S Corp Business For Texas owners, the paycheck meets the state report.
Steven Palmieri works the split as a Tax CFO, the Entrepreneur's CFO, from the practice in Dallas. Your company can be in the Hill Country, on the Gulf, in the Panhandle, or anywhere else in Texas. The call is on video, and the books are the shared file.
Dallas on the call, your counter wherever it is.
There is one practice, and it sits in Dallas. Nobody on this call is going to pretend we keep a second office, and nobody is going to pretend we spent a Saturday behind your counter. A reader whose shop is outside Dallas and Fort Worth still gets the same Friday split, and the words we use for that reader are simple ones, we are all Texans. May is the week a state report and the federal calendar show up in the same handful of days. That week is felt in Dallas too. The photograph at the top of this page is the Texas State Capitol, made by Sankenbruck and shared under CC BY-SA 3.0 on Wikimedia Commons.
What you get is a video call, the books in a file we both open, and a time on the calendar. The month still closes on the day we already named, with the counter in Dallas or a long drive from it. The acceptance letter, the paycheck, and the draw keep the names we gave them. A long highway does not merge those names back together.
Start the call with the acceptance letter in your hand, or start it by saying the letter is still missing. Tell us the last movement was a paycheck, a draw, or money you put back into the company. If a franchise report is still open, or a sales tax return is still open, say which one. That is the whole start of a Texas week.
Friday's wage is the number the report can see.
The wage on this site is a judgment about the work, written down before Friday arrives. That same judgment is the owner payment a Texas franchise report is built to see. Publication 98-806 treats compensation as W-2 wages plus cash paid to officers, directors, owners, partners, and employees. Net distributive income to natural persons is inside that figure, up to a cap for each person. Benefits the publication allows sit inside it too, and the examples it gives are health care and retirement.
A 1099 does not enter that figure. Payroll taxes the company itself pays do not enter it either. A draw is a separate movement that already left for the owner. A busy year does not promote a draw into the compensation line. If the books spent the year with the paycheck and the draw under one name, May is a guess instead of a reading.
Setup uses the payroll provider you already run, and setup stops before that provider runs payday. The names already in the books are the names we carry onto the report. We will not hand you a fraction of profit and call that fraction the wage. The wage is the work you did. The draw is whatever else went home.
The acceptance letter leaves the Comptroller list alone.
Once a year, Texas taxes the privilege of doing business in the state as a company. That is the franchise tax. Publication 98-806 is the Comptroller list of who is taxable. An S corporation stays on that list. So do corporations, limited liability companies with one owner, series companies, banks, partnerships, trusts, professional associations, and joint ventures.
Someone who works alone and never formed a company is usually left off that Comptroller list, and the Friday split on this site is not their week. A general partnership owned only by people, and not formed as a limited liability partnership, is generally absent too, along with the other categories that publication already names. When a reader wants examples of doing business in Texas, the publication points at Rule 3.586. We follow that rule. We do not write a private list beside it.
The federal acceptance letter changes how the owner's week is written down. It does not take the company off the Comptroller list. The same bank account and the same counter can still owe the report.
Pick one margin path and let the books agree.
Margin is what the tax uses, unless you qualify for the EZ computation and you actually choose it. On the long form there are four builds. The first build leaves the books untouched and simply holds onto seventy percent of total revenue. Another build takes out the cost of goods you really sold. Another takes out compensation, and that is the build a real paycheck can feed. The last build subtracts 1 million dollars, a subtraction that has existed since the start of 2014.
Build total revenue by beginning with the federal revenue figures and then removing what Tax Code section 171.1011 lets you exclude. The paycheck is not one of those exclusions. Sell services and nothing else, and section 171.1012 will often leave you with no cost of goods to subtract, unless your trade is one of the industry exceptions that section already lists. A counter that sells goods does have goods. Those goods have to be named as goods in the books before they can come out.
Once a margin build is chosen, Texas gets its share by looking at gross receipts, and the paycheck is not apportioned a second time on its own. Companies that file together as one combined group are stuck with one shared way of building margin. They do not each pick a different path. A member organized in Texas, or a member with nexus in Texas, still sends its own information report.
The 2026 threshold is not the 2024 threshold.
Look at report years 2026 and 2027 on their own row. Stay at or under 2,650,000 dollars of yearly revenue and both the franchise tax and the tax report drop away, while the Friday paycheck is still the wage you would need if a later year crossed the line. The short public report, or the ownership report, still has to leave unless the Comptroller skip list already covers you. On that same row the retail or wholesale rate is 0.375 percent, and every other business uses 0.75 percent. The compensation cap that sits beside the threshold is 480,000 dollars for each person.
