Texas sales tax is a 6.25% state tax on most retail sales of goods and many services, and cities, counties, transit authorities, and special districts can add up to 2% more, bringing the combined rate to a maximum of 8.25%.1State of Texas. Texas Code 151.051 – Sales Tax Imposed2Texas Comptroller of Public Accounts. Local Sales and Use Tax Frequently Asked Questions The Comptroller of Public Accounts administers the system, and the rules live in Chapter 151 of the Texas Tax Code. Most urban areas hit the 8.25% ceiling because overlapping local jurisdictions quickly fill the 2% local allocation, so if you’re shopping or selling in a Texas city, plan on the top rate.
What Texas Taxes
Two things fall under the tax: tangible personal property and taxable services. Tangible personal property is anything you can see, weigh, measure, or touch, and the definition also reaches computer programs and prepaid calling cards.3State of Texas. Texas Code 151.009 – Tangible Personal Property Digital products delivered electronically carry the same tax status as their physical counterparts.
Section 151.0101 lists 17 categories of taxable services, including amusement services, cable television, data processing, information services, telecommunications, security services, real property repair, debt collection, insurance services, and internet access.4State of Texas. Texas Code TAX 151.0101 – Taxable Services Repair and maintenance of tangible personal property is on the list, with exceptions for aircraft, most boats, and motor vehicles. A service not on the list is generally not taxed.
Use Tax on Out-of-State Purchases
The same 6.25% rate applies as a use tax to taxable items bought from out-of-state retailers and then stored, used, or consumed in Texas.5State of Texas. Texas Tax Code TAX 151.101 If an out-of-state vendor doesn’t charge Texas tax on your invoice, you owe the use tax directly to the Comptroller. The rule exists so buying from an out-of-state seller doesn’t become a workaround.
Common Exemptions
Subchapter H carves out dozens of exemptions. A handful cover most everyday situations.
Groceries
Most food products for human consumption are exempt: meat, dairy, eggs, produce, cereals, snack foods like chips and popcorn, and ice cream sold in containers.6Texas Public Law. Texas Tax Code Section 151.314 – Food and Food Products Prepared food ready for immediate consumption — restaurant meals, deli plates, food truck orders, vending machine items — is taxable. Soft drinks and candy don’t get the exemption. Bakery items stay exempt whether or not the seller heats them.
Health Care Items
Prescription drugs, insulin, and over-the-counter medicines labeled with a Drug Facts panel are exempt, along with hearing aids, prosthetics, corrective lenses, hospital beds, and wound care dressings.7State of Texas. Texas Code TAX 151.313 – Health Care Supplies Diapers (adult and children’s) and baby wipes are also exempt.
Sales for Resale
Items bought to be resold are exempt if the buyer gives the seller a valid resale certificate.8Texas Public Law. Texas Tax Code 151.302 – Sales for Resale Using a resale certificate to skip tax on items you actually intend to keep is a common audit trigger.
Manufacturing Inputs
Raw materials that become part of a finished product, chemicals that cause a physical or chemical change during production, and equipment directly used in manufacturing are exempt, and so is pollution control equipment used in manufacturing.9State of Texas. Texas Tax Code Section 151.318 – Property Used in Manufacturing Office supplies and break room furniture don’t qualify.
Occasional Sales by Individuals
A person who doesn’t hold a sales tax permit and isn’t a regular seller can move personal property without collecting tax, subject to conditions: the items were originally bought for personal use, no broker or auctioneer is involved (online auctions are an exception), and total receipts stay under $3,000 in a calendar year.10Texas Public Law. Texas Tax Code Section 151.304 – Occasional Sales Garage sales fit; a side business that sells regularly does not.
