Running a trade business in Texas: licenses, liens and the rules that bite

Texas is one of the easiest states in the country to start a general contracting business and one of the trickiest in which to get paid, thanks to a lien system with more clocks than a watch shop. Here is the 2026 picture for electricians, plumbers, HVAC techs and builders working in the Lone Star State.

Who licenses the trades in Texas

There is no statewide general contractor license in Texas. A builder can frame houses in most of the state with nothing more than local registrations, which surprises tradespeople arriving from almost anywhere else. The licensed trades are another story. Electricians are licensed statewide by the Texas Department of Licensing and Regulation (TDLR) through the apprentice, wireman, journeyman and master ladder, and electrical contracting businesses need a TDLR contractor license with a master electrician on the licence. Plumbers answer to the Texas State Board of Plumbing Examiners (tradesman, journeyman, master), and air conditioning and refrigeration contractors need a TDLR ACR contractor license (Class A or B). Cities layer their own registration requirements on top, so a Dallas jobsite and a Houston jobsite can carry different paperwork for the same crew.

Mechanics lien deadlines: the monthly notice trap

Texas lien law was simplified in 2022 and is still the most deadline-dense in the nation. Subcontractors and suppliers protect their rights with monthly notices: for commercial work, notice by the 15th day of the third month after each month you performed unpaid work; residential runs on a shorter fuse. The lien affidavit itself must generally be filed by the 15th day of the fourth month after your last month of work (third month on residential), and homestead projects add extra contract formalities before you even start. Miss a month of notices and you can lose lien rights for that month's work while keeping them for the next, which is why Texas contractors either calendar this religiously or use software that does.

Workers comp: optional, with a catch

Texas is the only state where workers compensation is optional for most private employers. Going without (being a non-subscriber) means filing DWC Form-005 annually, posting notices, and, critically, losing your common-law defences if an injured worker sues. Public construction contracts require coverage for every worker on the project, so most commercial contractors carry it anyway.

Sales tax on trade work

New construction labor is generally not taxable. Repair and remodeling of nonresidential (commercial) real property is taxable on the full charge, while residential repair labor is generally exempt with tax paid on materials. The residential/commercial split makes invoice coding matter, and the Comptroller audits it.

OSHA and other quick facts

Texas is a federal OSHA state, there is no state income tax, and the TDLR license search is public, which customers increasingly use to check contractors before hiring.

Texas FAQs for trade businesses

Do I need a license to be a general contractor in Texas?

No state license exists for general contracting, but cities often require registration, and the licensed trades (electrical, plumbing, HVAC) always need their state licenses regardless of who holds the prime contract.

What happens if I miss a monthly lien notice?

You generally lose lien rights for the unpaid work of that month while keeping rights for months you noticed properly. The affidavit deadline is separate again, which is why Texas contractors automate their notice calendar.

Is going without workers comp in Texas really safe?

It is legal, but non-subscribers lose their common-law defences, so one serious injury lawsuit can outweigh years of premium savings. Public projects require coverage regardless.

This guide is general information, not legal advice. Licensing thresholds, lien statutes and tax rules change; always confirm current requirements with the licensing board, an attorney or your accountant before relying on them.