The sales tax rate in Montgomery, Texas is 8.25%. That total combines the 6.25% Texas state sales tax with a 2% city sales tax, and it applies to most retail purchases made within city limits.1Texas Comptroller of Public Accounts. Texas Sales and Use Tax Rates It is also the highest rate allowed anywhere in the state, because Texas caps the combined local portion at 2% on top of the state’s 6.25%.2Texas Comptroller of Public Accounts. Sales and Use Tax
How the 8.25% Breaks Down
Texas imposes a 6.25% state sales and use tax on all taxable transactions.3State of Texas. Texas Tax Code 151.051 – Sales Tax Imposed The city of Montgomery adds 2% on top of that.1Texas Comptroller of Public Accounts. Texas Sales and Use Tax Rates Montgomery County itself does not impose a county sales tax, so the full 2% local share comes from the city.
Because the city has already used the entire 2% local cap, no special purpose district or transit authority can stack additional sales tax inside the city limits without an existing local rate being reduced to stay under the cap.2Texas Comptroller of Public Accounts. Sales and Use Tax For a shopper, that means the number on the receipt is stable: it won’t suddenly jump a quarter-point because of a district you didn’t know you were standing in.
What You’ll Pay Tax On
Most physical goods carry the full 8.25%. Furniture, electronics, clothing, tools, building materials, and household supplies are all taxable. The tax applies to leases and rentals of tangible property too, not only outright purchases.2Texas Comptroller of Public Accounts. Sales and Use Tax
Texas also taxes a specific list of services. Amusement services are a large category, covering movie tickets, gym memberships, sporting events, concerts, and online games. Streaming video and video-on-demand are taxed as cable television services. Credit reporting services are taxable when the applicant’s address is in Texas and the requester does business in the state.4Texas Comptroller of Public Accounts. Taxable Services
Cell phone service, paging, local and long-distance calls, and call forwarding are all taxable. Mobile charges are sourced to the customer’s billing address, so a Montgomery resident pays the full 8.25% on a cell phone bill regardless of where any individual call takes place.5Texas Comptroller of Public Accounts. Sales Tax on Telecommunications Services Internet access charges are exempt under federal law.
What’s Exempt
Grocery staples bought for home preparation, including flour, sugar, bread, milk, eggs, fruits, and vegetables, are not taxed.6Texas Comptroller of Public Accounts. Grocery and Convenience Stores Prepared food sold hot or ready-to-eat is taxable, so the same convenience store trip can produce both taxed and untaxed items depending on what you grabbed.
Prescription drugs dispensed on a licensed practitioner’s order are exempt.7Cornell Law Institute. 34 Texas Admin Code 3.284 – Drugs, Medicines, Medical Equipment, and Devices Over-the-counter medicines that carry an FDA-required Drug Facts panel are also exempt, which many shoppers miss at the register.6Texas Comptroller of Public Accounts. Grocery and Convenience Stores Prosthetic devices, hearing aids, corrective lenses, and orthopedic appliances qualify as well, most of them without any prescription required.
Motor Vehicles Are Taxed Separately
Buying a car in Montgomery doesn’t trigger the 8.25% rate. Texas applies a flat 6.25% motor vehicle sales and use tax on the retail price minus trade-in value, with no local portion added.8Texas Comptroller of Public Accounts. Revenue Object 3004 – Motor Vehicle Sales and Use Tax You pay the tax at the county tax assessor-collector’s office when you apply for a Texas title using Form 130-U, not to the dealership at the point of sale.9Texas Comptroller of Public Accounts. Motor Vehicle – Sales and Use Tax
The Annual Sales Tax Holiday
Texas holds a sales tax holiday every August. In 2026, it runs from Friday, August 7 through midnight on Sunday, August 9.10Texas Comptroller of Public Accounts. Sales Tax Holiday Most clothing, footwear, school supplies, and backpacks priced under $100 per item sell free of sales tax during that weekend, and the exemption covers the full 8.25% in Montgomery rather than only the state portion. Items priced at $100 or more don’t qualify even during the holiday, so a borderline price tag matters.
