A Texas seller’s permit costs nothing. The Texas Comptroller of Public Accounts issues the Sales and Use Tax Permit at no charge, and it doesn’t expire, so there’s no renewal fee either.1Texas Comptroller of Public Accounts. Sales and Use Tax The real cost of a Texas seller’s permit sits elsewhere: some applicants must post a security bond before the permit is issued, every holder takes on the duty of collecting and remitting sales tax, and the penalties for getting that wrong add up fast.
The Security Bond Some Applicants Must Post
The Comptroller can require you to post a security bond as a condition of getting your permit. The bond protects the state if you collect sales tax from customers and fail to send it in.
The bond amount is the greater of $100,000 or four times your estimated average monthly tax liability. Itinerant vendors have a lower minimum of $500. Whether you need one depends on factors like your compliance history and business type; applicants with past delinquencies or in higher-risk categories should expect the requirement. The Comptroller can also demand a new or larger bond later if your existing one becomes inadequate or you fall behind on payments.2Cornell Law Institute. 34 Texas Admin Code 3.327 – Taxpayers Bond or Other Security
Many small businesses and first-time applicants with clean records get their permit without one. But if the Comptroller requires a bond, you won’t receive the permit until it’s posted.
What the Permit Obligates You to Collect
The permit gives you legal authority to collect sales tax on taxable transactions, and the obligation to do so. Texas imposes a 6.25 percent state sales and use tax on retail sales, leases, and rentals of most goods, along with certain taxable services. Cities, counties, transit authorities, and special purpose districts can add up to 2 percent in local tax, for a maximum combined rate of 8.25 percent.1Texas Comptroller of Public Accounts. Sales and Use Tax
You need a permit if you sell, lease, or rent taxable goods, provide taxable services, or acquire taxable items from out-of-state suppliers that don’t hold a Texas permit.3Texas Comptroller of Public Accounts. Sales Tax Permit Requirements Remote sellers cross into the requirement at $500,000 in gross Texas revenue over the prior 12 calendar months, counting taxable, nontaxable, resale, and marketplace sales alike.
Not every sale is taxable. Most grocery food, prescription medications, and over-the-counter health items are exempt, and goods sold for resale are exempt when the buyer provides a valid resale certificate.
What Filing Returns Costs You, and the Small Discount for Timeliness
Once you have the permit, you file sales tax returns on a schedule the Comptroller assigns based on your volume: monthly, quarterly, or annually. Monthly returns are due on the 20th of the following month. Quarterly returns are due April 20, July 20, October 20, and January 20. Annual filers submit a single return by January 20 covering the prior year.4Texas Comptroller of Public Accounts. Sales and Use Tax – Section: Due Dates A return is required for every reporting period, even one with zero taxable sales.5Texas Comptroller of Public Accounts. Texas Sales and Use Tax Frequently Asked Questions
Filing on time pays a small discount. If you submit the return and payment by the due date, you keep 0.5 percent of the tax collected. Monthly and quarterly filers who prepay their estimated liability can claim an additional 1.25 percent prepayment discount on top of that.6Texas Comptroller of Public Accounts. Texas Sales and Use Tax Frequently Asked Questions The amounts are modest per return, and the discount disappears the moment you file late.
Penalties That Make a Free Permit Expensive
Miss a deadline and the penalties stack quickly:
- 1 to 30 days late: 5 percent of the unpaid tax.
- More than 30 days late: 10 percent of the unpaid tax.
- After a formal notice of tax due: an additional 10 percent, bringing the total to 20 percent.7Texas Comptroller of Public Accounts. Penalties for Past Due Taxes
Every late return also carries a flat $50 penalty, whether or not any tax was due.8Texas Public Law. Texas Tax Code 151.703 – Failure to Report or Pay Tax Interest begins accruing on the 61st day after the due date at a variable annual rate the Comptroller sets each year.7Texas Comptroller of Public Accounts. Penalties for Past Due Taxes Chronic non-compliance can lead the Comptroller to revoke your permit or require a security bond.
What You’ll Need to Apply
Applications go through the Comptroller’s eSystems portal, and processing takes about two to three weeks.9Texas Comptroller of Public Accounts. Texas Online Tax Registration Application Have these ready:
- The sole owner’s Social Security number, or the SSN or federal Employer Identification Number for each partner, officer, or director of a partnership or corporation.9Texas Comptroller of Public Accounts. Texas Online Tax Registration Application
- Your Texas Secretary of State file number, if you’re a Texas corporation.
- Your six-digit NAICS code identifying your business activity.
- Legal name, physical and mailing addresses, entity type, and an estimate of expected monthly taxable sales.
If you’re forming an LLC, partnership, or corporation, register the entity with the Secretary of State first. You can’t obtain an EIN from the IRS until the entity exists, and you can’t complete the Comptroller’s application without the proper identification numbers.10Internal Revenue Service. Get an Employer Identification Number
If You’re Buying an Existing Business Instead
Buying a business comes with a cost the fee schedule won’t show you. Under Texas successor liability, the buyer of a business or its stock of goods is personally liable for the seller’s unpaid sales tax, up to the purchase price. You’re required to withhold enough from the purchase price to cover any outstanding tax, penalties, and interest, and the only way to release yourself from that liability is a certificate from the Comptroller confirming the seller owes nothing.11Cornell Law Institute. 34 Texas Admin Code 3.7 – Successor Liability The new owner also has to apply for a new sales tax permit; you cannot operate under the previous owner’s permit number.2Cornell Law Institute. 34 Texas Admin Code 3.327 – Taxpayers Bond or Other Security Requesting that clearance certificate before closing is the step buyers most often skip.