The major tax in Texas levied on business is called the excise tax. True False
The correct answer and explanation is:
False.
The major tax levied on businesses in Texas is not called the excise tax; rather, it is the franchise tax. The franchise tax in Texas is a type of business tax that applies to businesses operating within the state, including corporations, limited liability companies (LLCs), and certain other types of entities. This tax is based on the business’s revenue, and it is required to be paid annually to the state of Texas.
The franchise tax is often seen as a “gross receipts” tax because it applies to a business’s total revenue, with certain exemptions and deductions allowed. Texas imposes this tax on businesses that exceed a certain revenue threshold. In this sense, it is designed to capture revenue from businesses that benefit from operating within the state’s economy.
Excise taxes, on the other hand, are typically applied to specific goods or services, such as fuel, tobacco, or alcohol, and are not the primary form of taxation on businesses. While Texas does impose excise taxes on certain goods (e.g., motor fuel taxes), the main tax levied on businesses is the franchise tax.
It’s important to note that Texas does not have a state income tax, which is why the franchise tax plays a significant role in generating revenue for the state. The franchise tax is crucial for funding state services like education, healthcare, and infrastructure.
The franchise tax is assessed at different rates based on a business’s revenue, with businesses making under a certain threshold being exempt from paying the tax. Businesses that do exceed the threshold are subject to rates that vary depending on their revenue, but they are usually lower compared to other states’ business taxes.