Thursday, January 25, 2007


For years the state of Texas has subjected Corporations to a Franchise tax which has gradually evolved into an income tax which the law euphemistically calls income earned surplus rather than admitting the State of Texas imposes an income tax. The tax used to be a tax on capital rather then income, then it became a tax on income, now it is being converted into a tax one either gross profit or a couple of alternatives.

The first margin tax will be due May 15, 2008. The tax rate is 1% of the taxable amount.

The tax does not apply if revenues are less than $ 300,000 or the tax amounts to less than $ 1000.

The taxable amount is gross revenue minus your choice of one of the following:

  • Cost of Goods Sold
  • Compensation (wages and officer compensation subject to limitations)
  • 30% of Gross revenue

The maximum salary allowable to be deducted for a single individual is $ 300,000.

LINKS and References – go to

IRS References

This information is not intended to be advice to the recipient. In compliance with Treasury Department Circular 230, unless stated to the contrary, any Federal Tax advice contained in this Blog was not intended or written to be used and cannot be used for the purposes of avoiding penalties.

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