Texas sales tax is a consumption tax levied on selling or renting most goods and services. The state’s sales and use tax rates vary by jurisdiction and can be as high as 8.25% in some areas. The tax is imposed on both in-state and out-of-state sellers, but the rules are more complex for remote sellers. Some examples of taxable items include software, digital products, and clothing. The tax is also levied on certain services such as transportation and telecommunications.
The Texas sales tax rate is 6.25%, and local jurisdictions can add up to 2% for a maximum combined sales tax of 8.25%. Local rates are based on an exact address, so using an accurate address-level sales tax rate lookup tool is important. Out-of-state sellers should consider registering for a Texas seller’s permit if they make more than $500,000 in annual sales or have a physical presence in the state.
How to file Texas Sales Tax?
If you operate a business in Texas, you are required to collect sales tax on the sale, lease, or rental of most tangible personal property and some services. You must also remit this tax to the state by a certain date. The state of Texas uses this money to fund local government services. Therefore, you are acting as the state’s de facto tax collector.
Once you have registered for sales tax, you will receive a Webfile number and an assignment of your filing frequency (monthly, quarterly, or annually). Then, you will need to log in to the Texas Comptroller’s eSystems website using this Webfile login.
Once logged in, select your tax type and enter the relevant information. Choose the period and city(s) where taxable sales occurred. The system will calculate the amount owed to Texas and those cities. Review the results and pay online by ACH debit or credit card.
Texas Sales Tax-exempt Items
Many goods are exempt from sales tax in Texas, including most non-prepared food items, medical supplies, and household remedies. Additionally, nonprofit organizations and merchants purchasing items for resale are exempt from paying sales tax. If you sell these types of goods, make sure to request a valid exemption or resale certificate from your customers.