TX Texas State sales tax rates

STATEWIDE SALES TAX RATE

6.25%

ECONOMIC SALES THRESHOLD

$500,000

TRANSACTIONS THRESHOLD

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Do you need to collect sales tax in Texas?

You’ll need to collect sales tax in Texas if you have nexus there. There are two ways that sellers can be tied to a state when it comes to nexus: physical or economic. Physical nexus means having enough tangible presence or activity in a state to merit paying sales tax in that state. Economic nexus means passing a states’ economic threshold for total revenue or the number of transactions in that state.

Do you have physical nexus in Texas?

Texas considers a seller or retailer to have physical nexus 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
Another place where business is conducted

Do you have economic nexus in Texas?

Effective October 1, 2019, remote sellers with Texas revenues above $500,000 are required to register for a sales tax permit, collect sales tax on sales that ship to Texas, and remit the sales tax to the state.

Is what you’re selling 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.Tangible products are taxable in Texas. Charge sales tax to buyers if you sell tangible goods.

Is SaaS taxable in Texas?

SaaS is considered part of a data processing service in Texas and is 80% taxable and 20% exempt from sales tax.

Collecting Sales Tax

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. The Texas sales tax rate is 6.25%. 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.”

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.

When are 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.

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.