As an e-commerce seller, you will need to collect sales tax in Texas if you have:
(1) $500,000 in gross revenue in Texas in the previous 12 calendar months (economic nexus), or
(2) Physical presence in Texas (physical nexus).
Below, we will highlight some of the basic provisions of Texas sales tax law.
What is the tax rate range for Texas?
State: Texas’s general sales tax rate is 6.25%.
Local: Local jurisdictions can range from 0% to 2%.
A remote seller may elect to collect local tax at a single rate (currently 1.75%) by making an election on Form 01-799. Form 01-799, Remote Seller's Intent to Elect or Revoke Use of Single Local Use Tax Rate (PDF)
Do you have physical or economic nexus in Texas?
Physical nexus. Certain business activities create physical nexus in Texas. If you have physical nexus, you are required to collect and remit sales tax on all taxable sales that are shipped to Texas. Examples of business activities that can create physical nexus in Texas include:
- A physical office or place of business
- An employee present in the state
- A place of distribution
- Warehouse or storage space
- Any place where business is conducted
Economic nexus. Texas recognizes economic nexus for any vendor with $500,000 or more in gross revenue into the state in the previous 12 calendar months.
The dollar amount is based on gross revenue from sales of all taxable and nontaxable tangible personal property and services into Texas, including sales for resale and sales to exempt entities.
Any sales you make through a marketplace must also be included in the total.
Once you have economic nexus established, you will be obligated to collect sales tax from buyers in the state on the first day of the second month following the twelve-month period in which you met the threshold.
What are examples of sales of taxable items?
- Tangible personal property, unless an exemption applies
- Leases and rentals of most goods
- Certain services, including amusement services, data processing, information services, services to personal property, and personal services
- Software as a Service (SaaS) - 80% taxable and 20% exempt
What are examples of sales of nontaxable/exempt items?
- Drugs, medicine, and first aid supplies
- Property used production of agricultural products for sale
- Food products (not including candy and soft drinks)
Are there any sales tax holidays?
Texas recognizes an annual sales tax holiday in April. This holiday supports natural disaster preparation efforts and applies to a variety of items. Texas Emergency Preparation Supplies Sales Tax Holiday
Texas recognizes an annual sales tax holiday in May for certain specified energy efficient products including dishwashers, clothes washers, refrigerators, ceiling fans, lightbulbs, and programmable thermostats. Water-efficient Products Sales Tax Holiday
Texas recognizes an annual sales tax holiday in August for certain clothing, footwear, back-to-school supplies and backpacks. Sales Tax Holiday (texas.gov).
Is Texas a member of the SST (Streamlined Sales Tax)?
Currently, Texas is not a full or associate member of the Streamlined Sales Tax Governing Board (SSTGB).
How to get a sales tax permit / links to register in this state?
You can register online at: Texas Online Tax Registration Application
A remote seller may collect sales tax state-wide at a combined rate that is currently 8% by making an election with the Comptroller’s Office.
If the election is not made, a remote seller with nexus must collect the state rate and the applicable local rates.
For more information on Texas rates, see: Texas - City Sales and Use Tax Table.