Payroll tax in Texas: What employers need to know [Updated 2026]
In this article
If your team is growing in Texas or you have a team member working remotely in the Lone Star state, it's essential to know that payroll tax regulations vary from state to state. Therefore, it's crucial to clearly understand tax laws in all the states where your employees reside.
Companies in Texas are responsible for state payroll taxes and federal payroll FICA taxes, such as Medicare tax and Social Security taxes. Texas has one of the simplest state tax structures in the country—there's no state income tax for individuals, so there's no income tax withholding burden for employers beyond their new hire paperwork.
If you have employees in Texas, whether for a small business or a global corporation, it is important to stay compliant with the IRS and the Texas Workforce Commission. To do so, you should become familiar with the state unemployment insurance tax, its rates, and your filing obligations.
About Texas payroll taxes
In Texas, the Texas Workforce Commission (TWC) collects and administers payroll taxes at the state level. There's only one payroll tax in Texas: unemployment insurance (UI) tax. Texas has no state income tax, no state disability insurance, and no paid family leave program—making it one of the most employer-friendly states for payroll compliance.
The UI tax amount is calculated by multiplying the amount of taxable wages by the employer's assigned tax rate. Employers deduct taxes for salaried employees based on their W-4 form on their first pay period, but are not responsible for withholding state income tax—only federal income tax applies.
Unemployment insurance tax
The Texas Unemployment Compensation (TUC) program is funded by the unemployment insurance tax to assist workers who have lost their jobs due to circumstances beyond their control, like layoffs. This tax is part of the nationwide program administered by the US Department of Labor. Neither employers nor employees are mandated to pay state income tax in Texas.
The rate of tax an employer pays is determined by their experience rating, which considers how often their employees have claimed unemployment benefits in the past. In 2026, UI taxes are charged based on five components:
General Tax Rate (GTR) — experience-rated based on your former employees' unemployment benefit claims
Replenishment Tax Rate (RTR) — 0.21% in 2026, replenishes benefits paid to workers who can't be charged to a specific employer
Obligation Assessment Rate (OA) — funds bond obligations
Deficit Tax Rate (DTR) — applies when the UI trust fund falls below minimum levels
Employment Training Investment Assessment (ETIA) — 0.10% in 2026, funds workforce training programs
In 2026, Texas new employers pay a UI rate of 2.70% on the first $9,000 of each employee's wages (the taxable wage base). The minimum tax rate for experienced employers is 0.32% and the maximum is 6.32%. After the first year, employers are notified of their new experience-rated rate each calendar year.
Who pays | Employer |
|---|---|
Tax rate | New employers: 2.70% (2026) Experienced employers: 0.32%–6.32% |
Taxable wage limit | First $9,000 per employee per year (2026) |
Maximum tax | $568.80 (6.32% × $9,000) |
Payroll tax due dates in Texas
Employers in Texas are required to pay unemployment insurance tax to the Texas Workforce Commission every quarter. To set up a tax account, employers must register with the Commission and report wages paid to employees along with paying the taxes due each quarter. Submit quarterly wage reports and taxes by the last day of the month following the end of the calendar quarter:
First quarter (January–March): Filed and paid by April 30
Second quarter (April–June): Filed and paid by July 31
Third quarter (July–September): Filed and paid by October 31
Fourth quarter (October–December): Filed and paid by January 31
Penalty for late filing in Texas
Penalty | |
|---|---|
1-15 days after due date | $15.00 |
Day 16 through end of the first month after due date | $30.00 + 0.05% (.0005) of taxable wages not reported |
During 2nd month after due date | $60.00 + 0.15% (.0015) of taxable wages not reported |
During 3rd month after due date | $90.00 + 0.35% (.0035) of taxable wages not reported |
The report penalty reaches its maximum in the third month, but interest continues to accrue at a rate of 1.5 percent per month, up to a maximum of 37.5 percent.
How to submit payroll taxes in Texas
Texas employers must report and pay UI taxes electronically. TWC offers several electronic filing options at no cost.
File electronically
According to the Texas Workforce Commission's regulations, employers must report their unemployment insurance wages and pay quarterly unemployment insurance taxes electronically. Failure to comply with this requirement may result in penalties per the Texas Unemployment Compensation Act.
TWC offers employers and their representatives three free electronic methods for filing reports:
Unemployment Tax Services
The Unemployment Tax Services system enables employers with up to 1,000 employees to submit wage reports online, with four filing options available at no cost. You must have an employer account to use this option.
Uploading a file (Excel or comma-separated format)
Using an employer's last report as a starting point
Entering the wage details manually
Submitting a No Wages report when an employer did not pay any wages in the quarter
QuickFile
QuickFile is a free wage reporting software that employers can use with any number of employees, agents, and payroll providers representing multiple clients.
File by mail
Only employers who have received hardship waivers from the Commission can submit their quarterly reports by mail using the printed form. A hardship waiver is granted to employers who don't have a computer or internet access.
You can submit your reports and payments to: Cashier - Texas Workforce Commission, P.O. Box 149037, Austin, TX 78714-9037.
Rippling's full-service payroll software
Texas may have just one state payroll tax, but that doesn't mean compliance is trivial—especially when your team is growing fast. With Rippling's payroll software, you can sync your HR data with payroll automatically, eliminating manual entry and tax calculation errors. Rippling handles all compliance needs—including Texas UI tax filings, federal requirements, and local labor laws—and ensures timely filing with the TWC and IRS. As your team scales in Texas, Rippling scales with you: one platform for HR, payroll, and benefits, all working together.
Frequently Asked Questions
Are there local tax laws in Texas?
No, there are no local payroll tax laws in Texas.
Can your tax returns be audited in Texas?
Yes, taxpayers should be aware that their tax returns can be subject to audit by the State of Texas Comptroller's Office to ensure that the taxes paid are accurate and based on the taxpayer's actual books and records.
Are nonprofit organizations subject to payroll taxes in Texas?
Yes, nonprofit organizations in Texas are not subject to exemptions and have the same unemployment tax rules as other employers.
Does Texas require employers to provide workers’ compensation?
No, workers' compensation insurance is not required for employers in Texas.
Disclaimer
Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.
Author
Vanessa Kahkesh
Content Marketing Manager, HR
Vanessa Kahkesh is a content marketer for HR passionate about shaping conversations at the intersection of people, strategy, and workplace culture. At Rippling, she leads the creation of HR-focused content. Vanessa honed her marketing, storytelling, and growth skills through roles in product marketing, community-building, and startup ventures. She worked on the product marketing team at Replit and was the founder of STUDENTpreneurs, a global community platform for student founders. Her multidisciplinary experience — combining narrative, brand, and operations — gives her a unique lens into HR content: she effectively bridges the technical side of HR with the human stories behind them.
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