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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 14404
Experience:  15years with H & R Block. Divisional leader, Instructor
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We received a letter stating: "The Texas Secretary of State

This answer was rated:

We received a letter stating:

"The Texas Secretary of State has notified us that this entity has registered
to transact business in Texas. We need additional information to determine if

the entity is subject to franchise tax. Please complete an online Franchise
Tax Accountability Questionnaire within 30 days to assist us in making a
determination."

I've filled out the information online, but what tax and how would it be calculated by the state of Texas for doing sales to their residents (we have a debt management license). The company is located outside of Texas. Can you help figure out what would be owed to Texas on a hypothetical sale of $100k of debt relief services to residents of Texas and also show links for the state to understand how this is calculated?

Thanks!

Robin D :

Hello and thank you for using Just Answer,
The Texas franchise tax is a privilege tax imposed on each taxable entity chartered/organized in Texas or doing business in Texas. Your organization is certainly doing business in Texas based on your stated information.
The Texas website has a calculator that is so simple to navigate.
I entered your $100,000 and it calculated Franchise tax $700, but I also assumed all your revenue was Texas so the apportionment might be off for you.
The best way for you to see how Texas calculates this is to use this link
http://www.window.state.tx.us/taxinfo/taxforms/HB3Calc.pdf
You will see that it is a simple form as the calculations are completed for you when you enter advance through the form.


Robin D :

An easy estimate for the Franchise tax for foreign entities doing business in Texas would be
Total Revenue(not just Texas) x Apportionment Factor (Texas Revenue divided by All Revenue) x 0.00575

Robin D :

I hope this is helpful

Robin D :

The Texas Comptroller's office is always very helpful and you can call them if you ever have a question.

Customer:

Thanks. So we'll need to track the sales from Texas residents going forward, right?

Robin D :

Most certainly

Robin D :

Your percentage is based on that

Robin D :

Your positive rating is always thanks enough.

Robin D :

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