An owner can hand May a revenue number that the monthly close never named. The franchise report uses margin, and the revenue in it should be the same revenue the monthly close already named.
Read the May report.
Call it a privilege tax. It reaches a taxable entity that was formed in Texas or that does business in Texas. Personal income is outside it, and so is a corporate income tax. The state also leaves property tax to cities, to the county, and to school districts.
Margin is the ordinary base, and the EZ computation is the other door when the entity qualifies and chooses it. Four ways exist to compute margin. One multiplies total revenue by 70 percent. One subtracts cost of goods sold from total revenue. One subtracts compensation from total revenue. One subtracts 1 million dollars, and that last way has been available since 1 January 2014.
The federal return, after the exclusions the instructions allow, is where total revenue begins. The bank balance is the wrong starting pile, because a year of deposits also holds loans, owner money, and transfers. None of those three is margin. A monthly close that called them income hands the mistake to this May report.
Cost of goods sold follows its own instructions, and compensation follows another set. Wages count, and so does cash paid to officers, owners, partners, and employees, up to a per person limit, along with certain benefits. A personal expense does not become compensation just because May is close.
Report years 2026 and 2027 share one no tax due line at 2,650,000 dollars. Retail and wholesale margin is computed at 0.375 percent, and every other activity is computed at 0.75 percent. Compensation subtracted under the compensation method stops at 480,000 dollars for a person. The EZ door opens only when total revenue is 20 million dollars or less, and the rate on that door is 0.331 percent.
Crossing under the threshold can still leave a report to file. Zero tax is not the same thing as no filing. An entity that skips the report because the threshold feels comfortable can still meet a 50 dollar penalty for a late report.
Put 15 May on the calendar when the year starts. A Saturday, a Sunday, or a holiday pushes 15 May forward to the following business day. The information report uses that same day. Waiting for a reminder is how the date gets missed.
The late report penalty is 50 dollars, and it shows up even on an entity whose tax computed to nothing. A payment that lands 1 to 30 days after the May date adds a 5 percent penalty on the tax. A payment later than 30 days adds a 10 percent penalty. Interest on tax that is still unpaid begins on day 61, at the rate published for that year, not at a rate remembered from an older year.
A filer who is not on electronic pay can push the report to 15 November. Electronic pay is required when franchise tax paid in the prior state fiscal year was 10,000 dollars or more. That filer gets a first extension to 15 August and, if needed, a second extension out to 15 November.
An extension paid short protects only the part that was actually paid. Penalty and interest still attach to the unpaid part, measured from the original date. A careful May payment is cheaper than a November surprise.
Once nexus ends, a final report is due inside 60 days, and the clock changes again for a termination, a conversion, or a merger. That packet is not the annual May report. Filing one in place of the other misstates whether the entity is still operating.
Closed months should already have produced the revenue this report uses. Twelve closed months make May arithmetic. Three open months make May a guess, and we will say so before anyone files.
Corporations file, limited liability companies file, and partnerships file unless they sit in the narrow exception the instructions describe. Other entities are on that same list. A sole owner skips this report only when the shop is not wrapped in a single member limited liability company. A general partnership owned entirely by natural persons has an exception, and a limited liability partnership is a further twist on that exception.
We read the entity documents before we decide the report does not apply. A shop that feels like a sole owner and is actually a limited liability company still files. The feeling is not the form.
The same May season also carries the public information report and the owner information report. Neither one is the tax. Missing the information report can still block a status letter a bank or the secretary of state asked for. We build them in the same packet as the margin report so May is one piece of work.
Say whether the year is closed, and whether the entity is retail, wholesale, or something else.
You will be talking to the Steven Palmieri practice.