The Franchise Tax
The state’s major business tax is the Franchise Tax. The Texas franchise tax is
a privilege tax imposed on each corporation and limited liability company
chartered/organized in Texas or doing business in Texas. For franchise tax
purposes, the term "corporation" also includes a bank, state limited banking
association, savings and loan association, limited liability company,
professional limited liability company, a corporation that elects to be an S
corporation for federal income tax purposes, and a professional corporation. A
corporation’s initial report is due one year and 89 days after the corporation’s
beginning date in Texas. Thereafter, annual reports are due each May 15. The
rate is the greater of .25% (.0025) per year of privilege period of net taxable
capital or 4.5% (.0450) of net taxable earned surplus. For the initial report,
the net taxable capital rate is prorated over the initial period.
Texas Workforce Commission
New Employer Tax Rates
New employers who do not acquire an existing business start at a tax
rate of 2.70% and continue to pay at this rate until the employer’s
account is chargeable with claims for unemployment benefits for four
complete quarters. This period generally extends six calendar quarters
from the date that first wages are paid, but can be as long as eight
quarters. At the end of this period and for each year thereafter, the
employer’s tax rate is computed based upon the amount of unemployment
insurance benefits former employees receive along with a number of
statewide factors. This computed rate is called the Employer’s General
Tax Rate.
Experience Tax Rate Formula
Effective Tax Rate =
General Tax Rate + Replenishment Tax Rate + Deficit Tax Rate
Components of the Tax Rate
General Tax Rate - This rate is
based on unemployment insurance claims charged to your account, and is the
product of a Statewide multiplier called the Replenishment Ratio and your
Benefit Ratio, multiplied by 100% and rounded up to the next tenth. The
Replenishment Ratio is calculated each year based on total benefits paid
Statewide for a four-quarter period. The Benefit Ratio is the total of your
chargebacks of unemployment benefits paid to your former employees for the three
years prior to the rate computation date divided by your employees’ taxed wages
for the same period. The ratio is multiplied by 100% and rounded up to the next
hundredth. Change in an employer’s general tax rate is directly related to staff
patterns and restructuring to adjust to the marketplace.
Replenishment Tax Rate - This is a tax based on Statewide
benefits and taxed wages and is applicable to all employers to cover
unemployment claims not charged to a specific employer. This tax varies
inversely from year to year, to statewide economic conditions.
Deficit Tax Rate - This tax is calculated by multiplying the Statewide
Deficit Ratio by the sum of your prior year’s General, Deficit, and
Replenishment Tax Rates. The product is rounded to the nearest hundredth and may
not exceed 2.00%.
Texas Workforce Commission
State Unemployment Tax Rates
|
|
|
Minimum
|
Maximum
|
Average
|
Average
|
|
Federal |
|
|
|
Tax
|
Tax
|
Tax
|
Experience
|
Unemployment |
Year |
Wages |
Rate
|
Rate
|
Rate
|
Tax Rate
|
Tax Rate |
|
2005 |
$9,000 |
0.58% |
8.02% |
1.74% |
1.63% |
6.2% |
|
2004 |
$9,000 |
0.67% |
8.26% |
1.74% |
1.64% |
6.2% |
|
2003 |
$9,000 |
0.67% |
8.47% |
1.68% |
1.56% |
6.2% |
|
2002 |
$9,000 |
0.30% |
6.54% |
1.03% |
0.85% |
6.2% |
|
2001 |
$9,000 |
0.24% |
6.24% |
0.94% |
0.75% |
6.2% |
|
