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Deb is the head of marketing at Numeral. He has worked with the likes of Shopify and Wonderment and has helped countless ecommerce stores scale seamlessly. With a background in finance, he often finds himself advising stores on sales tax and good financial systems.
February 28, 2024 Reviewed by
Kevin is a licensed CPA in the state of California. Prior to Numeral, Kevin operated multiple ecommerce businesses and worked at KPMG as a tax advisor.
This comprehensive Texas sales tax guide offers all the information you need to properly collect and remit taxes and avoid paying penalties.
In this articleThis comprehensive Texas sales tax guide offers all the information you need to properly collect and remit taxes and avoid paying penalties.
| State taxing authority | Texas Comptroller of Public Accounts |
|---|---|
| Texas base sales tax rate | 6.25% |
| Local tax rates | up to 2% sales and use tax |
| 2023 Texas sales tax rate | 6.25% to 8.25% |
| Tax threshold | $500,000 in sales revenue |
| Website | https://comptroller.texas.gov/ |
| Tax Line | 800-252-5555 |
The Texas sales tax rate is 6.25% statewide. Local jurisdictions can add up to 2% in additional sales taxes for a maximum possible rate of 8.25%.
You can use this formula to calculate Texas sales tax:
Sales tax = (State tax rate + local tax rate) x taxable purchase.
For example, if you purchase a taxable item for $100 in a location with a 1.5% local rate, the sales tax would be:
The Texas sales taxes have remained the same.
Texas is an origin-based state, meaning sellers charge tax based on where their ecommerce business is located. Destination-based states require sellers to charge tax based on the customer is location.
Texas is an origin-based sales tax state. Sellers collect tax based on the rates where their ecommerce business is located.
The Streamlined Sales Tax Project (SSTP) aims to simplify sales tax collection across states that adopt its Streamlined Sales and Use Tax Agreement (SSUTA), and Texas still needs to join the SSTP or implement the SSUTA.
Texas considers a seller to have nexus if they have:
To register for sales tax in Texas, you can visit the Texas Comptroller Registration Page. You will need to provide the following information:
Once you have registered for a sales tax permit, you must collect and remit sales tax on all of your sales in Texas. You can do this using a sales tax software program or manually calculating and remitting the sales tax.
If you are an online seller, you must register for sales tax in Texas if you meet the following criteria:
There is no cost to register for a sales tax permit in Texas. However, you may be required to pay a security deposit. This is done to ensure taxes are paid in case of business closure. The amount of security will be determined at the time you apply.
To fully comply with sales tax requirements in Texas, businesses may need to register with the following agencies:
You need a Texas seller's permit anytime you want to sell in Texas. This applies to Wholesalers just as it applies to retail businesses.
Yes, you need a Texas seller's permit if you only sell temporarily in the state. If you sell tangible personal property in Texas for more than 90 days in a calendar year, you must register for a seller's permit and collect sales tax on all of your sales.
Texas imposes a 6.25% sales tax on most retail sales, leases, and rentals of most goods and taxable services. Local jurisdictions can also add a 2% sales and use tax for a maximum combined sales tax of 8.25% in Texas.
Groceries are exempt from sales tax in Texas. For instance, sugar, flour, bread, milk, eggs, etc., are exempt from sales tax. However, non-food items like paper products, pet products, and others are charged a sales tax.
Clothing is taxable in Texas. Even on a sales tax holiday, the clothing item must be under $100 to qualify for an exemption.
Yes, digital products, such as software, music, and movies, are taxable in Texas. This includes both downloadable and streamable products.
Software-as-a-service (SaaS) is taxable in Texas. Apart from the local sales taxes that apply to all taxable goods and services, Texas does not have a specialized tax on SaaS or other cloud computing services. However, SaaS is still subject to the state's 6.25% sales and use tax if accessed within Texas. The tax is applied to the subscription fees or other charges for using the SaaS.
Many services are taxable in Texas. This includes services such as restaurant meals, haircuts, car repairs, dry cleaning, hotel stays, rental cars, and tickets to sporting events and concerts. However, some services such as medical and financial services, are exempt from sales tax in Texas.
Excise taxes are levied on specific goods or services. These discretionary taxes are imposed by local governments in Texas or any other state, and the rates can vary from city to city. In Texas, the maximum local sales tax rate is 2%, while cities can also levy additional taxes on hotel occupancy, mixed beverages, and other goods and services at their discretion. Let's look at some of the local sales taxes.
Except for gasoline, Texas adds a “Sin” tax on the rest of the items. Here are the excise tax rates in Texas.
Marijuana: The controlled substance tax was repealed in 2015. It was previously $3.50 per gram of marijuana.
