Tex. Codes » Tax Code · TITLE 2. STATE TAXATION · SUBTITLE F. FRANCHISE TAX; CREDITS · CHAPTER 171. FRANCHISE TAX

Tex. Tax Code § 171.002

Rates; Computation Of Tax

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Sec. 171.002. RATES; COMPUTATION OF TAX. (a) Subject to Sections 171.003 and 171.1016 and except as provided by Subsection (b), the rate of the franchise tax is 0.75 percent of taxable margin.

(b) Subject to Sections 171.003 and 171.1016, the rate of the franchise tax is 0.375 percent of taxable margin for those taxable entities primarily engaged in retail or wholesale trade.

(c) A taxable entity is primarily engaged in retail or wholesale trade only if:

(1) the total revenue from its activities in retail or wholesale trade is greater than the total revenue from its activities in trades other than the retail and wholesale trades;

(2) except as provided by Subsection (c-1), less than 50 percent of the total revenue from activities in retail or wholesale trade comes from the sale of products it produces or products produced by an entity that is part of an affiliated group to which the taxable entity also belongs; and

(3) the taxable entity does not provide retail or wholesale utilities, including telecommunications services, electricity, or gas.

(c-1) Subsection (c)(2) does not apply to total revenue from activities in a retail trade described by Major Group 58 of the Standard Industrial Classification Manual published by the federal Office of Management and Budget.

(c-2) For purposes of Subsection (c)(3), the provision of telecommunications services does not include selling telephone prepaid calling cards.

(d) A taxable entity is not required to pay any tax and is not considered to owe any tax for a period if:

(1) the amount of tax computed for the taxable entity is less than $1,000; or

(2) the amount of the taxable entity's total revenue from its entire business is less than or equal to $2.47 million or the amount determined under Section 171.006 per 12-month period on which margin is based.

Acts 1981, 67th Leg., p. 1691, ch. 389, Sec. 1, eff. Jan. 1, 1982. Amended by Acts 1984, 68th Leg., 2nd C.S., ch. 31, art. 3, part D, Sec. 1, eff. May 1, 1985; Acts 1987, 70th Leg., 2nd C.S., ch. 5, art. 2, pt. 1, Sec. 1, eff. Jan. 1, 1988; Acts 1987, 70th Leg., 2nd C.S., ch. 5, art. 2, pt. 2, Sec. 1, eff. Jan. 1, 1990; Acts 1991, 72nd Leg., 1st C.S., ch. 5, Sec. 8.031(a), eff. Jan. 1, 1992; Acts 1997, 75th Leg., ch. 1185, Sec. 2, eff. Jan. 1, 1998; Acts 1999, 76th Leg., ch. 394, Sec. 10, eff. Jan. 1, 2000.

Amended by:

Acts 2006, 79th Leg., 3rd C.S., Ch. 1 (H.B. 3), Sec. 2, eff. January 1, 2008.

Acts 2007, 80th Leg., R.S., Ch. 1282 (H.B. 3928), Sec. 7, eff. January 1, 2008.

Acts 2009, 81st Leg., R.S., Ch. 286 (H.B. 4765), Sec. 1(a), eff. January 1, 2010.

Acts 2009, 81st Leg., R.S., Ch. 286 (H.B. 4765), Sec. 2(a), eff. January 1, 2012.

Acts 2013, 83rd Leg., R.S., Ch. 1232 (H.B. 500), Sec. 17, eff. January 1, 2014.

Acts 2015, 84th Leg., R.S., Ch. 449 (H.B. 32), Sec. 2, eff. January 1, 2016.

Acts 2017, 85th Leg., R.S., Ch. 275 (H.B. 2126), Sec. 1, eff. January 1, 2018.

Acts 2023, 88th Leg., 2nd C.S., Ch. 2 (S.B. 3), Sec. 1, eff. January 1, 2024.

