The sales tax rate in McAllen, TX is 8.25%, which combines the 6.25% Texas state sales tax with a 2% local tax. That is the highest combined rate Texas law permits, so no city or county in the state charges more.1Texas Comptroller of Public Accounts. Sales and Use Tax The local 2% stays in McAllen, where it funds city operations, property tax relief, and economic development projects.
Where the 2% Local Share Goes
Texas charges 6.25% on retail sales, leases, and rentals of most goods along with a defined list of taxable services. Cities, counties, transit authorities, and special purpose districts can add local rates on top, but the combined total is capped at 8.25%.1Texas Comptroller of Public Accounts. Sales and Use Tax
McAllen uses the entire 2% local allocation, divided three ways in the Comptroller’s records:2Texas Comptroller of Public Accounts. Cities with Additional Sales and Use Tax
- 1.0% to the city general fund, which supports day-to-day municipal operations like public safety and road maintenance.
- 0.5% for property tax relief, adopted in 1990, which offsets residential property tax burdens.
- 0.5% for Type 4B economic development, in effect since 1997, funding community projects such as parks, sports venues, and infrastructure.
Retailers collect the full 8.25% at the register. The Comptroller then distributes McAllen’s local share back to the city each month.
What Gets Taxed at 8.25%
The rate applies to most physical goods you can carry out of a store: clothing, electronics, furniture, appliances, and similar items. Leasing or renting tangible goods carries the same tax as buying them outright.1Texas Comptroller of Public Accounts. Sales and Use Tax
Texas also taxes a specific list of services. The ones McAllen shoppers and businesses run into most often are:3Texas Comptroller of Public Accounts. Taxable Services
- Data processing, including word processing, data entry, and data storage. Only 80% of the charge is taxable; the remaining 20% is exempt.
- Information services, such as electronic data retrieval and database access. The same 20% exemption applies.
- Credit reporting services.
- Cable television, including satellite, streaming video, video-on-demand, and subscription TV.
- Nonresidential real property repair and remodeling (commercial buildings, not homes).
- Amusement services, including sporting events, movie theaters, fitness centers, and golf courses.
- Debt collection and insurance services.
The 20% carve-out on data processing and information services catches people off guard. On a $1,000 data processing invoice, tax applies to only $800. Businesses that miss that detail end up over-collecting from customers.
What’s Exempt in McAllen
Several everyday purchases carry no sales tax at all. Groceries are the biggest category for most households. Food products for home preparation (produce, meat, dairy, bread, eggs, and similar staples) are not taxed, and snack items like chips and candy fall within the food exemption as well. Ready-to-eat meals sold with utensils generally do not qualify.4Texas Comptroller of Public Accounts. Grocery and Convenience Stores
Prescription medications are exempt. So are over-the-counter drugs that the FDA requires to carry a “Drug Facts” panel on the label, along with wound care supplies, many medical devices, and prosthetics.4Texas Comptroller of Public Accounts. Grocery and Convenience Stores
Agricultural producers can buy qualifying items like feed, seed, fertilizer, and farm machinery tax-free, provided the items are used exclusively on a farm or ranch producing agricultural goods for sale. The buyer needs a valid agricultural and timber registration number from the Comptroller and must present a completed exemption certificate at purchase.5Texas Comptroller of Public Accounts. Agricultural and Timber Exemptions
Back-to-School Sales Tax Holiday
Texas holds an annual sales tax holiday before the school year starts. In 2026, the tax-free weekend runs Friday, August 7 through Sunday, August 9.6Texas Comptroller of Public Accounts. Sales Tax Holiday During that window, most clothing, footwear, school supplies, and backpacks priced under $100 per item are exempt from both state and local sales tax. There is no cap on how many qualifying items you can buy, and no exemption certificate is required at checkout.
If You’re Selling in McAllen
Any business that sells, leases, or rents taxable goods or provides taxable services in Texas must hold an active sales tax permit before its first taxable transaction. Applications go through the Texas Comptroller’s online registration portal. Sole owners need a Social Security number; partnerships provide SSNs or federal employer identification numbers for each partner; Texas corporations need their Secretary of State file number along with SSNs for each officer or director.7Texas Comptroller of Public Accounts. Texas Online Tax Registration Application Applicants must be at least 18, though a parent or legal guardian can apply for a minor.
The Comptroller assigns your filing frequency (monthly, quarterly, or yearly) after your permit is approved and notifies you by letter. Businesses collecting more than roughly $100,000 in state sales tax annually are typically placed on a monthly schedule.
Deadlines and the Timely Filing Discount
Sales tax returns are due on the 20th of the month following the reporting period. April sales tax, for a monthly filer, is due by May 20. If the 20th falls on a weekend or federal holiday, the deadline shifts to the next business day.8Texas Comptroller of Public Accounts. Due Dates for Taxes, Fees and Information Reports Electronic payments through Webfile must be submitted by 11:59 p.m. Central Time on the due date.
Businesses that file and pay on time can keep 0.5% of the tax collected as a timely filing discount.9Texas Comptroller of Public Accounts. Texas Sales and Use Tax Frequently Asked Questions Monthly and quarterly filers who prepay their estimated tax can claim an additional 1.25%, bringing the total discount to 1.75%.
How to File and Pay
Most businesses file through Webfile, the Comptroller’s secure online portal, reached through the eSystems login page.10Texas Comptroller of Public Accounts. File and Pay You need your 11-digit Texas taxpayer number and Webfile credentials to log in.11Texas Comptroller of Public Accounts. Identify Taxpayer The return asks for your total gross sales for the period, your non-taxable sales (exemptions, resale transactions, and out-of-state sales), and the resulting taxable amount. Payment can be made by ACH debit or credit card through the portal. Businesses owing more than $1,000,000 per payment must use TEXNET and initiate the transfer by 8:00 p.m. CT on the business day before the due date.1Texas Comptroller of Public Accounts. Sales and Use Tax
Paper filing is still allowed. Mail the completed return with a check or money order to the Comptroller’s office, postmarked by the due date.
Penalties for Filing Late
Missing a deadline gets expensive quickly. The penalty structure is tiered:12Texas Comptroller of Public Accounts. Penalties for Past Due Taxes
- 1 to 30 days late: 5% penalty on the tax due.
- More than 30 days late: 10% penalty.
- After the Comptroller issues a Notice of Tax Due: an additional 10% stacks on top, for a total of 20%.
Interest begins accruing on the 61st day after the original due date at a variable rate the Comptroller sets each year. You also forfeit the 0.5% timely filing discount for any period where the return or payment is late. File even if you had zero taxable sales for the period; the return itself is still required.
Use Tax on Out-of-State Purchases
When you buy something from an out-of-state seller that does not collect Texas tax, you owe use tax on that purchase at the same 8.25% combined McAllen rate. This applies to businesses and individual consumers alike. Businesses with a sales tax permit report use tax on the same return they use for sales tax. Individuals without a permit can contact the Comptroller’s office to report and remit what they owe.