If You Buy Online or Out of State
If you buy a taxable item from an out-of-state seller that doesn’t charge Texas tax, you owe use tax at the same combined rate where you store or use the item. For a Montgomery address, that is the full 8.25%.11Texas Comptroller of Public Accounts. Use Tax Most large retailers already collect it: an out-of-state seller must get a Texas permit and start collecting once it exceeds $500,000 in gross Texas revenue in the previous 12 months, and marketplace platforms like Amazon and eBay collect on behalf of their third-party sellers.12Texas Comptroller of Public Accounts. Remote Sellers and Marketplace Frequently Asked Questions
Where use tax does come up is purchases from smaller retailers without a Texas presence. If you don’t hold a sales tax permit, you report and pay use tax on Form 01-156. Owe under $1,000 for the year, and the deadline is January 20 of the following year. Hit $1,000 or more in any month, and you file by the 20th of the next month.11Texas Comptroller of Public Accounts. Use Tax
Garage Sales and Occasional Sellers
Not every private sale is taxable. Texas exempts “occasional sales,” allowing someone who doesn’t normally sell at retail to make one or two taxable sales in a 12-month period without collecting tax. There is also a separate carve-out for selling personal property originally bought for your own or your family’s use, as long as receipts stay under $3,000 in a calendar year and you don’t go through a broker or auctioneer. Online auction platforms are fine.13State of Texas. Texas Tax Code 151.304 – Occasional Sales A couple of garage sales a year under that threshold won’t create a tax bill.
If You Sell in Montgomery
Any business that sells, leases, or rents taxable goods or provides taxable services in Texas needs a sales tax permit from the Comptroller before its first sale.14Texas Comptroller of Public Accounts. Sales Tax Permit Requirements The permit is free and can be applied for online. You also need one if you buy taxable items from out-of-state suppliers that don’t collect Texas tax.
The Comptroller assigns a filing frequency when it issues the permit. Returns are due on the 20th of the month following each reporting period, whether you file monthly, quarterly, or annually.15Texas Comptroller of Public Accounts. Due Dates for Taxes, Fees and Information Reports When the 20th falls on a weekend or federal holiday, the deadline moves to the next business day. Electronic payments must be submitted by 11:59 p.m. Central Time on the due date, and mailed checks must be postmarked by then.
Penalties and Timely-Filing Discount
A return filed one to 30 days late carries a 5% penalty on the tax owed. After 30 days, the penalty climbs to 10%, and if you still haven’t paid after a formal Notice of Tax Due, another 10% is added for a total of 20%.16Texas Comptroller of Public Accounts. Penalties for Past Due Taxes Interest begins accruing on day 61 at a variable rate the Comptroller sets each January.
File and pay on time, and you keep 0.5% of the tax reported as a collection discount. Prepaying the tax adds another 1.25%, bringing the total to 1.75%.2Texas Comptroller of Public Accounts. Sales and Use Tax
Resale, Manufacturing, and Agricultural Exemptions
A business buying inventory it plans to resell can purchase those items tax-free by giving its supplier a completed Form 01-339, the Texas Sales and Use Tax Resale Certificate.17Texas Comptroller of Public Accounts. Texas Sales and Use Tax Frequently Asked Questions – Resale The certificate only covers items genuinely intended for resale. If you end up using merchandise bought that way, you owe tax on the purchase price or the fair market rental value for the period you used it. Sellers must keep certificates on file for at least four years.
Manufacturers can buy materials, chemicals, and equipment tax-free when those items are used directly in production and cause a physical or chemical change in the product being made for sale. The exemption also covers quality control equipment, pollution control devices, required safety apparel, and wrapping and packaging supplies. Items used for administrative work or shipping finished goods don’t qualify.18Texas Comptroller of Public Accounts. Manufacturing Exemptions
Agricultural producers get a broad exemption on livestock raised for food, animal feed, seeds for food crops, and farm machinery used exclusively in agricultural production for sale.19Texas Comptroller of Public Accounts. Texas Agricultural Sales and Use Tax Exemption Certificate Livestock and feed are always exempt without any certificate. Most other qualifying farm equipment and supplies require a current ag/timber exemption number from the Comptroller.