January 3, 2020

Texas Adopts a $500,000 Receipts Threshold for Franchise Tax

By John Bonk, National State & Local Tax Leader

Texas road sign State & Local Tax

On December 20, 2019, the Texas Comptroller of Public Accounts adopted amendments to the current nexus standards for the Texas franchise tax. For all Texas franchise tax reports due after January 1, 2020, Texas will apply an economic nexus standard of $500,000 of Texas-sourced receipts.

Prior law required a physical connection with the state to create a franchise tax filing requirement. Earlier in the year, Texas adopted the same economic nexus standard for sales and use tax purposes. Therefore, going forward a taxpayer will have nexus for both franchise tax and sales and use tax in Texas, the earlier of their first physical presence in the state or when they exceed $500,000 of Texas-sourced gross receipts.

For questions about how this update affects your Texas franchise filing requirement, please contact your Marcum State and Local Tax professional.