A Texas side hustle still has a federal estimated-tax test and, on taxable sales of most goods or of taxable services, a state sales tax. The state sales tax is 6.25 percent. Local tax can add up to 2 percent, and the combined rate stops at 8.25 percent. An LLC is on the franchise-tax list. For 2026 and 2027 reports, the no-tax-due threshold is $2,650,000 of annualized total revenue. At or below that line the entity does not owe franchise tax, and it does not file the old No Tax Due Report. It files an information report. The Comptroller's tax A-to-Z, read on October 6, 2026, lists franchise tax, sales and use tax, and property tax. It does not list a personal income tax.
The Federal $1,000 Test
The IRS estimated-tax page says: "Individuals, including sole proprietors, partners, and S corporation shareholders, generally have to make estimated tax payments if they expect to owe tax of $1,000 or more when their return is filed." The same page says that if you are in business for yourself, you generally need to make estimated tax payments, and that estimated tax pays income tax and other taxes such as self-employment tax. How that self-employment tax is figured is on the self-employment tax page.
The Franchise Report
The franchise tax overview lists limited liability companies, including single-member LLCs and series LLCs, among taxable entities formed in Texas or doing business in Texas. The same overview lists sole proprietorships, except single-member LLCs, among entities that do not file or pay franchise tax. A general partnership directly owned entirely by natural persons is on that second list, except a limited liability partnership.
For a taxable entity that is at or below the threshold, the 2024-and-later filing page says: "For the 2024 report year and later, a taxable entity whose annualized total revenue is less than or equal to the No Tax Due Threshold is not required to file a No Tax Due Report." The same paragraph requires Form 05-102, the Public Information Report, or Form 05-167, the Ownership Information Report. The page also says the entity does not owe any tax. The Comptroller discontinued the No Tax Due Report, Form 05-163, for the 2024 report year and later. The form is not available for any new reporting periods.
The franchise tax home page prints the threshold by report year. The 2026 and 2027 table sets the no-tax-due threshold at $2,650,000. On that table the retail or wholesale rate is 0.375 percent, and the rate other than retail or wholesale is 0.75 percent. The same table prints an EZ computation rate of 0.331 percent and an EZ total-revenue threshold of $20 million. The 2024 and 2025 table sets the threshold at $2,470,000, with those same rates and the same $20 million EZ threshold. Use the table for the report year being filed. The annual franchise tax report is due May 15. If May 15 falls on a weekend or holiday, the due date is the next business day.
Two other cases on the 2024-and-later filing page are easy to mix up with the threshold. A taxable entity with zero Texas gross receipts must file the EZ Computation Report or the long form, complete the line items that compute total revenue, report zero on the Texas gross receipts line, and file a Public Information Report or an Ownership Information Report. For reports originally due on or after January 1, 2024, a qualifying new veteran-owned business is not required to file a No Tax Due Report or an information report during its initial five-year period.
Sales Tax, Up to 8.25 Percent
The sales tax page says: "Texas imposes a 6.25 percent state sales and use tax on all retail sales, leases and rentals of most goods, as well as taxable services. Local taxing jurisdictions (cities, counties, special purpose districts and transit authorities) can also impose up to 2 percent sales and use tax for a maximum combined rate of 8.25 percent."
A marketplace provider, on the marketplace providers page, is a person who owns or operates a marketplace and processes sales or payments for third-party sellers. That page says marketplace providers must collect and remit state and local sales and use tax on all third-party sales. The permit page says to complete the application if you are engaged in business in Texas and you sell or lease tangible personal property in Texas, or you sell taxable services in Texas.
Property Tax and the Home Office
Property tax is one of the taxes on the Comptroller's A-to-Z list. The property tax section says "Texas has no state property tax." The same paragraph says the Comptroller's office does not collect property tax or set tax rates, and that local taxing units do. A federal home-office deduction, including the $5 simplified rate and the 300-square-foot limit, is on the deductions page. That page also says the simplified method does not apply to rental use, and that a shared rental and business area cannot be counted twice.
Frequently Asked Questions
Does a sole proprietor file a Texas franchise report?
The Comptroller's franchise overview lists sole proprietorships, except single-member LLCs, among entities that do not file or pay franchise tax. It lists limited liability companies, including single-member LLCs, among the entities subject to the tax.
My LLC is far under $2,650,000. What do I file?
For report years 2024 and later, a taxable entity at or below the no-tax-due threshold does not owe franchise tax and does not file a No Tax Due Report. It files Form 05-102, the Public Information Report, or Form 05-167, the Ownership Information Report. The Comptroller discontinued the No Tax Due Report for those report years. The threshold on the 2026 and 2027 table is $2,650,000. The 2024 and 2025 table was $2,470,000. The annual report is due May 15, or the next business day when May 15 is a weekend or holiday.
What sales tax rate applies if I sell goods in Texas?
The Comptroller says Texas imposes 6.25 percent state sales and use tax on retail sales, leases, and rentals of most goods, and on taxable services. Local jurisdictions can add up to 2 percent. The maximum combined rate is 8.25 percent. A marketplace provider must collect and remit state and local sales and use tax on all third-party sales.
Does living in Texas remove federal estimated tax?
No. The IRS says individuals, including sole proprietors, partners, and S corporation shareholders, generally have to make estimated tax payments if they expect to owe tax of $1,000 or more when their return is filed. Estimated tax covers income tax and self-employment tax. How self-employment tax is figured is on the self-employment tax page.
Sources
- IRS, estimated taxes, for the $1,000 test when the return is filed, and for estimated tax covering income tax and self-employment tax
- Texas Comptroller, franchise tax overview, for LLCs including single-member LLCs as taxable entities, and for sole proprietorships except single-member LLCs as entities that do not file or pay
- Texas Comptroller, no-tax-due reporting for 2024 and later, for no tax owed at or below the threshold, the information report instead of Form 05-163, zero Texas gross receipts, and the veteran-owned five-year period
- Texas Comptroller, franchise tax, for the 2026 and 2027 threshold of $2,650,000, the 2024 and 2025 threshold of $2,470,000, the 0.375 percent and 0.75 percent rates, the 0.331 percent EZ rate and $20 million EZ threshold, and the May 15 due date
- Texas Comptroller, sales and use tax, for 6.25 percent state tax plus local tax up to 2 percent, combined maximum 8.25 percent
- Texas Comptroller, marketplace providers, for collection and remittance on all third-party sales
- Texas Comptroller, taxes A to Z, for the list that includes franchise, sales and use, and property tax
- Texas Comptroller, property tax, for no state property tax and for local taxing units setting the rates
Self-employment tax is on the self-employment tax page. The federal home-office rules are on the deductions page.
