Texas
Sales Tax

General requirements

Texas is an origin-based state (sales are taxed where the seller is located).

• Sales tax is charged on all retail sales, leases, and rentals of most goods, as well as taxable services
• For manufacturers, purchases used for production aren’t taxed
• For distributors, items purchased for resale aren’t taxed

Businesses with less than $100,000 in taxes due can file using one of these methods:

• Webfile
• Electronic Data Interchange (EDI)
• Telefile (for taxpayers with a sales tax permit and no taxable sales to report for the filing period; more restrictions may apply)
• Tax Forms

Rates

Texas imposes a 6.25% state sales tax. In addition, local taxing jurisdictions (cities, counties, special purpose districts and transit authorities) can also impose up to 2% tax for a maximum combined rate of 8.25%.

How food is taxed

Prepared food sold in restaurants is taxable at the full rate. Bakery items sold without plates or utensils are not taxable. Grocery-type food items sold for home consumption are generally not taxable.

Nexus in Texas

Businesses establish a minimum tax connection to the state if any of the following apply:

• Maintains, occupies or uses an office, place of distribution, sales or sample room, warehouse or storage place, or other places of business
• Has any representative, agent, salesperson, canvasser or solicitor who operates in the state under the authority of the seller to sell, deliver or take orders for any taxable items
• Promotes a flea market, trade day or other events that involve sales of taxable items
• Uses independent salespersons in direct sales of taxable items
• Derives receipts from a rental or lease of tangible personal property (TPP) that is located in the state
• Allows a franchisee or licensee to operate under its trade name if the franchisee or licensee is required to collect Texas sales or use tax
• Conducts business in this state through employees, agents or independent contractors

Filing schedule

Returns are generally due on the 20th of the month following the reporting period. Most businesses will be required to file monthly.

Registering to collect sales tax in Texas

Apply for a tax permit using the state’s Online Tax Registration Application. You’ll receive your permit within 2-3 weeks, and are required to post it in your place of business.

Penalties

Penalties for late payments are calculated as follows:

• If you are paying the tax 1-30 days late, add a 5% penalty
• If you are paying the tax over 30 days late, add a 10% penalty
• If you are paying the tax after the date referenced on the Notice of Tax/FEE Due, add an additional 10% penalty (for a total of 20%)

For most taxes, a taxpayer who fails to file returns on time will be assessed an additional penalty of $50.00 for each late return.