Texas has no personal or corporate income tax, which is a large part of why it's a common state to hold operating subsidiaries in. Texas entities are not free of state tax, though — most LLCs and corporations formed or registered in Texas file an annual franchise (margin) tax report, even if the entity owes nothing because its revenue falls under the no-tax-due threshold.
Many Wyoming holding companies own Texas subsidiaries because Texas charges no state personal income tax and no traditional corporate income tax. Texas's absence of income tax is a real savings, not just a paperwork simplification, since it applies regardless of which state the subsidiary sits in.
Texas does still require most entities — including an out-of-state holding company registered to do business in Texas — to file a franchise tax report ("Public Information Report" or "Ownership Information Report") every year, even when no tax is due.
The general federal tax treatment of holding companies (consolidated filings, dividends-received deductions, and the like) is set at the federal level and does not change state to state — what changes is the entity-level tax Texas itself charges an LLC or corporation formed or registered there.
Texas calls its entity-level tax a franchise tax, but it functions more like a tax on gross margin than a traditional income tax. It applies to most Texas LLCs and corporations, including those owned by an out-of-state holding company. For report years 2026 and 2027, an entity with annualized total revenue at or below $2,650,000 owes no franchise tax at all — a "no-tax-due" report still needs to be filed, but the tax due is zero.
Above that threshold, the standard rate is 0.75% of taxable margin for most entities, and 0.375% for those primarily engaged in retail or wholesale trade.
Beyond the franchise tax, a Texas subsidiary that sells goods or taxable services owes Texas sales and use tax at 6.25% at the state level, plus up to 2% in combined local taxes for a maximum 8.25% rate. A subsidiary with employees also owes state unemployment insurance tax and standard federal payroll taxes, regardless of the parent's state of formation.
A common structure pairs a Wyoming LLC as the parent with a Texas entity handling operations, holding property, or running a Texas-facing business.
The Texas entity still owes Texas franchise tax if its revenue is above the no-tax-due threshold, and it still needs a Texas registered agent and annual filings — the Wyoming parent doesn't change the Texas entity's own obligations. What it does add is separation: liabilities generated by the Texas operation stay with the Texas entity, and the Wyoming parent's ownership stays off Texas's public filings.
For more on the general structure, see the Wyoming holding company guide and how to set one up.
No-tax-due threshold ($2,650,000 for 2026–2027) and franchise tax rates (0.375% / 0.75%): Texas Comptroller of Public Accounts (comptroller.texas.gov/taxes/franchise). Sales and use tax rate: Texas Comptroller of Public Accounts.
Note: the no-tax-due threshold is periodically adjusted by the Comptroller (it was $1,180,000 as recently as 2022–2023 and $2.47M for 2024–2025) — reconfirm the current figure against the Comptroller's site before publishing, since related pages elsewhere on this site may still cite the older, superseded threshold and should be updated to match.
Texas's lack of income tax makes it an efficient state for a holding structure's operating subsidiary, but don't assume "no income tax" means "no filings" — the franchise tax report is still due annually even when no tax is owed. If you have questions about structuring a Wyoming-Texas holding arrangement, reach out through our contact form.
If you have questions about structuring a Wyoming-Texas holding arrangement, reach out through our contact form or call +1 (307) 683-0983 to speak with one of our experienced Business Success Advisors. Visit our homepage and blog for more.