Texas sits in the south-central US and is the second-largest state by area. The "Lone Star State" is divided into 254 counties, more than any other US state. Its southern border with Mexico makes up roughly half of the entire border between the two nations. With around 30 million people, Texas has the second-largest population of any US state. Texas is an incredibly diverse state: vibrant cities like Houston and San Antonio, Corpus Christi with its stunning Gulf of Mexico beaches, and of course plenty of cowboy culture. Whether you want to explore a big city or enjoy small-town life, Texas has something for everyone.
If Texas were its own nation, it would be the ninth-largest economy in the world, ahead of countries like Australia and Russia. GDP, exports, population growth, job creation: Texas leads the US on all of them. Those alone are strong reasons why so many companies move to the "Lone Star State". Its outstanding infrastructure, with international access by land, sea and air, matches its importance. Low taxes, reasonable living costs and a predictable regulatory environment round out the ideal setting for entrepreneurs.
Where is Texas? Texas lies in the south-central United States. It borders Oklahoma to the north, Arkansas and Louisiana to the east and New Mexico to the west. At its southern tip, Texas also borders Mexico.
View Larger Map
The best state for business
Unmatched access and heavy investment in infrastructure, combined with the largest deal-closing funds in the United States, create a business-friendly climate that is also very tax-friendly. That holds for expanding companies and newcomers alike. Toyota, for example, moved its headquarters from California to Texas, and Apple is building its new campus here. Beyond the giants moving in, the "Lone Star State" is often the birthplace of successful startups, Dell being just one example.
Chief Executive Magazine has named Texas the best state for business for the 17th year in a row. The ranking is based on an annual CEO survey. Company size and industry don't matter; mindset does. If you want to make it big, you choose Texas. So it seems almost logical that in 2021 Texas was named the state that created the most small-business jobs.
A history of innovation
Breakthroughs in aerospace (Johnson Space Center in Houston) are as much a part of Texas history as biomedical milestones, including the first artificial heart transplant (Texas Heart Institute). With cutting-edge research at the Texas Biomedical Research Institute, Texas intends to keep making history. Texas cities rank among the top innovators in technology.
An outstanding workforce, today and tomorrow
Texas has not only the second-largest population and the second-largest workforce, but also the best-trained workers, as labor and education data show. That is one of the keys to Texas's economic success.
Business leaders look beyond today's talent needs to the future, and in Texas they have no reason to worry: far more young people are enrolled in higher education here than in other states. Graduate numbers speak just as clearly, with Texas producing 88% more graduates than Florida and even 100% more than New York.
A tradition as a top exporter
No other US state comes close to handling as much freight as Texas, according to a CNBC data analysis. For 19 years, Texas has held the top spot as the country's largest exporter. Its central location, accessible ports and heavy investment in road, rail and air networks make this possible.
A growing pool of highly skilled workers, low taxes and competitive incentives: in Texas, a lot is bigger and better.
Income tax in Texas
Texas levies no income tax on individuals, and since 2019 that has even been written into the Texas Constitution. Federal income taxes still apply.
Corporate tax in Texas
Texas levies no corporate income tax. There is, however, a franchise tax on business margin: 0.375% for retail and wholesale, 0.75% for all other businesses. No franchise tax is due up to annual revenue of $2,650,000 (report years 2026 and 2027). Federal corporate income tax still applies.
Sales tax in Texas
The USA has no VAT on the European model. Instead, states, counties and municipalities levy a local sales tax on the sale of goods (but not services).
Texas sales tax rate
The state sales tax in Texas is 6.25%. Cities and counties can add up to 2%, so the combined maximum is 8.25%.
Texas nexus laws & sales tax
Learn more about economic nexus laws and sales tax. Here you'll find our quick introduction to US tax law for European entrepreneurs.
Effective date
October 1, 2019
Included transactions:
Gross revenue from sales of tangible personal property and services into the state (i.e. total Texas revenue)
Treatment of exempt sales:
Exempt sales and exempt services count toward the threshold
Trigger:
Sales only
Sales/transaction threshold:
$500,000
Evaluation period:
The threshold applies to the previous 12 months, with the first 12-month period running from July 1, 2018 to June 30, 2019.
Additional information:
- Registration requirements: A remote seller must register with the Texas Comptroller no later than the first day of the fourth month after the month in which it crossed the economic nexus threshold. For details, see 34 Texas Administrative Code §3,286
- Post-Wayfair resources for sellers
- HB 2153
Texas marketplace sellers & sales tax
Learn more about registration requirements for marketplace sellers
Effective date for marketplace facilitators:
October 1, 2019
Economic nexus threshold:
More than $500,000 in gross Texas revenue in the current or previous calendar year. Remote sellers should include sales made through a marketplace when calculating the threshold. Marketplace facilitators don't need to calculate the threshold: all of them must collect and remit tax on third-party sales.
Registration requirements:
- Remote multichannel sellers: Once you cross the economic nexus threshold, you must register with the Texas Comptroller of Public Accounts and collect Texas use tax on sales not taxed by a marketplace facilitator.
- Remote marketplace sellers: You must register once you cross the economic nexus threshold. Contact the Texas Comptroller for more information.
- You can request to file annual returns.
- In-state multichannel sellers: You must register with the Texas Comptroller and collect tax on sales not taxed by a marketplace facilitator.
- In-state marketplace sellers: You must register. Contact the Texas Comptroller for more information.
- You may also have franchise tax obligations, since economic nexus for the franchise tax took effect on October 1, 2019.
- Learn more here.
Read more in What makes Texas so attractive as a US base and on our page on company formation in Texas; for all states, see the overview of US states. How a tax-free US LLC without a US permanent establishment works is explained on our sister site zerotax.llc.
Our services in Texas:
Mount Bonnell Advisors is based in Austin, and Texas is where we form your company. You'll find the options and fees under Company formation in Texas; whether Texas is the right state for you is something we'll work out in a consultation.