Prepared food and beverages sold at restaurants, bars, concessions, food trucks, etc., are subject to the regular Texas state sales tax rate, which is currently 6.25%. This includes dine-in, takeout, and delivery. Unprepared food items from a grocery store are generally exempt from sales tax.
Texas defines a remote seller as a seller that does not have a physical presence in the state. This includes online sellers that ship goods to Texas residents.
Here are the prepaid sales tax rates for fuel products in Texas:
The prepaid rates apply when the fuel is purchased wholesale for resale. The taxes are paid upfront by the distributor.
When fuel is sold at retail to end consumers, the regular state and local sales tax rates apply on top of the prepaid tax that has already been collected.
For example, if gasoline is sold for $3 per gallon at a retail gas station, the taxes would be:
For a total tax of 45 cents per gallon. The prepaid tax allows Texas to collect a fixed amount per gallon upfront from distributors. The sales tax is then collected on the retail price when sold to consumers.
Texas allows cities, counties, transit agencies, and special districts to impose local discretionary sales taxes up to 2% on top of the statewide 6.25% rate. This means that total sales tax can reach 8.25% in some metro areas.
Sellers must collect both state and local taxes based on the buyer's location. Out-of-state sellers are impacted by economic nexus laws. Staying current on varying local rates is challenging but address-level rate lookup software can help optimize compliance.
Let's look at how you can collect taxes as an ecommerce seller in Texas.
Even if you do not have a physical presence in the state, you must register with CDTFA if you're considered "engaged in business" in Texas. You can voluntarily register to collect and pay use tax for your Texas customers.
There are five common ways to be considered as “engaged in business”:
There are specific rules for convention shows, voluntary disclosure, prepaid mobile services, Texas Tire Fee, and more.
You can register for a seller's permit online using CDTFA's online registration services. Once you obtain the seller's permit in Texas, you are free to do business in the state and begin collecting sales tax even if you're not physically based in Texas.
Online sellers selling taxable items in Texas must collect sales tax on shipping charges. However, if the product being sold is exempt from sales taxes, you do not need to collect sales tax on shipping.
For instance, if you sell an office desk for $800 and require a transport and assembly fee of $200, you need to collect sales tax on the total $1000. If the buyer provides you with an exemption certificate for the office desk, you do not need to collect the sales tax on shipping as the office desk is also exempt from taxes.
Sales taxes are collected by businesses on selling goods and services in Texas. Businesses then remit those taxes to the state government. The filing frequency for businesses depends on the total sales.
Texas sales tax returns are due on the 20th of the month following the reporting period. Returns can be filed and paid online or by mail.
| Filing Frequency | Tax Period | Due Date |
|---|---|---|
| Monthly | January | February 20 |
| Monthly | February | March 20 |
| Monthly | March | April 20 |
| Quarterly | Jan-Mar | April 20 |
| Monthly | April | May 20 |
| Monthly | May | June 20 |
| Monthly | June | July 20 |
| Quarterly | Apr-Jun | July 20 |
| Monthly | July | August 20 |
| Monthly | August | September 20 |
| Monthly | September | October 20 |
| Quarterly | Jul-Sep | October 20 |
| Monthly | October | November 20 |
| Monthly | November | December 20 |
| Monthly | December | January 20 |
| Quarterly | Oct-Dec | January 20 |
| Annual | Jan-Dec | January 20 |
Let's look at the filing penalties on what happens if you fail to pay your taxes on time or pay an incorrect amount.
The due dates for filing sales tax returns and making payments in Texas are synchronized and vary based on the frequency of your filing—monthly, quarterly, or annually.
Yes, you still need to file a “zero return” sales tax return even if you didn't collect any sales tax. This is because you may be eligible for a refund.
No, you cannot ask for an extension in Texas unless a disaster has been declared in your business area.
Yes, you can file an amended return in Texas. Simply add a line stating “Amended Return” on top of the return filing form and check “Yes” or item “j” on the form. For instance, if you overpaid $20,000 in a previous filing year and want to adjust the same in this one, fill the amended return with proper filing and documentation to help verify the additional taxes.
The Texas Comptroller of Public Accounts charges a $50 penalty on each late-filed report. Apart from that, if the tax is paid 1-30 days after the due date, there is a 5% penalty. For taxes paid over 30 days after the due date, there is a 10% penalty.
Let's look at the audit and appeal process in Texas.
Registering for sales tax in Texas is a simple online process.
For sales tax filing and appeals in Texas, you would be required to contact:
Deb is the head of marketing at Numeral. He has worked with the likes of Shopify and Wonderment and has helped countless ecommerce stores scale seamlessly. With a background in finance, he often finds himself advising stores on sales tax and good financial systems.
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