Texas State Tax Updates

Our Dash of SALT Blog provides the most recent developments and changes in state and local tax regulations. Here are the latest updates for Texas.

March 2, 2026

Texas Revises Its Franchise Tax Rule on Total Revenue

Authored by: Bonnie Susmano, JD, MBA and Katerine Velasquez

The Texas Comptroller has amended its franchise tax rule on total revenue, effective March 1, 2026, to reflect recent legislation and updated federal tax conformity. For reports originally due on or after January 1, 2026, total revenue will generally be based on amounts reported on a taxpayer’s current federal income tax return, with the 2007 Internal Revenue Code applying only where specifically referenced.

The rule retains the 2007 IRC standard for excluding foreign dividends and royalties, meaning GILTI and FDII remain included in total revenue, and related federal deductions are not allowed. The amendment also incorporates various statutory exclusions applicable to certain industries and situations.

If you have any questions, please reach out to a member of the Withum SALT Team.

February 24, 2026

Texas Updates Franchise Tax Rules on Revenue Reporting

Authored by: Brian Meier, MSA and Katie Nguyen, CPA

Texas has amended its franchise tax rule on total revenue (34 TAC § 3.587) for reports due on or after January 1, 2026. The revised rule requires taxpayers to compute total revenue using amounts from their current federal income tax return, except where Texas law specifically references the 2007 Internal Revenue Code, which continues to apply only in targeted circumstances. Notably, the Comptroller confirmed that the exclusions under Tax Code §171.1011(c)(1)(B)(ii) for amounts determined under IRC §78 or §951–964 (including foreign dividends and royalties) remain tied to the 2007 IRC. Because post-2007 additions like GILTI (now NCTI) and FDII (now FDDEI) are not considered dividends or royalties under that version, these amounts are not excludable and must be included in total revenue. Additionally, related federal deductions for GILTI/NCTI and FDII/FDDEI are not allowable under Tax Code §171.1011(c)(1)(B)(iv), as they do not qualify as Schedule C deductions tied to included dividend income. The amendment also consolidates a wide array of statutory exclusions for industries such as insurance, lending, and certain regulated businesses, providing clearer administrative rules for revenue reporting.

For help determining how these revised revenue rules may affect your Texas franchise tax calculations, reach out to Withum’s SALT Team.

January 28, 2026

Texas Updates Franchise Tax Nexus Rule

Authored by: Brandon Spinella and Penny Sweeting, CPA

The Texas Comptroller of Public Accounts has revised the franchise tax nexus regulation (34 Tex. Admin. Code § 3.586), with the changes taking effect on January 7, 2026. The amendment clarifies how certain entities should determine whether they have an economic nexus in Texas. Under the updated rule, a foreign taxable entity that calculates its margin using a method other than gross receipts must instead rely on gross receipts sourced to Texas in accordance with 34 Tex. Admin. Code §§ 3.591(e) and 3.591(f)—for purposes of establishing economic nexus.

If you have any questions about the Texas Franchise Tax, please reach out to a member of the Withum SALT Team.

January 14, 2026

Texas Comptroller Adopts Amendment to Franchise Tax Nexus Rule Clarifying Economic Nexus for Certain Entities

Authored by: Bonnie Susmano, JD, MBA and Joe Petrucci

The Texas Comptroller adopted an amendment to 34 TAC §3.586 (Margin: Nexus) that provides additional guidance on determining economic nexus for certain entities. Effective January 7, 2026, the rule adds §3.586(f)(3) to clarify that a foreign taxable entity that apportions its margin using a method other than gross receipts must nevertheless use gross receipts sourced to Texas under 34 TAC §3.591(e) and (f) (Margin: Apportionment) to determine whether it meets Texas’s economic nexus standard.

If you have any questions regarding the amendments to the economic nexus standard for the Texas Franchise tax, please contact a member of the Withum SALT Team.

November 5, 2025

Texas Franchise Tax Rates and Thresholds Set for Report Years 2026–2027

Authored by: Bonnie Susmano, JD, MBA and Joe Petrucci

The Texas Comptroller has confirmed the franchise tax rates and no-tax-due threshold for report years 2026 and 2027. The no-tax-due threshold remains $2,470,000, exempting entities below this level from both filing and payment. The standard franchise tax rates remain unchanged at 0.75% for most taxable entities and 0.375% for taxpayers primarily engaged in retailing or wholesaling. The EZ computation rate remains 0.331%, available to qualifying entities that elect the simplified calculation method. The per-employee compensation deduction cap will be adjusted for inflation for the 2026–2027 reporting period, with formal figures to be issued in the Comptroller’s biennial inflation notice. Businesses close to the threshold or evaluating EZ eligibility should reassess their filing position ahead of the 2026 report year.

