The Austin sales tax rate is 8.25 percent, which is the highest combined rate allowed under Texas law. It applies to most retail purchases of tangible goods and to a specific list of services. Groceries, prescription drugs, and most medical devices are exempt, so a typical trip to the supermarket for staple foods carries no tax at all.
How the 8.25 Percent Is Divided
Three taxing authorities share every taxable dollar spent inside Austin city limits:
- Texas state sales tax: 6.25 percent, the same everywhere in the state.
- City of Austin: 1.0 percent, funding municipal services like roads, parks, and public safety.
- Capital Metropolitan Transportation Authority: 1.0 percent, funding bus routes, the MetroRail commuter line, and other transit.
Texas caps combined local sales tax at 2 percent on top of the 6.25 percent state rate, so 8.25 percent is the ceiling anywhere in the state.1Texas Comptroller of Public Accounts. Sales and Use Tax Unincorporated areas near Austin that fall outside the Capital Metro service area or sit within a different special purpose district can carry a slightly lower combined rate, so the exact percentage can shift by a fraction once you cross certain boundary lines.
What’s Taxable
Most tangible personal property sold in Austin is taxable at the full 8.25 percent. That includes electronics, furniture, clothing (outside the annual tax holiday), household goods, and leases or rentals of tangible property.
Texas also taxes a specific list of services, which catches some buyers off guard. Taxable services include data processing, cable television, telecommunications, pest control, landscaping, janitorial work, motor vehicle parking, laundry and dry cleaning, security services, and debt collection, among others. A 20 percent exemption applies to data processing and information services, so only 80 percent of those charges are taxed.1Texas Comptroller of Public Accounts. Sales and Use Tax Most professional services — legal, accounting, medical — are not taxed.
Groceries and Prepared Food
Grocery shopping in Austin is tax-free for most staple foods. Bread, milk, eggs, fruits, vegetables, meat, cereal, cheese, and snack items like chips, nuts, and granola bars are all exempt.2State of Texas. Texas Tax Code 151.314 – Food and Food Products Soft drinks, candy, and ice are taxable exceptions.
Prepared food is where the line shifts. Any food sold heated, served with eating utensils, or ready for immediate consumption at a restaurant, deli counter, or food truck is fully taxable at 8.25 percent. That includes pizza by the slice, rotisserie chicken from the hot case, made-to-order sandwiches, and salads assembled by the store. If a store employee heats a frozen burrito for you, tax is due; if you heat it yourself in a store microwave, it isn’t.3Texas Comptroller of Public Accounts. Grocery and Convenience Stores
Food that’s merely cut, repackaged, or pasteurized, like a pre-made cheese tray or bagged salad mix, stays exempt as long as the store doesn’t provide utensils with it. Plates, forks, cups, and straws count as utensils; napkins and foam containers don’t.3Texas Comptroller of Public Accounts. Grocery and Convenience Stores
Health-Related Exemptions
Beyond groceries, several health-related categories are exempt:
- Prescription drugs are exempt. Over-the-counter products are also exempt if they carry a “Drug Facts” panel required by the FDA. Insulin is exempt whether sold with a prescription or not.4Cornell Law Institute. 34 Texas Admin Code 3.284 – Drugs, Medicines, Medical Equipment, and Devices
- Braces, hearing aids, prosthetic devices, orthopedic appliances, dental devices, and their replacement parts are exempt. No prescription is required for these except corrective lenses.4Cornell Law Institute. 34 Texas Admin Code 3.284 – Drugs, Medicines, Medical Equipment, and Devices
- Hospital beds designed for patient care, including mattresses and built-in devices, are exempt.5Texas Public Law. Texas Tax Code 151.313 – Health Care Supplies
Vehicles Are Taxed Differently
Buying a car in Austin doesn’t follow the usual retail rules. The motor vehicle sales tax rate is 6.25 percent, with no local sales tax added on top.6Texas Comptroller of Public Accounts. Tax Rates – Motor Vehicle Tax Guide So a vehicle purchase in Austin is taxed at 6.25 percent rather than 8.25 percent, and the tax is collected by the county tax assessor-collector’s office when you title and register the vehicle, not by the dealer at the point of sale.