Notes of Decisions
Cited in 71 cases (8 in the last 5 years), 1987–2026 · leading case: TGS-NOPEC GEOPHYSICAL CO. v. Combs
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TGS-NOPEC GEOPHYSICAL CO. v. Combs (2011) tex · cites it 2× “” Tex. TaxCode §§ 171.002, .101; see Act of May 2, 2006, 79th Leg.”
General Dynamics Corp. v. Sharp (1996) texapp · cites it 5× “On the other hand, service industries, even those generating large profits, did not pay as much, unless they were also capital intensive.”
INOVA Diagnostics, Inc. v. Strayhorn (2005) texapp · cites it 2× “See Tex. Tax Code Ann. § 171.002 (b). The tax is calculated by adding the tax on net taxable capital and the difference between the tax on net taxable earned surplus and the tax on net taxable capital.”
Rylander v. Palais Royal, Inc. (2002) texapp · cites it 2× “Laws 2454 , 2454-55 (current version at Tex. Tax Code Ann. § 171.002 (West 2001)).”
Upjohn Co. v. Rylander (2000) texapp “See Tex. Tax Code Ann. § 171.002 (West 1992 & Supp.”
Sergeant Enterprises, Inc. v. Strayhorn (2003) texapp “Laws 2454 , 2454-55 (current version at Tex. Tax Code Ann. § 171.002 (West 2002)).”
MacFarlane v. Utah State Tax Commission (2006) utah “Tex. Tax Code Ann. § 171.002 (b) (Vernon 2002).”
El Paso Natural Gas Co. v. Strayhorn (2006) texapp “Tex. Tax Code Ann. § 171.001 (Vernon Supp.”
In Re National Steel Corp. (2005) ilnb “Tex. Tax Code Ann. § 171.002 . Net taxable capital is composed of the sum of a corporation’s stated capital (as defined under the Texas Business Corporation Act) and its surplus (net corporate assets minus stated capital), apportioned to Texas pursuant to § 171.”
Bullock v. Sage Energy Co. (1987) texapp “” Tex.Tax Code Ann. §§ 171.002, 171.101 (1982).”
Nabisco, Inc. v. Rylander (1999) texapp · cites it 2× “3 Tex. Tax Code Ann. §§ 171.002 , .101 (West 1992).”
Central Power and Light Co. v. Sharp (1996) texapp “Tex.Tax Code Ann. § 171.002 (West Supp.1995).”
Show all 71 citing cases →
— Tex. Tax Code § 171.002(a) — 10 cases
Hegar v. Gulf Copper & Manufacturing Corp. (2017) texapp
Rent-A-Center, Inc. v. Hegar (2015) texapp
Hegar v. Sunstate Equip. Co. (2017) texapp
Pauley v. Virginia Department of Taxation (2001) vaccrichmondcty
Metropolitan Telecommunications Holding Company v. Glenn Hegar, Comptroller of Public Accounts of the State of Texas, an (2019) texapp
— Tex. Tax Code § 171.002(c) — 1 case
Glenn Hegar, Comptroller of Public Accounts of the State of Texas And Ken Paxton, Attorney General of the State of Texas (2021) texapp
— Tex. Tax Code § 171.002(c)(1) — 1 case
Glenn Hegar, Comptroller of Public Accounts of the State of Texas And Ken Paxton, Attorney General of the State of Texas (2021) texapp
— Tex. Tax Code § 171.002(c)(2) — 1 case
Glenn Hegar, Comptroller of Public Accounts of the State of Texas And Ken Paxton, Attorney General of the State of Texas (2021) texapp
— Tex. Tax Code § 171.002(c)(3) — 2 cases
Metropolitan Telecommunications Holding Company v. Glenn Hegar, Comptroller of Public Accounts of the State of Texas, an (2019) texapp
American Multi-Cinema, Inc.// Glenn Hegar, Comptroller of Public Accounts of the State of Texas And Ken Paxton, Attorney (2015) texapp
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