Report years 2024 and 2025 are a separate pair, and the numbers do not travel. No tax due begins at 2,470,000 dollars on that older pair, and the compensation cap is 450,000 dollars. The rates, and the EZ threshold, are the ones the Comptroller page shows for the later years. A sentence about 2026 does not borrow the older threshold. A sentence about 2024 does not borrow the newer one.
The EZ computation is available when annualized total revenue is 20 million dollars or under, and the rate on that choice is 0.331 percent. Choosing it means you give up the margin deductions, including the compensation path your paycheck was going to feed. We say that trade out loud before anyone picks the short math. Above that revenue line, or when a margin deduction is the reason you are filing, the report is the long form.
No tax still means the short report goes out.
Form 05-102, the public information report, is the one filed by a corporation, a limited liability company, a limited partnership, a professional association, or a financial institution that is organized in Texas or that has nexus. Other taxable entities in that same spot file Form 05-167, the ownership information report. On Form 05-167 the names of the owners stay off the public copy, even in a year when the only owner payment we are carrying is the Friday paycheck. The signature can be an officer's, or it can belong to someone else the company has already authorized to sign. The day that report is due matches the franchise report.
Some filers are told by the Comptroller to skip both reports. That group is exempt entities, companies with no Texas organization and no Texas nexus, passive entities, and qualifying new veteran owned businesses during their first five years. Everyone else on the list still files. A company under the no tax due threshold is in that everyone else.
Leaving the short report unsent is not a shrug. The page the Comptroller keeps on this point cites Tax Code sections 171.251, 171.2515, 171.252, and 171.255. Forfeiture can remove the right to sue in a Texas court and the right to defend there, and it can put certain company debts onto officers, directors, partners, members, or owners. Sections 171.259 and 171.260 leave financial institutions outside those forfeiture rules. A new officer can wait for the next annual report. You amend sooner only for an error or a critical need, and that amendment is not how the Friday wage gets onto the form. A new registered agent is a Secretary of State filing. It does not ride along on these two forms.
May 15, then the extension clock, then the penalties.
May 15 is the day the franchise report leaves, in a year when the calendar does not push it. When that day is a weekend or a holiday, the next business day is the one that counts, and we check the shift on the Comptroller calendar for that year instead of guessing it in January. A tentative extension opens if a timely payment arrives by the original due date, or if the Comptroller extension form arrives by that same date. The payment, in the ordinary case, is aimed at 100 percent of last year's tax or at 90 percent of the tax this report will owe. The aim tied to last year's tax is closed on a first annual report when the company only became subject during the prior year, so that first report uses the 90 percent aim.
When the state has not required an electronic transfer, you ask for the extra time in Webfile or on Form 05-164, and the day you gain runs out on November 15, well after the Friday split has been named. Pay 10,000 dollars or more of franchise tax in the previous state fiscal year and the next payment has to move electronically, whether the owner's Friday was a paycheck or a draw. That electronic filer gets a first extra day of August 15 and can ask again so the report reaches November 15. Cross 500,000 dollars of franchise tax already paid and the extra time is requested only through TEXNET, using code 13080, with Form 05-164 left unsent for that same request. The hour that makes the TEXNET payment count as on time is printed on the extensions page, and we open that page in the week the money moves rather than pinning a clock into this paragraph.
A report that shows up after the due date draws a penalty of 50 dollars, and it draws that penalty once for each late report. Pay the tax 1 to 30 days late and the added charge is 5 percent. Wait longer than 30 days and the added charge on the franchise tax rises to 10 percent, on top of that 50 dollar penalty. Interest on the late franchise tax starts once day 61 arrives, and the rate is whatever the Comptroller shows on its interest page that week, so this paragraph refuses to freeze a number that would be wrong by the time you read it. Lose enough nexus and you have 60 days to send the final franchise report, counted from the day the Texas tie ended. Meet the payment rules and that final report can wait another 45 days past its original final due date, which is extra time on the closing papers and not extra time on the Friday split. Ending the Texas tie, or closing the Texas company, is your decision. The final report and the Secretary of State certificate of account status belong to that closing. Before we say which paper goes first, we read the Comptroller instructions for closing or reinstating.
Filing rules for the research credit changed for reports tied to dates on or after January 1, 2026. That change stays on the Comptroller franchise page, and it is not copied into the Friday split written on this page.
Sales tax keeps its own 20th.
An accepted federal election does not retire sales tax on a counter that sells goods. On most goods, and on the services the state has listed, the state piece of Texas sales and use tax is 6.25 percent. A city can add local tax, a county can add it, and a transit district can add it, up to 2 percent. Stack the state piece and the local piece and stop. The ceiling on one sale is 8.25 percent. Which local piece applies depends on the place, so the rate locator is opened on the day of the sale. A city rate is not printed on this page.
