Texas S-Corporation Election
By Edmond Hui · Facts verified July 29, 2026 against primary state sources
Edmond Hui · Founder, MyStateLLC
Edmond Hui is a software engineer and serial entrepreneur based in New York who has founded multiple online businesses across e-commerce, media, and information publishing. Before transitioning into tech, he spent years as a commercial real estate professional closing deals totaling over 100,000 square feet, giving him firsthand experience with business formation and entity structuring. He built MyStateLLC to provide the free, state-specific LLC guidance he wished existed when forming his own companies.
Does Texas recognize the federal S election?
State treatment of the S election
| Follows the federal election | Not applicable — no corporate income tax |
| Separate state election form | None required |
Texas is one of 4 states with no corporate income tax where the state S election simply does not exist. That is not the same as the state rejecting the election — there is no state income tax for it to apply to. Your federal S election is unaffected.
What an S corporation still owes Texas
Texas has no personal or corporate income tax, so there is no state-level S-corporation election or income-tax recognition. A federal S election does NOT exempt an entity from the Texas franchise (margin) tax — S corporations are taxable entities and file the same franchise tax report and Public Information Report as any other entity.
Franchise or gross-receipts tax
Texas imposes a franchise (margin) tax on taxable entities in lieu of a corporate income tax. No-tax-due total revenue threshold: $2,470,000 for report years 2024-2025 and $2,650,000 for report years 2026-2027 (entities at or below the threshold owe no tax but must still file a Public Information Report or Ownership Information Report). Rates: 0.375% for entities primarily engaged in retail or wholesale trade, 0.75% for all other taxable entities; the optional EZ computation rate is 0.331% (available up to $20M annualized revenue). The franchise tax applies regardless of a federal S-corporation election.
Texas corporation vs Texas LLC
State filing charges only. Corporate income tax and franchise tax are excluded because both depend on income or net worth, so no flat figure exists for either entity.
| Corporation | LLC | |
|---|---|---|
| Formation filing fee | $300 | $300 |
| Report cadence | Every year | Every year |
| Report fee | $0 | $0 |
| Entity-level tax on the LLC side | — | Franchise Tax |
Both entities cost $300 to file in Texas, so the filing fee is not a reason to pick one over the other.
Full Texas LLC cost breakdown · LLC vs C-corp explained · LLC vs S-corp explained
How Texas compares
| State treatment of the federal S election | States |
|---|---|
| Follows the federal election, no state form needed | 43 |
| No corporate income tax, so no state election exists | 4 |
| Has a corporate income tax and does not follow the election — the corporation is taxed like a C corporation | 2 |
| Follow the election but still impose some entity-level tax on the S corporation — California, Illinois, New York, Massachusetts and Delaware among them | — |
| Require a separate state election form as well | 1 |
Compare all 50 states · LLC vs S-corp · S-corp salary and savings calculator
Frequently Asked Questions
Where these numbers come from
This page covers how Texas treats the federal S-corporation election and what an S corporation still owes the state. Every figure was checked against Texas's own published sources on July 29, 2026— the state business filing agency's fee schedule, the governing statute, and where a state tax applies, the state Department of Revenue. Commercial formation-service pages were used as leads only and are never cited. Anything the review could not confirm from an official source is left blank on this page rather than filled with an estimate.
Corporate income tax and franchise tax are quoted as the state publishes them, as rate schedules and thresholds, and are excluded from every dollar total here. They depend on income or net worth, so there is no flat figure that would be true for every corporation.