Texas sales tax guide
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Thank you for visiting 1stopVAT’s Texas sales tax guide. We hope it will help you learn how much the sales tax in Texas is and what the criteria to become a sales tax collector are. If you don’t find the answers to your questions here, please reach out to the 1stopVAT team by clicking here.
Texas sales and use tax in a nutshell
Administered by Texas Comptroller, Texas sales tax (TX) is similar to VAT in Europe and is due to the final customer. The sales tax rates Texas-based companies and remote businesses selling to customers in the state depend on the sale destination. The total sale tax amount consists of Texas state sales tax rate and the local rates.
Both businesses located in Texas and remote sellers must register for Texas tax sales permits as soon as they establish a nexus in the state. Please find more information about the Texas state sales tax nexus below.
When goods are consumed rather than purchased, a use tax applies. Both sales and use tax Texas have the same rates and must be remitted to the Texas Comptroller’s office.
Should you register for collecting sales tax in Texas (TX)?
It is evident that most Texas-based businesses must register for collecting the sales tax. However, once a remote seller forms a strong bond with the state (called a nexus), it becomes obliged to charge and collect the correct Texas sales tax rates from its customers in the state, too.
Does your business have a nexus for sales tax for Texas?
Companies based in Texas are considered to have a physical nexus with the state. Remote sellers and companies that have business ties with the state might have a nexus that can be defined by several different criteria.
Here are the types of sales tax Texas nexus, applicable to out-of-state businesses:
- Economic nexus. Suppose that in the last 12 months, your company does not have a physical presence in Texas but has reached $500 000 in gross revenue from sales to customers in the state. Such turnover is a nexus trigger, resulting in an obligation to charge and collect the correct Texas sales tax rate from your Texas-based customers.
- Affiliate nexus. This type of nexus is normally triggered by a business using the help of sales representatives or other types of affiliates in the state.
- Storing inventory in the state. If you store goods for sale in Texas, including the use of Amazon-owned warehouses (Fulfillment by Amazon), you must register for a Texas sales tax permit.
- Attending trade shows and exhibitions. If your company has made sales during a trade show in Texas, you might be responsible for collecting the sales tax.
What goods and services are taxable in Texas?
The first step in determining what’s the sales tax in Texas that your company has to charge, you must check whether the goods or services that you provide are taxable.
Most goods sold in Texas are taxable, except for foods items such as flour, sugar, bread, milk, vegetables, and similar. In contrast, services are non-taxable, with some exceptions. Texas Comptroller has issued a seventeen-item list of taxable services, including telecommunications, amusement services, a broad category of taxable labour, and information services. The standard sales tax rate Texas on services applies.
What is the current sales tax in Texas?
If you are figuring out what is the sales tax rate in Texas that you should apply on your goods and services, you should determine the local Texas sales tax percentage that varies based on the sales destination.
The general sales tax rate in Texas is 6.25 percent, and the local tax jurisdictions such as cities, counties, and districts can impose an additional sales tax rate of 2 percent. For the most recent general and local sales tax rates, please visit our sales tax calculator.
If, after reading this guide, you still doubt how much sales tax in Texas should be applied to your goods or services, please contact the 1stopVAT team for a consultation.
Registering for sales tax in Texas
A simple way to register for a sales tax permit in Texas is by visiting the Texas Comptroller of Public Accounts website. Texas sales tax online registration is free of charge and requires you to fill in a form with your personal and business details. If you prefer a non-online registration, you can also download the AP-201 form, print it, and send it to the Comptroller’s office by post.
Managing the sales tax
After becoming a registered sales tax collector, you will have to remit the tax at an assigned frequency. The typical filing periods are monthly, quarterly, and annual. In Texas, sales tax returns and payments are due on the 20th, 21st, or 22nd day of the month following each reporting period, depending on the filing period.
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