Non-Texas corporations doing business in Texas without a Certificate of Authority are also liable for Texas franchise tax. However, professional associations and limited liability partnerships are not liable for the franchise tax. Non-Texas corporations wanting to obtain a Certificate of Authority may contact the Texas Secretary of State. How the Tax is Computed Corporations pay the greater of the tax on net taxable capital or net taxable earned surplus. The rates and computations discussed below are effective for reports originally due on or after January 1, 1994.
Taxable capital is apportioned using a single gross receipts factor.
Taxable capital for an annual report is based on financial information as of the end of the corporation's last accounting period in the year in which the report is due. The tax rate on taxable capital is 0.25 percent per year of privilege period. Earned Surplus Earned surplus includes federal net taxable income, plus compensation paid to officers and directors of a corporation. S corporations and corporations with fewer than 36 shareholders are generally exempt from the compensation add-back. Taxable earned surplus is apportioned using a single gross receipts factor.