goods sold, compensation and Texas gross receipts.

Texas has no personal or corporate income tax, but its franchise tax (often called the margin tax) applies to corporations, LLCs, partnerships and most other entities that are formed in Texas or doing business there. A Delaware C-Corp with an Austin office or Texas employees is in scope. The Comptroller publishes all 2026 forms along with the instructions booklet, Form 05-915 (2026 Texas Franchise Tax Report Information and Instructions).

The report you file depends on annualized total revenue, not on whether you are profitable. Every entity also files an information report with its franchise tax filing. Here is how the 2026 forms fit together.

The old No Tax Due Report (Form 05-163) is gone. For reports originally due on or after January 1, 2024, an entity at or below the threshold files only the 05-102 or 05-167. Older guides that tell you to file a no-tax-due report, or that call Form 05-164 a no-tax-due form, are out of date.

Combined groups (affiliated entities in a unitary business) file one report for the group and add the Affiliate Schedule (05-166) and Common Owner Information Report (05-177). Form 05-175 is the Tiered Partnership Report, which only applies to tiered partnerships; most startups never see it.

For reports due in 2026 and 2027, the Comptroller's published figures are:

• No-tax-due threshold: $2,650,000 of annualized total revenue (it was $2,470,000 for 2024 and 2025)
• Tax rate: 0.75% of taxable margin for most entities, 0.375% for qualifying retailers and wholesalers
• EZ Computation: 0.331% of apportioned total revenue, available at $20 million or less of annualized total revenue
• Compensation deduction cap: $480,000 per person (it was $450,000 for 2024 and 2025)

The threshold test uses annualized total revenue from the entire business. It is not reduced by apportionment. A Delaware C-Corp with $3 million of revenue, only 20% of it from Texas customers, is above the threshold and must file a long form or EZ report. Apportionment reduces the tax, not the filing requirement.

Two more rules matter for small companies. There is no minimum franchise tax, and if the tax you calculate is less than $1,000 you are not required to pay it, though you still file the report. Texas also does not require estimated franchise tax payments.

Taxable margin is total revenue minus the most favorable of four deductions, subject to a cap: margin can never exceed 70% of total revenue. The options are:

1. 70% of total revenue (the 30% standard deduction)
2. Total revenue minus cost of goods sold
3. Total revenue minus compensation, where wages and benefits count up to $480,000 per person for 2026 and 2027
4. Total revenue minus $1 million

You then multiply margin by your Texas apportionment factor (Texas gross receipts divided by gross receipts everywhere) and by the rate. Total revenue starts from your federal return. For a C-Corp, the instructions pull from Form 1120 line 1c and several other income lines, then apply Texas adjustments.

For most software startups, the compensation deduction wins because payroll is the largest cost and COGS for services is narrowly defined. For example, a SaaS company with $4 million of total revenue and $2.5 million of qualifying compensation has margin of $1.5 million under the compensation method, compared with $2.8 million under the 70% method. With 40% Texas apportionment, tax at 0.75% is $4,500.

The same company could file the EZ report instead: $4 million times 40% times 0.331% is $5,296. The long form is cheaper here, and the EZ method also gives up all credits for that year. Run both before you pick.

One 2026 change is worth a look if you do engineering in Texas. Senate Bill 2206 repealed the old Subchapter M research credit and created a Subchapter T research and development credit based on the Texas share of qualified research expenses from federal Form 6765. It is claimed on Form 05-182, and an entity that owes no franchise tax for the period can apply for it as a refundable credit on Form 05-183.

An extension gives you more time to file, not more time to pay. You request it with Form 05-164 or through WebFile by May 15, and the payment you send with it has to meet one of two tests:

• At least 90% of the tax that will be due on this year's report, or
• 100% of the tax reported as due on last year's report, if that report was filed by May 14

The 100% option is not available to an entity that first became subject to the tax in the prior year, so a new company must estimate and pay 90%.

Extended due dates for 2026 reports were:

• Non-EFT filers: November 15 (November 16, 2026, because the 15th fell on a Sunday)
• Mandatory EFT payers: August 15 for the first extension (August 17, 2026), with a second extension to November 15 if all tax was paid with the first

EFT payers are entities that paid $10,000 or more in franchise tax in the prior state fiscal year. They extend by paying through TEXNET (code 13080) or WebFile, and should not mail a paper 05-164. Companies at or below the threshold that just need more time for the information report can file a zero-money extension.

If an extension payment falls short, the due date reverts to May 15 and penalties and interest apply to the unpaid part of the 90%.

Your first annual report is due May 15 of the year after the entity becomes subject to Texas franchise tax. It covers the period from the date you became subject to the tax (formation in Texas, or the date you started doing business here) through your last federal accounting year end in the prior calendar year.

That short first period creates a trap. To test the threshold and EZ eligibility, Texas annualizes total revenue: divide revenue by the number of days in the period and multiply by 365. The Comptroller's own example uses a period of September 15 to December 31, 2025 (108 days) with $800,000 of revenue. Annualized, that is $2,703,703.70, so the entity is above the $2,650,000 threshold even though it only booked $800,000. The tax is still computed on the actual $800,000.

A Delaware C-Corp that registers with the Texas Secretary of State gets a Texas SOS file number and a Comptroller taxpayer number. Use the Texas numbers on the report, not your Delaware file number.

Texas charges a $50 penalty for every report filed late, even when no tax is due. Late tax adds a 5% penalty if paid 1 to 30 days late and 10% if paid more than 30 days late. Interest on past-due tax starts 61 days after the due date.

The bigger risk is forfeiture. If you don't file required reports or pay within 45 days after the Comptroller's Notice of Intent to Forfeit, the entity's right to transact business in Texas can be forfeited. After forfeiture, officers and directors can become personally liable for debts the entity creates or incurs in Texas after the report due date and before privileges are restored (Texas Tax Code §171.255). Fail to fix it within 120 days and the registration itself can be forfeited.

The mistakes we see most often:

• Assuming the information report is optional because no tax is due
• Testing the threshold on Texas-only revenue instead of total revenue
• Forgetting to annualize a short first period
• Mailing a paper 05-164 after already paying the extension online

Most companies file through WebFile, the Comptroller's free online system, which handles the long form, the EZ report, information reports and extension payments, and does the arithmetic for you. Approved tax software can also generate the forms. Paper filing is still allowed for many filers, but electronic payment is required for EFT payers.

Our recommended sequence for a Delaware C-Corp with Texas operations:

1. Confirm the Texas taxpayer number and SOS file number before April.
2. Compute annualized total revenue from the draft Form 1120 figures.
3. If you are above $2,650,000, calculate all four margin methods and the EZ amount, and look at the Subchapter T credit.
4. If the federal return won't be final by May 15, pay 90% of an estimate and extend with Form 05-164.
5. File the Public Information Report every year, whatever the revenue.

We prepare Texas franchise tax filings alongside the federal return, so the revenue and compensation figures tie to the same books. The thresholds and rates above were checked against the Comptroller's site and the 2026 instructions in October 2026. This is general guidance, not tax advice for your specific facts.