Once a permit is approved, the letter from the Comptroller tells you whether that file is monthly or quarterly. Sales tax does not come due on a Saturday, a Sunday, or a legal holiday. The due day slides to the next working day, and the 20th follows that slide. A monthly report leaves on the 20th of the month after the month you are reporting, so April's report leaves on May 20. Someone who files once a year reports the prior year on January 20. Someone on a quarter reports in April, then in July, then in October, then in January.
File and pay on time and you may take a discount of 0.5 percent of the tax. Prepay and you may take that 0.5 percent plus another 1.25 percent for the prepayment. A sales tax report that is late draws a penalty of 50 dollars. The tax itself, if paid 1 to 30 days late, draws 5 percent more, and if paid later than that it draws 10 percent more. Past due sales tax starts accruing interest once day 61 has passed, and the percent is taken from the live Comptroller page that week rather than typed into this one.
A seller moved onto TEXNET who is sending more than 1,000,000 dollars has to start that sales tax payment by 8 pm Central Time on the banking business day before it is due. At 1,000,000 dollars or less, the same TEXNET payment can leave as late as 10 am Central Time on the due date itself. When a business is pushed into electronic pay, the notice shows up as a letter from the Comptroller.
Resale certificates, the remote harbor, and one made up week.
Goods bought to sell again can stay free of tax when the seller takes a completed Form 01-339 instead of the tax. That form is the resale and exemption certificate, and the certificate is the evidence. A photocopy of a permit does not stand in for it. The seller holds the certificate for four years. If the shop later uses an item it bought for resale, tax is due on the purchase price, or on a fair rental value for the time of use, and that amount goes on the taxable purchases line. The picture the Comptroller uses is a broom taken off the shelf to sweep the shop. If the buyer cannot say the item is going back out for resale, the buyer leaves Form 01-339 unsigned and the tax is collected instead. A blanket certificate is for a customer who buys only in order to resell, and who says so.
Stay under 500,000 dollars of Texas revenue across the prior twelve calendar months, with no place of business in Texas, and a remote seller does not have to get a permit or collect use tax. That test counts gross sales of goods and of services into Texas, and it still counts a marketplace sale inside the total when the marketplace was the one that collected. A seller who lives in Texas does not get that harbor, and a seller who has a counter here does not get it either. Records of gross receipts are kept at least four years. Marketplace sales remain inside total Texas sales. They come out of taxable sales when the marketplace has said in writing that it collected. That certification can live inside terms the seller already accepted. No extra form is required for it.
Form 01-799 carries a single local use tax rate, and only a remote seller may use it. The Comptroller recomputes that percent, so on the day a return needs it we read the marketplace page. We do not freeze the percent here. The single local rate on that form is closed to a marketplace provider, even when the provider is the one collecting. A server is not a place of business. A website is not one. A domain name is not one. Count a store or an office as a place of business when sales people there take three or more orders during the calendar year from people who are outside the staff, the contractors, and the affiliates. Local sales tax generally follows that place. Local use tax follows the spot where the customer first stores the item or first uses it. An order taken face to face is completed at that Texas place. The longer writing is Publication 94-105.
The week that follows is constructed. It is not a client and it is not a return we have seen. Picture a counter in the Hill Country selling the same goods it sold before the acceptance letter arrived. Revenue for the report year sits under 2,650,000 dollars, so 2026 brings no franchise tax and no tax report. Form 05-102 still goes out by May 15. If a later year crosses the threshold and the long form is required, the Friday paycheck is the only owner payment that can sit in compensation. The Saturday transfer into a personal account stays a draw. None of that franchise quiet changes the sales tax return, which still has to leave on the 20th for that counter. The state piece is 6.25 percent, the local piece is whatever the locator shows for that counter, and the two together do not pass 8.25 percent.
On the video call we name the wage and then the report.
On that call we keep the books, we put the paycheck on the provider you already use, and we prepare the franchise report from names those books already carry. Payday itself stays with the provider. Payroll setup stops before it. Sales tax for that month is prepared from the same closed books, in the same sitting as the franchise names. Own sales, marketplace sales, and certificates stay in separate piles.
We will not put our name on an audit, a review, or a compilation, because those signed reports belong to a firm that issues them, and the Friday split is a different job. Ask for one of those reports and that request leaves the week. If a Comptroller hearing belongs with a lawyer, the hearing leaves too. The books stay here so the lawyer is not starting from a year that mixed the paycheck and the draw.
The research credit, a city rate, and the interest percent are read on the Comptroller pages during the week we need them. What this page keeps are the thresholds, the form numbers, the May 15 date, the 20th, and the split between a paycheck and a draw.
Tell us the company is in Texas.
Say whether the letter is in and whether a state report is still open.
You will be talking to the Steven Palmieri practice.