Texas Franchise Tax Requirements for Restaurant Businesses

Quick answer: Based on the documents I have, I can address the Texas franchise tax that would apply to a restaurant business entity, but I don't have documents covering Texas sales tax on food/beverages or the state's mixed beverage taxes — those would need to be confirmed with the Texas Comptroller.

What I can confirm: Texas Franchise Tax

If the restaurant operates as an LLC, corporation, partnership, or similar entity, it's a "taxable entity" for franchise tax purposes. As the documents explain: taxable entities include LLCs, corporations, S corporations, partnerships (except certain general partnerships owned solely by natural persons), and professional associations formed in or doing business in Texas, though sole proprietorships are not subject to the tax.¹ The annual report is due May 15.

No-tax-due threshold: Many small restaurants won't owe any franchise tax. For report years 2026 and 2027 an entity with annualized total revenue of $2,650,000 or less owes nothing and files only an information report.² For 2024–2025 reports, that threshold was $2,470,000³.

Above the threshold: If revenue exceeds that amount, the restaurant would owe franchise tax. Revenue up to $20 million may use the EZ Computation at a 0.331% rate; larger entities (or those wanting margin deductions) file the long form at 0.375% (retail/wholesale) or 0.75% (other).⁴ A key detail for restaurants: the long form is required above $20 million, and available by choice below it when margin deductions give a better result — taxable margin is the least of 70% of total revenue; total revenue minus cost of goods sold; total revenue minus compensation; or total revenue minus $1,000,000 — apportioned to Texas.⁵ Whether a restaurant counts as "retail/wholesale" (0.375%) or falls into the general "other" category (0.75%) depends on how its activities are classified — this is a detail worth confirming with a CPA given the mix of food sales and on-premise service.

What these documents don't cover

I don't have documents addressing:

• Texas sales and use tax on prepared food, or the specific rules for taxable vs. exempt food items
• Texas Mixed Beverage Gross Receipts Tax and Mixed Beverage Sales Tax, which apply specifically to businesses selling mixed beverages (liquor-based drinks) and beer/wine for on-premises consumption
• Alcohol permit/licensing requirements through TABC (Texas Alcoholic Beverage Commission)

For sales tax and mixed beverage tax specifics, I'd recommend checking directly with the Texas Comptroller of Public Accounts (comptroller.texas.gov), which administers all of these taxes.

What it depends on:

• The restaurant's legal entity type (LLC/corp vs. sole proprietorship)
• Annualized total revenue (drives whether franchise tax is owed at all)
• Classification as retail/wholesale vs. other for rate purposes

Given the combination of franchise tax, sales tax, and mixed beverage tax questions your restaurant faces, it's well worth a consultation with a CPA familiar with Texas hospitality businesses to make sure all filings are correctly identified and timed.