Texas Remote Seller Sales Tax: Threshold, Permit, and Filing

If you sell into Texas from out of state, you must register for a Texas use tax permit and begin collecting tax once your sales into the state exceed $500,000 over any rolling 12-month period. This Texas remote seller sales tax rule took effect after the U.S. Supreme Court’s 2018 decision in South Dakota v. Wayfair, Inc., which let states tax sellers based on economic activity rather than physical presence.¹ No warehouse, office, or employee in Texas is required to create the obligation.

The $500,000 Threshold and When You Must Start Collecting

Texas measures the threshold against your gross revenue from sales of tangible goods and services shipped or delivered into Texas over the preceding 12 calendar months. That gross figure includes taxable and nontaxable sales, handling charges, shipping fees, installation costs, sales for resale, and sales to exempt buyers.² Almost everything you ship into Texas counts, whether or not tax applies to it.

Below $500,000, you’re inside a safe harbor: no permit, no collection, no filing. Once you cross the line, you must obtain a permit and begin collecting Texas use tax no later than the first day of the fourth month after the month you exceeded the threshold. If your trailing 12-month revenue tips over $500,000 in March, for example, you need to be permitted and collecting by July 1.²

Because the window rolls month by month rather than resetting on January 1, you should be checking your trailing 12-month Texas revenue monthly. A strong holiday quarter can push you over without warning, and the Comptroller does not send reminders.

Use Tax Permit, Not Sales Tax Permit

Remote sellers in Texas technically collect use tax, not sales tax. For the customer, the difference is invisible: both carry the same 6.25 percent state rate and the same local rates.³ The distinction matters only for your paperwork. When you register, you’re applying for a use tax permit, though the Comptroller’s application form and online portal handle both sales and use tax permits together.

How to Register

There is no fee to apply, though the Comptroller may require a security bond depending on your circumstances.⁴ Have these items ready:

Your Federal Employer Identification Number, or your Social Security Number if you’re a sole proprietor without an FEIN.
The NAICS code matching your primary business activity.
Your legal entity name as registered in your state of formation.
Names and addresses of officers, partners, or directors.
The date your Texas revenue first exceeded $500,000.

The Comptroller’s online registration system (Webfile) typically issues permits within two to three weeks.⁵ Owners, partners, officers, or directors without a Social Security Number cannot use the online system and must mail paper Form AP-201 to the Comptroller in Austin, which takes longer.⁶

Which Local Rate to Charge

Texas has more than 1,500 local taxing jurisdictions, and the destination rate at a customer’s address can reach 2 percent on top of the 6.25 percent state tax, for a combined maximum of 8.25 percent.³ To simplify compliance, Texas lets remote sellers charge a flat single local use tax rate of 1.75 percent instead of calculating the exact local rate at each delivery address.⁷

The flat rate is optional. It’s simpler but may slightly overcharge or undercharge individual customers. The Comptroller publishes the rate in the Texas Register by January 1 each year, so check annually. Two groups cannot use the single rate: businesses physically located in Texas, and marketplace providers collecting on behalf of third-party sellers.⁷

If you opt out of the flat rate, you must apply the correct combined local rate at each customer’s delivery address, factoring in city, county, transit authority, and special purpose district taxes. Using a single city’s rate for every Texas shipment is a common and expensive mistake.

What Texas Taxes

Texas’s 6.25 percent state tax applies to retail sales of most tangible goods and to a defined list of taxable services.³ Several points matter especially for remote sellers.

Clothing is generally taxable in Texas, unlike some states that exempt apparel. Groceries, prescription drugs, and most over-the-counter medications are exempt. Digital goods such as streaming video, online games, and on-demand content are taxable as amusement or cable television services.⁸

Software as a service and other cloud-based offerings are taxable in Texas as data processing services, though 20 percent of the charge is exempt. Information services (electronic data retrieval, database access) follow the same 20-percent-exempt structure. Credit reporting, debt collection, and insurance-related services are also taxable.⁸ SaaS sellers who assume only physical goods are taxable can rack up large back-tax exposure quickly.

If You Sell Through a Marketplace

Platforms like Amazon, eBay, Etsy, and Walmart Marketplace are “marketplace providers” under Texas law and must collect and remit the tax on sales made through them.⁹ The provider carries the same rights and duties as a seller for those transactions, including calculating the right rate and filing returns.¹⁰

If every one of your Texas sales flows through a collecting marketplace, you don’t need your own permit. But watch two things. First, if you also sell direct through your own website, those direct sales can push you over the threshold and require you to register for the direct-sale portion. Second, marketplace sales still count toward your $500,000 total even though the platform collected the tax, so tracking only direct sales can mislead you about where you stand.²

Filing, Discounts, and Penalties

After you register, the Comptroller assigns a filing frequency. Most remote sellers begin on a quarterly schedule; those collecting more than $100,000 in Texas tax per year generally move to monthly. You report total sales, taxable sales, and tax collected through Webfile.

Timely filers earn a 0.5 percent discount on tax due.³ Monthly and quarterly filers can earn an additional 1.25 percent prepayment discount by paying at least 90 percent of the current period’s liability, or 100 percent of the same period’s liability from the prior year, before the due date.¹¹

Late payment is expensive. A report that’s one to 30 days late carries a 5 percent penalty on the tax owed; past 30 days, that becomes 10 percent. If the Comptroller issues a formal Notice of Tax/Fee Due, an additional 10 percent applies, bringing the total to 20 percent. Filing a return late draws a $50 penalty per report even if you owe nothing. Interest begins accruing on the 61st day after the due date at a variable rate reset each calendar year.¹² Payments can be made by ACH debit, credit card, or mailed check.

When You Can Stop Collecting

You can stop collecting Texas use tax once your trailing 12-month Texas revenue has stayed below $500,000 for 12 consecutive months. You cannot simply stop filing; you must submit a form to the Comptroller to terminate your collection obligation. If your sales later climb back above the threshold, you must resume collecting by the first day of the second month after the 12-month period in which you exceeded it again.¹³

1
Supreme Court of the United States. South Dakota v. Wayfair, Inc.
2
Texas Comptroller of Public Accounts. Remote Sellers
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Texas Comptroller of Public Accounts. Sales and Use Tax
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Texas Comptroller of Public Accounts. Texas Sales and Use Tax Frequently Asked Questions – Permit
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Texas Comptroller of Public Accounts. Texas Online Tax Registration Application
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Texas Comptroller of Public Accounts. Texas Application for Sales Tax Permit and/or Use Tax Permit
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Texas Comptroller of Public Accounts. Single Local Use Tax Rate Taxpayer Search
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Texas Comptroller of Public Accounts. Taxable Services
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Texas Comptroller of Public Accounts. Marketplace Providers and Marketplace Sellers
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Texas Constitution and Statutes. Texas Tax Code 151.0242 – Marketplace Providers and Marketplace Sellers
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Texas Comptroller of Public Accounts. Texas Sales and Use Tax Frequently Asked Questions – Report and Pay
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Texas Comptroller of Public Accounts. Penalties for Past Due Taxes
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Texas Comptroller of Public Accounts. Close Business Location