The August Sales Tax Holiday
Texas holds a sales tax holiday each August. The 2026 dates are August 7 through August 9. During that weekend, most clothing and footwear priced under $100 per item can be purchased tax-free, along with school supplies under $100 and student backpacks under $100, including wheeled and messenger styles.7Texas Comptroller of Public Accounts. Sales Tax Holiday
The $100 threshold applies per item, not per transaction, and you can’t split a price. A $90 pair of shoes qualifies; a $110 pair does not. The exemption applies automatically at the register, with no coupons or certificates required.
Online and Out-of-State Purchases
Ordering online from a seller outside Texas doesn’t avoid the tax. Those purchases are subject to Texas use tax at the same 8.25 percent rate when shipped to an Austin address. In practice, most large retailers and marketplace platforms now collect it automatically at checkout.
Texas requires remote sellers with more than $500,000 in total Texas revenue over the preceding twelve months to register for a sales tax permit and collect tax. Below that threshold, the seller isn’t required to collect. Total Texas revenue includes taxable and nontaxable sales of goods and services shipped into Texas, plus handling and shipping charges.8Texas Comptroller of Public Accounts. Remote Sellers
Marketplace platforms like Amazon, eBay, and Etsy have a separate obligation. Under Texas Tax Code Section 151.0242, a marketplace provider must collect and remit sales tax on all taxable sales made through its platform, even when the actual seller is a small third-party vendor who wouldn’t independently meet the $500,000 threshold.9State of Texas. Texas Tax Code 151.0242 Individual sellers remain responsible for collecting tax on sales made outside these platforms, like through their own website or at a craft fair.
For Businesses: Permits and Filing
Any business selling taxable goods or services in Texas needs a Sales and Use Tax Permit from the Texas Comptroller before making its first taxable sale. The permit is free, and the application is online. The application asks for owner, partner, or officer identifying numbers (SSN or FEIN), a NAICS code describing your business activity, and the physical address of each location. Each location needs its own permit, so a restaurant with two Austin storefronts needs two.10Texas Comptroller of Public Accounts. Texas Online Tax Registration Application
The Comptroller assigns a filing frequency, monthly, quarterly, or annual, based on how much tax you collect. For monthly filers, the return and payment are due on the 20th of the month following the reporting period. April’s sales are due by May 20. When the 20th falls on a weekend or holiday, the deadline shifts to the next business day.11Texas Comptroller of Public Accounts. Due Dates for Taxes, Fees and Information Reports Most businesses file through the Comptroller’s Webfile system in the eSystems portal.12Texas Comptroller of Public Accounts. File and Pay
Filing and paying on time earns a 0.5 percent timely filing discount on the tax collected. Monthly and quarterly filers can take an additional 1.25 percent prepayment discount.13Texas Comptroller of Public Accounts. Texas Sales and Use Tax Frequently Asked Questions – Report and Pay Each discount is small per return but worth claiming every period.
Penalties for Filing Late
Missing a deadline triggers both a flat penalty and percentage charges that escalate:
- 1 to 30 days late: a 5 percent penalty on the tax due.
- More than 30 days late: 10 percent.
- After a Notice of Tax Due is issued: an additional 10 percent, bringing the total to 20 percent of the tax owed.
On top of the percentage, the Comptroller adds a flat $50 penalty for each late report, even if no tax was due for that period. Interest begins accruing on the 61st day after the original due date at a variable rate the Comptroller sets each calendar year.14Texas Comptroller of Public Accounts. Penalties for Past Due Taxes A single missed return can cost far more than the underlying tax once penalties and interest stack up.