Texas Sales Tax Guide for Businesses
- Sales Tax Rate
- Local Taxes
- Texas Sales & Use Tax
- Tax Line
We wrote this guide for online sellers who want to know if they even have to bother with sales tax in Texas, and if so, how best to tackle the sales tax situation in the Lone Star State.
After reading this, you’ll know:
- Do you or don’t you need to collect Texas sales tax?
- Which customers do you collect from?
- How much do you collect?
- What do you do with all the sales tax you’ve collected?
- Way more than you probably ever wanted to know about Texas sales tax!
Do you Have Sales Tax Nexus in Texas?
Good news! You only have to begin thinking about Texas sales tax if you have sales tax nexus in Texas.
“Sales tax nexus” is just a fancy way of saying “significant presence” in a state.
Texas considers a seller to have sales tax nexus in the state if you have any of the following in the state:
- An office or place of business
- An employee present in the state
- A place of distribution
- A warehouse or storage space
- A sales or sample room
- Or another place where business is conducted
Here’s exactly what Texas has to say about sales tax nexus.
Do you Have Sales Tax Nexus in Texas if you Sell on FBA?
If you sell on Amazon FBA, you may fall under Texas’s nexus rules due to storing goods in an Amazon fulfillment center, and thus may have sales tax nexus in Texas. Texas is home to four Amazon Fulfillment Centers.
To determine whether or not you have items stored in an FBA warehouse in Texas, you can do one of two things:
- Login to Amazon Seller Central and pull your inventory report
- Sign up for a 30-day free trial of TaxJar and find out from where your Amazon inventory ships with our Amazon badge feature
You may find that your inventory is stored in one or all of Texas’s Amazon fulfillment centers in this list:
|Warehouse Code||Address||County||Tax Rate|
|DFW6||940 W Bethel Road Coppell, TX 75019||Denton||8.25%|
|DFW7||700 Westport Parkway Fort Worth, TX 76177||Tarrant||8.25%|
|SAT1||6000 Enterprise Avenue Schertz, TX 78154||Guadalupe||8.25%|
|XUSB||14900 Frye Rd Fort Worth, TX 76155||Tarrant||8.25%|
Is What You’re Selling Even Taxable?
You’ve probably read this far because you realized you have sales tax nexus in Texas. Your next step is to determine if what you’re selling is even taxable.
Services in Texas are sometimes taxable. Charge sales tax on services in Texas if you provide:
- Amusement services
- Cable and Satellite television service
- Construction services if you separately charge for materials
- Credit reporting services
- Data processing services
- Debt collection services
- Information services
- Internet access services (though the first $25 per account, per month is tax exempt.)
- Motor vehicle parking and storage services
- Nonresidential real property repair, restoration or remodeling
- Personal property repair, restoration or remodeling services
- Personal services
- Real property services
- Security services
- Taxable labor (included labor used in the process of making tangible personal property)
- Telecommunications services
- Telephone answering services
- Utility transmission and distribution services
In general, other services not mentioned here are not taxable in Texas. That said, this is always subject to change. So check with the Texas Comptroller if you think you may be selling taxable services. Here’s a current list of services taxable in Texas.
Tangible products are taxable in Texas. Charge sales tax to buyers if you sell tangible goods.
If you have sales tax nexus in Texas and your products are taxable, your next step is to register for a sales tax permit.
How to Register for a Sales Tax Permit in Texas
Sellers with sales tax nexus in Texas must apply for a Texas sales tax permit.
Don’t skip this step! Texas considers it unlawful to collect sales tax in their name without a permit. Go here for more on how to register for a sales tax permit in Texas.
How to Collect Sales Tax in Texas
So you’ve determined that you have sales tax nexus in Texas and what you’re selling is taxable. And you’re all set and registered for your Texas sales tax permit(s).
The next step is to determine how much sales tax to collect.
The sales tax rate you collect in Texas depends on whether you are based in Texas or out-of-state.
How to Collect Sales Tax in Texas if You are Based in Texas
Texas is an origin-based sales tax state. So if you live in Texas, collecting sales tax is fairly easy. Collect sales tax at the tax rate where your business is located.
Example: You live and run your business in Plano, TX, in the 75023 zip code. The sales tax rate in Sedona is made up of the 6.25% Texas sales tax rate, the 1% Plano sales tax rate and a 1% district rate, for a total of 8.25%. If you live in Texas, you would charge all of your Texas customers, no matter where in the state they live, that 8.25% sales tax rate.
If you have more than one location in Texas, then you would base the sales tax rate you charge on the point of origin of your sale.
How to Collect Sales Tax in Texas if you are Not Based in Texas
This is where things get trickier for online sellers. Texas wants sellers who made a sale into Texas from outside the state to charge sales tax based on the destination of the item (i.e. the buyer’s ship to address.)
Here’s what they have to say about that: “If a seller receives an order at a place of business located outside of Texas, but delivery or shipment is made to a customer in Texas from a location within the state that is not a place of business (such as a warehouse or distribution center), the seller must collect use tax for the city, county, special purpose district or transit authority where the product is delivered if the seller is engaged in business in the jurisdiction.” (Source: Texas Sales and Use Tax Bulletin, p. 11).
