We’ve spent time recently blogging about changes in California.  But, Miles Consulting also helps clients in other states , so we decided to dedicate some time on those as well. This week our focus is on Texas.

Business Climate:

Texas has long been considered a state that is friendly to business.  Texas boasts that it is the state with the most exports – topping $279 Billion in 2013. It also lays claim to 52 of the Fortune 500 companies.  http://www.texaswideopenforbusiness.com/business-climate/economic-strength.php  Texas is a right to work state with low unionization, as well as low worker’s compensation rates.  Major Texas industries include petroleum and natural gas, farming, steel, banking and tourism.

Taxes:

Texas is unique because the state does not impose a personal or corporate income tax, but instead relies on sales tax, property tax, and a franchise tax.  The state’s current sales and use tax rate is 6.25%. In addition, cities, counties, special purpose districts, and transit authorities may also impose sales and use tax up to two percent for a total maximum combined rate of 8.25%.  The franchise tax (also known as the “margin” tax) applies to partnerships (general, limited and limited liability), corporations, LLCs, business trusts, professional associations, business associations, joint ventures, incorporated political committees and other legal entities. If your annualized total revenue is less than or equal to $1,080,000, or your tax due is less than $1,000, you will owe no tax. All taxable entities must file a report, even if no tax is due.   The following entities are not subject to the franchise tax:  sole proprietorships and general partnerships directly and solely owned by natural persons.  

For 2014, the franchise tax rates are:

  • .975% for most entities
  • 0.4875% for qualifying wholesalers and retailers
  • 0.575% for those entities with $10 million or less in Total Revenue (annualized per 12 month period on which the report is based) electing the E-Z Computation

For more information about the Texas franchise tax click here: http://www.window.state.tx.us/taxinfo/franchise/

Tax Credits & Incentives:

As of January 1, 2014 a new law allows qualified taxable entities engaged in research and development activities to claim eithera franchise tax credit based on qualified research expenses ora sales and use tax exemption on the purchase, lease, rental, storage or use of depreciable tangible personal property directly used in qualified research.  The franchise tax credit expires on Dec. 31, 2026; however, any unused credit established before the expiration may be carried forward for 20 consecutive reports.  The amount of credit for any report equals five percent of the difference between qualified research expenses in Texas (QRET) and 50 percent of the average amount of QRET incurred during the three tax periods proceeding the period on which the report is based.

Additional credits and incentives to watch for in Texas include the Texas Enterprise Zone program, manufacturing exemptions, value limitation & tax credits, Freeport exemptions,  renewable energy incentives, defense economic readjustment zone program, and data center exemption. If you would like any more information about any of the taxes or credits and incentives described please contact us.

Random Texas Facts:

  • El Paso is closer to California than to Dallas
  • World’s first rodeo was in Pecos, July 4, 1883
  • Dr Pepper was invented in Waco in 1885
  • The first domed stadium in the U.S. was the Astrodome in Houston
  • Texas possesses three of the top ten most populous cities in the United States: Houston, Dallas, and San Antonio
  • More land is farmed in Texas than in any other state
  • Famous people born in Texas: George Strait, Jessica Simpson, Farrah Fawcett, Willie Nelson, Jamie Fox, Miranda Lambert, Kelly Clarkson, Selena Gomez, Beyonce Knowles, Luke and Owen Wilson, and Patrick Swayze