If you have questions about the Texas Margin Tax, please reach out to a member of the Withum SALT Team.

August 18, 2025

Texas Allows Television and Radio Broadcasters to Claim COGS Reduction

Authored by: Courtney Easterday, MSA and Ryan Schupp

Pursuant to TX SB 263, signed by Gov. Abbott on June 20, 2025, television and radio broadcasters subject to the Texas Franchise (Margin) Tax will be able to claim a cost of goods sold (COGS) reduction. This change is effective immediately.

Prior to the enactment of SB 263, only entities primarily engaged in the sale of real or tangible property were allowed to claim a COGS reduction.

If you have questions about the Texas Margin Tax, please contact a member of the Withum SALT Team.

August 11, 2025

Texas Comptroller Confirms Telehealth Services Are Not Subject to Sales Tax Under Bundled Plans

Authored by: Bonnie Susmano, JD, MBA and Kiana McGowan, CPA, MBA

On July 1, 2025, the Texas Comptroller issued Private Letter Ruling 202507018L, confirming that telehealth services provided through a lump-sum contract are not subject to Texas sales tax. These services include virtual consultations, health questionnaires, medication profiles, educational content, and at-home test kits. Since telehealth is not a taxable service in Texas and involves expert use of technology, it does not fall under taxable data processing or information services.

Businesses offering these services, particularly in healthcare or employee benefits, can generally treat the plan as non-taxable. Note that physical items, such as test kits, are taxable when purchased by the provider but are not taxed when included in a bundled service. Businesses should consult with their sales tax preparers to ensure proper tax treatment.

For more details, please refer to a copy of the PLR here.

If you have questions about sales tax, please reach out to a member of the Withum SALT Team.

August 4, 2025

Texas Comptroller Issues Expanded Tax Filing Relief for Flood Victims

Authored by: Emilia Jarrin and Penny Sweeting

The Texas Comptroller has extended tax filing and payment relief to residents and businesses in all 30 counties covered under Gov. Abbott’s July 2025 flood disaster declaration, including the newly added Edwards, Kinney, Real, and Schleicher counties. Affected taxpayers may request extensions for state tax return filing and payment deadlines; relief is provided only upon request and is not automatic. Additionally, property owners whose structures suffered at least 15 percent damage can apply for temporary property tax exemptions, with applications due within 105 days of the disaster declaration, typically by October 2025. For more information on the Comptroller’s relief provisions, please visit the Comptroller’s website.

If you have questions about state and local tax relief related to natural disasters, please reach out to a member of the Withum SALT Team.

August 6, 2025

Texas Offers Tax Relief to Taxpayers Affected by Recent Floods

Authored by: Bonnie Susmano, JD, MBA and Eric Wagener

Governor Abbott declared a disaster for communities affected by the heavy rainfall and flooding. Taxpayers in the affected counties may be eligible for an extension of time to file returns, pay taxes, and meet other deadlines established by the Comptroller. In most cases, extensions are considered upon request and on a case-by-case basis. The following counties affected by the disaster include Bandera, Bexar, Burnet, Caldwell, Coke, Comal, Concho, Gillespie, Guadalupe, Hamilton, Kendall, Kerr, Kimble, Lampasas, Llano, Mason, Maverick, McCulloch, Menard, Reeves, San Saba, Sutton, Tom Green, Travis, Uvalde, and Williamson.

In addition, qualified properties that are at least 15 percent damaged by the extreme weather can receive a temporary exemption for part of the appraised property value. Property classifications include tangible personal property used in profit generation, improvements to real property, and some manufactured homes. Those who wish to apply for a property exemption must apply for a local appraisal no later than 105 days after the governor declares a disaster area.

If you have questions about state disaster tax relief, please reach out to a member of the Withum SALT Team.

June 3, 2025

Texas Proposes Constitutional Amendment to Ban “Death Taxes”

Authored by: Brian Meier, MSA and Katie Nguyen, CPA

The Texas Legislature has proposed a constitutional amendment, set for voter approval on November 4, 2025, that would ban the state from imposing taxes related to death or the transfer of wealth, such as estate, inheritance, legacy, succession, gift, or generation-skipping transfer taxes. This prohibition applies to individuals, families, estates and trusts, and includes restrictions on introducing new taxes or expanding existing ones beyond their status as of January 1, 2025. However, the amendment allows for certain exceptions, including taxes on real estate transfers under Article VIII Section 29(b), motor vehicle gift transfers, and property taxes. While Texas does not presently impose a state estate or inheritance tax, the measure aims to solidify Texas’s stance against “death taxes.”

If you have questions about state estate or inheritance taxes, please reach out to a member of the Withum SALT Team.

