Texas Increases Small Business Margin Tax Exemption!
August 27, 2009
Great news if you have less than $1,000,000 in revenues - you are exempt from the Margin Tax. Lawrence Newman has the scoop:
“In 2009, the Texas Legislature increased the franchise tax exemption for small businesses. Formerly, the exemption applied to entities with $300,000 or less in gross income. According to the Texas Comptroller, for returns due Jan. 1, 2010, entities that have total revenues of not greater than $1,000,000 or owe less than $1,000 in taxes are exempt from the tax. This exemption expires on December 31, 2011. For reports due on or after Jan. 1, 2012, the exemption will be $600,000.
The new franchise tax or “margins tax” was created in 2006, when the Texas Legislature passed amendments to the Texas Tax Code in place of the old franchise tax beginning in 2007, with returns due May 15, 2008.
The new margins tax generally applies to an entity’s or group’s total revenue after deducting the greater of i) compensation, ii) the cost of goods sold, or iii) thirty percent of total revenue. The tax rate is 0.5 percent for businesses which are primarily retailers and wholesalers and one percent for all other taxable entities. Under the new margins tax, certain limited partnerships and partnerships are no longer exempt from taxation. The tax is apportioned by the relationship of the Texas receipts to the entity’s total receipts. Affiliated groups will choose one kind of deduction for the group and will do combined reporting.
Information on the new margins tax is available from the Texas Comptroller at http://www.window.state.tx.us/taxinfo/franchise/index.html . This information does not constitute tax or legal advice. Please consult your tax advisor for your particular situation. More information on this and other business law issues are available in Texas Corporation Law, www.knowlespublishing.com.”
