small business owners guide to taxes
Texas Business Franchise Tax
Small business owners in the State of Texas are being inundated with costs which could put them out of business. One of those new costs, is the ever changing Texas’ Franchise Tax. The Texas franchise tax is a privilege tax imposed on each taxable entity formed or organized in Texas or doing business in Texas.
The revised franchise tax applies to partnerships (general, limited and limited liability), corporations, LLCs, business trusts, professional associations, business associations, joint ventures, incorporated political committees and other legal entities.
Who has to pay the Franchise Tax? Most business who make more than the $1,030,000 (the no-tax-due threshold) for January 2012 through January 2014 tax years. On January 1, 2014, the no-tax-due threshold is scheduled to be $600,000. Keep in mind that the no-tax-due threshold is calculated taking the lowest of three calculations:
- total revenue minus cost of goods sold;
- total revenue minus compensation; or
- total revenue times 70 percent.
On January 12, 2012, the Texas Supreme Court dismissed the Nestle case, In Re Nestle USA, Inc., Switchplace, LLC, and NSBMA, LP, challenging the revised franchise tax, the so-called “Margin Tax,” on constitutional grounds. On February 10, 2012, the Texas Supreme Court rejected a second challenge by Nestle Case to the Texas franchise tax http://www.supreme.courts.state.tx.us/historical/2012/feb/021012.htm.
So for now, small business owners will just have to suffer through trying to calculate and pay this complicated business tax.