May 6, 2025

Texas Provides Guidance on the Taxation of Data Processing Services

Authored by: Chao Zhang, MSA and Bonnie Susmano, JD, MBA

Texas has clarified data processing service taxability applicable to employer-sponsored plan reporting. Compilation, storage, conversion, and data manipulation of employer information in federal prescription drug reports fall within Texas’s statutory definition of taxable “data processing.” Extraction of supporting documentation from data provided by employers in payroll or W-2 preparation is also taxable. These are defined in Texas Tax Code §§ 151.0035(a)(1) and 3.330(a)(1), as well as Admin. Code § 3.330(b)(1).

If you have questions about how states tax digital goods and services, please reach out to a member of the Withum SALT Team.

April 8, 2025

Texas Updates Tax Rules for Data Processing Services, Effective April 2025

Authored by: Bonnie Susmano, JD, MBA and Emilia Jarrin

Effective April 2, 2025, the Texas Comptroller of Public Accounts revised the state’s data processing services rule (34 Tex. Admin. Code §3.330). The amendment specifies if a data processing service is bundled with another service for a single charge and is secondary to that service without a distinct value, it is not taxable. However, the entire charge remains taxable if the other service is secondary to the data processing service. The rule further explains how to determine whether a data processing service has a separate value and expands upon the meaning of “ancillary” services. In addition, the rule updates definitions, gives examples of taxable and exempt services, and clarifies that marketplace providers may offer data-related services such as data entry, retrieval, storage, and manipulation.

If you have questions about how states tax digital goods and services, please reach out to a member of the Withum SALT Team.

April 1, 2025

Texas Comptroller Offers Relief for Taxpayers Affected by Severe Weather and Welder Fire

Authored by: Jessie Racioppi, MS and Katie Nguyen, CPA

On March 24, 2025, Governor Abbott declared a disaster for the following North Texas Counties affected by severe weather:

A disaster was also declared for taxpayers in the following counties affected by the Welder Fire:

Filing/payment extensions are only issued to affected taxpayers upon request.

If you have questions about Texas Disaster Relief, please reach out to a member of the Withum SALT Team.

February 7, 2025

Texas Determines a Company’s Hosting of Cryptocurrency Mining Equipment at Its Facility Exempt From Taxation

Authored by: Emilia Jarrin and Katie Nguyen, CPA

A recent ruling from the Texas Comptroller of Public Accounts (Letter No. 202411011L, dated November 15, 2024) established that a company’s hosting services for cryptocurrency mining hardware are not taxable. The company charges a comprehensive fee based on power consumption for these services at its Texas facility. Customers retain full remote control over their machines, while the company does not have access to any data or internal processes. The company’s responsibilities include providing a temperature-controlled environment, installing the machines, ensuring internet connectivity, and offering maintenance and security services. It is important to note that while the hosting services are deemed non-taxable, any repairs or restorations performed on the customer’s machines are considered taxable under Texas law.

If you have questions about the taxability of digital services, please contact a member of the Withum SALT Team.

January 30, 2025

Texas Issues Guidance on Franchise Tax Credits and Credit Carryforwards

Authored by: Brandon Spinella, Brian Meier, MSA and Courtney Easterday, MSA

The Texas Comptroller’s Office provided guidance on the proper order for applying various franchise tax credits and credit carryforwards. 2008 Temporary Credits and R&D credits have flexibility in their application order, with priority given to credits and carryforwards with earlier expiration dates. In the event multiple R&D credits are taken, they must be applied in order of Subchapter O carryforwards, Subchapter M carryforwards, and lastly Subchapter M current year credits. For credits such as the Clean Energy Project Credit, Historic Structure Credit, and Housing Development Credit, taxpayers must apply for other credits first and subsequently apply for the credits in the order listed previously. Taxpayers should generally apply credit carryforwards before current year credits to maximize their benefits.

If you have questions about claiming state tax credits, please reach out to a member of the Withum SALT Team.

October 16, 2024

Texas Adopts Amendments to Rule Concerning Applications for Property Tax Exemption

Authored by: Bonnie Susmano, JD, MBA and Brandon Spinella

The rule concerning applications for property tax exemptions in TX will be amended by the Comptroller of Public Accounts effective October 13, 2024. The regulation implements the amendments to Tax Code, §11.43, which allows the chief appraiser to permit the surviving spouse of a qualified individual age 65 or older or disabled to continue claiming the residence homestead exemption without requiring the surviving spouse to file a new application under certain circumstances.

If you have questions about state homestead exemptions, please reach out to a member of the Withum SALT Team.

Disclaimer: Please note that this information is readily available at this time and is subject to change, so please consult your Withum tax advisor.