Getting a Sales Tax Permit
Any business selling or leasing tangible personal property or providing taxable services in Texas needs a sales tax permit before collecting tax.11Texas Comptroller of Public Accounts. Texas Online Tax Registration Application The permit itself is free, though the Comptroller may require a security bond depending on the circumstances.12Texas Comptroller of Public Accounts. Texas Sales and Use Tax Frequently Asked Questions
You apply online through the Comptroller’s website. The application asks for Social Security numbers of sole owners, partners, or corporate officers, your NAICS code, and, for Texas corporations, your Secretary of State file number. Applicants without a Social Security number have to submit Form AP-201 by email or fax instead. Processing takes two to three weeks.11Texas Comptroller of Public Accounts. Texas Online Tax Registration Application
Each location needs its own permit, and you have to display it at the place of business. A permit is not transferable to another person or address.12Texas Comptroller of Public Accounts. Texas Sales and Use Tax Frequently Asked Questions
When Returns Are Due
The Comptroller assigns a filing frequency based on how much tax you collect. Monthly filers file by the 20th of the following month. Quarterly returns are due April 20, July 20, October 20, and January 20. Yearly filers submit one return by January 20 for the prior year.13Texas Comptroller of Public Accounts. Sales and Use Tax If a due date falls on a weekend or legal holiday, it moves to the next business day.
Businesses that paid $50,000 or more in sales and use tax during the prior fiscal year must file electronically.14Texas Comptroller of Public Accounts. File and Pay Taxpayers owing more than $1,000,000 initiate payment through TEXNET by 8 p.m. CT on the banking business day before the due date. For amounts of $1,000,000 or less, TEXNET payments are due by 10 a.m. CT on the due date.13Texas Comptroller of Public Accounts. Sales and Use Tax
How to File and Pay
Most filers use WebFile through the Comptroller’s eSystems portal.14Texas Comptroller of Public Accounts. File and Pay The return asks for total gross sales, non-taxable amounts to subtract, and a breakdown of taxable sales by local jurisdiction so the state can allocate the local share correctly.
Electronic check payments carry no convenience fee. Credit card payments (Visa, Mastercard, Discover, American Express) over $100 cost 2.25% of the amount paid plus a $0.25 processing charge; payments of $100 or less carry a flat $1.00 fee.15Texas Comptroller of Public Accounts. Pay with Credit Card
The Timely Filing Discount
File and pay on time and you keep 0.5% of the tax due. Businesses that prepay claim an additional 1.25% discount on top of that.13Texas Comptroller of Public Accounts. Sales and Use Tax For a business remitting $10,000 a month, the 0.5% discount is $50 per filing. Missing the deadline forfeits it.
Penalties for Late Filing
A late return triggers a $50 flat penalty no matter how much tax is owed.14Texas Comptroller of Public Accounts. File and Pay Percentage penalties then stack on the unpaid tax:
- 1 to 30 days late: 5% of the tax due.
- Over 30 days late: 10%.
- After a Notice of Tax/Fee Due: an additional 10%, for a 20% total.
Interest begins accruing 61 days after the due date.13Texas Comptroller of Public Accounts. Sales and Use Tax Taxpayers required to file electronically who send in paper returns instead face an added 5% penalty for the wrong filing format.14Texas Comptroller of Public Accounts. File and Pay One missed deadline can cost the timely filing discount, the $50 flat fee, and a 5% hit on the balance in a single month.
Remote Sellers and the $500,000 Threshold
Out-of-state sellers aren’t automatically exempt. A remote seller whose total Texas revenue exceeds $500,000 in the preceding 12 calendar months must get a Texas sales tax permit and start collecting and remitting use tax.16Texas Comptroller of Public Accounts. Remote Sellers The $500,000 figure counts all Texas sales, including those made through marketplace facilitators, wholesale transactions, and exempt sales. Once you cross it, you have until the first day of the fourth month after crossing to begin collecting.
Marketplace facilitators like Amazon and eBay generally handle collection and remittance for third-party sellers on their platforms. Sellers running their own websites, or selling through platforms that don’t collect, need to track Texas revenue on their own. Falling back below the threshold later doesn’t automatically end the obligation; contact the Comptroller to see whether the permit can be canceled.
Deducting Texas Sales Tax on Your Federal Return
Because Texas has no state income tax, residents who itemize on their federal return can deduct state and local sales taxes on Schedule A. The combined state and local tax deduction is capped at $10,000 ($5,000 if married filing separately).17Internal Revenue Service. Use the Sales Tax Deduction Calculator The IRS provides optional sales tax tables based on income and family size, or you can total actual receipts. Major purchases like vehicles aren’t included in the tables and need to be added separately.