For Immediate Release
September 17, 2007
Comptroller Posts Proposed Rules for Revised Texas Franchise Tax
AUSTIN — Comptroller Susan Combs says proposed rules implementing major changes to the Texas franchise tax are now published in the Texas Register. Following a 30-day public comment period, the rules are expected to be adopted in December.
“It is important for all franchise taxpayers, especially those who will be required to report franchise tax for the first time, to review these proposed rules,” Combs said.
The Texas Legislature revised the franchise tax by changing the tax base and the tax rate and extending coverage to most legal entities. About 200,000 new entities will have to file franchise tax reports.
For franchise tax reports originally due on or after Jan. 1, 2008, taxable entities with $10 million or less in total revenue may choose an E-Z filing option (i.e., .00575 x apportioned total revenue) or they may choose to pay tax on their margin. All taxable entities with total revenue greater than $10 million must pay tax on their margin. Margin is the least of three calculations: total revenue minus cost of goods sold, total revenue minus compensation or total revenue times 70 percent. Total revenue is determined based on federal income tax reporting. Discounts ranging from 20 percent to 80 percent are available for taxable entities with less than $900,000 in total revenue.
The new tax rate is generally 0.5 percent for wholesalers and retailers and 1 percent for all others. Based on calculation formulas and discounts, entities with total revenue of $434,782 or less and entities that calculate they owe less than $1,000 in franchise tax will not be required to pay the tax, but they will still be required to file a report.
“Now is the time for businesses to begin familiarizing themselves with the revised Texas franchise tax, before the first major filing deadline occurs on May 15, 2008,” Combs said. “The experts in our office are always available to answer questions or assist taxpayers in any way.”
Read the proposed rules for the revised franchise tax at www.sos.state.tx.us/texreg/archive/September142007/PROPOSED/34.PUBLIC%20FINANCE.html#106. An online franchise tax calculator is available at www.window.state.tx.us/taxinfo/taxforms/HB3Calc.pdf to help taxpayers estimate their revised franchise tax liability.