Example: You live in Arkansas, but have sales tax nexus in Texas due to having products stored in the Amazon fulfillment center in Dallas, TX. If you make a sale to a buyer in Round Rock, Texas (78665 zip code) then you would charge sales tax based on the 8.25% sales tax rate in the buyer’s location, Round Rock.
What are the Amazon sales tax settings for Texas?
If you are an Amazon pro seller and use Amazon to collect sales tax, be sure you have your Texas sales tax settings entered correctly. Find step-by-step instructions for setting up your Amazon sales tax settings here.
|If you are a…||State tax||County tax||City tax||District tax||Custom rate||Is shipping taxable?||Is gift wrapping taxable?|
|Seller living in Texas||X||X||X||X||N/A||Yes||Yes|
|Seller living outside of Texas||X||X||X||X||N/A||Yes||Yes|
Should you Collect Sales Tax on Shipping Charges in Texas
Shipping charges are generally taxable in Texas as long as the goods you are selling are also taxable.
Read a full explanation of sales tax on shipping in Texas here.
|6||El Paso||674,433||El Paso||8.25%|
Caption: Sales Tax Rates in the Top 20 Most Populous Texas Cities
When are Texas Sales Tax Returns Due?
When you file and pay Texas sales tax depends on two things: your state-assigned filing frequency and your state’s due dates.
How often will you file sales tax returns in Texas?
States assign you a filing frequency when you register for your sales tax permit. In most states, how often you file sales tax is based on the amount of sales tax you collect from buyers in the state.
In Texas, you will be required to file and remit sales tax either monthly, quarterly, or annually.
How often you are required to file sales tax in Texas follows this general rule:
|Average Monthly Tax Liability||Filing Frequency|
|$1,500.01 and up||Monthly|
|$83.34 to $1,500.00||Quarterly|
|$0 to $83.33||Annually|
Texas sales tax returns are always due the 20th of the month following the reporting period. If the filing due date falls on a weekend or holiday, sales tax is generally due the next business day.
2017 Texas Quarterly Sales Tax Filing Due Dates
|Taxable Period||Due Date|
|Q1 (Jan - Mar)||April 20, 2017|
|Q2 (Apr-Jun)||July 20, 2017|
|Q3 (Jul-Sep)||October 20, 2017|
|*Q4 (Oct-Dec)||January 22, 2018*|
*indicates a due date pushed back due to a weekend or holiday
2017 Texas Annual Sales Tax Filing Due Dates
|Taxable Period||Due Date|
|*Year 2017||January 22, 2018*|
*indicates a due date pushed back due to a weekend or holiday
Click here for more info on Texas sales tax filing due dates in 2017.
How to File Sales Tax in Texas
When it comes time to file sales tax in Texas you must do three things:
- Calculate how much sales tax you owe
- File a sales tax return
- Make a payment
This video will walk you through manually filing your Texas sales tax return using your TaxJar report:
How to File and Pay Sales Tax in Texas**
You have two options for filing and paying your Texas sales tax:
- File online - File online at the “TxComptroller eSystems” site. You can remit your payment through their online system. Click here for a step-by-step guide to filing your Texas sales tax returns.
- File by mail - You can also download a Texas Sales and Use tax return here.
You’ll mail your return to:
Comptroller of Public Accounts
P.O. Box 149355
Austin, TX 78714-9355
Keep in mind that if you made $10,000 or more in sales tax payments to Texas in the preceding fiscal year, you are required to file and pay online.
Other Facts You Should Know about Texas Sales Tax Filing
There are a few more things you should know about sales tax in Texas:
According to the Texas Comptroller:
“The law imposes a $50 late filing penalty on every report filed after the due date, even if no tax was due for the period or the report was eventually filed.” Source.
They also state:
“If you fail to file a required sales tax report, the Comptroller’s office will send you an estimated billing, with instructions to file a report providing your actual sales data for the estimated period. Please be aware that failure to file or pay a sales tax report may result in collection actions, including, but not limited to, additional late filing penalties, liens, and criminal charges.”
Texas requires that any seller with a sales tax permit file a sales tax return on your due date even if you don’t have any sales tax to report or pay. Failing to file will result in a fine of $50 per filing missed.
Many states understand that collecting sales tax is a difficult burden on merchants, and will provide a discount to help alleviate some of this burden. In Texas, as long as the sales tax is paid on time, a discount is available equal to 0.5% of tax due plus 1.25% of the amount of any prepaid tax you may have paid.
Texas Sales Tax Holidays
Texas has 3 sales tax holidays in 2017:
April 22-24, 2017: Emergency Preparation Sales Tax Holiday
May 27-29, 2017: Energy Efficiency Sales Tax Holiday
August 11-13, 2017: Back to School Sales Tax Holiday
Check here for more information about Texas sales tax holidays including how to handle sales tax holidays as an online seller.
And that’s it. You’ve mastered Texas sales tax filing! Now that sales tax is out of the way, you can get back to what you do best – running your business.
Texas Sales Tax Resources
For more about Texas sales tax, check out the Texas section of the TaxJar blog.