The sales tax rate in The Colony, Texas is 8.25 percent. That’s the combined rate charged on most retail purchases inside city limits, and it’s the highest total rate Texas law allows. It applies to tangible goods and a defined list of services, with groceries, prescription drugs, and a few other essentials carved out.
Where the 8.25 Percent Goes
Four separate taxing entities share every taxable sale:
- State of Texas: 6.25 percent, directed to the state’s general revenue fund.
- City of The Colony: 1.0 percent for general municipal operations.
- Economic Development Corporation: 0.5 percent for business attraction and job-creation programs.
- Community Development Corporation: 0.5 percent for parks, recreation, and community infrastructure.
The 2.0 percent local portion is the maximum any Texas city can add on top of the state rate, so The Colony sits at the statutory ceiling.1The Colony, TX. Finance – Section: Tax Rates Texas Tax Code Chapter 321 authorizes municipalities to adopt these local sales taxes, and The Colony has exercised the full allowable amount.2Texas Comptroller of Public Accounts. Sales and Use Tax
What the Tax Applies To
The 8.25 percent is charged on most tangible personal property: electronics, furniture, clothing, building materials, and the like. It also covers 16 specific service categories, including telecommunications, property repair and remodeling, data processing, security services, and cable television.3Texas Comptroller of Public Accounts. Taxable Services Professional services such as legal advice and accounting work are not on that taxable list.
Groceries and Food
Most food bought at a grocery store is exempt. The exemption covers cereals, milk and dairy, meat, poultry, fish, eggs, fruits, vegetables, spices, coffee, tea, and snack items.4Texas Public Law. Texas Tax Code 151.314 – Food and Food Products Prepared food sold ready to eat, like a restaurant meal or something from a deli counter, is generally still taxable.
Medical Items
Prescription drugs and medicines dispensed by a licensed practitioner are exempt, as are over-the-counter insulin and certain medical devices prescribed by a healthcare provider.5Texas Public Law. Texas Tax Code 151.313 – Health Care Supplies
Resale Purchases
Businesses buying inventory for resale don’t pay sales tax on those purchases, but they have to document the exemption. Texas uses Form 01-339, the Sales and Use Tax Resale Certificate, which you present to your supplier at the time of purchase. The supplier keeps it on file in lieu of collecting the tax.6Texas Comptroller of Public Accounts. Texas Sales and Use Tax Forms If you later use the item yourself instead of reselling it, you owe the tax.
The Annual Sales Tax Holiday
Once a year, Texas suspends sales tax on certain back-to-school items statewide. In 2026 the holiday runs from Friday, August 7 through midnight on Sunday, August 9. Clothing, footwear, school supplies, and backpacks priced under $100 per item qualify, and there’s no cap on how many qualifying items you can buy.7Texas Comptroller of Public Accounts. Sales Tax Holiday
Jewelry, watches, handbags, luggage, accessories, and athletic or protective footwear don’t qualify, and neither does anything priced at $100 or more. Shipping and handling count toward the price, so a $95 shirt with $6 shipping comes to $101 and loses the exemption.7Texas Comptroller of Public Accounts. Sales Tax Holiday
Online and Out-of-State Purchases
Remote sellers aren’t automatically exempt from charging The Colony’s rate. A seller based outside Texas with more than $500,000 in total Texas revenue over the preceding twelve months must register and collect state and local sales tax on shipments to Texas addresses. That threshold counts all Texas sales, taxable and nontaxable, including shipping and handling.8Texas Comptroller of Public Accounts. Remote Sellers Sellers below the threshold aren’t required to collect.
For most big online purchases, that means the correct 8.25 percent is already added at checkout. If you buy from a smaller out-of-state retailer that doesn’t collect, you technically owe use tax at the same rate directly to the state.
For Businesses Collecting the Tax
Any business selling taxable goods or services in The Colony must get a Texas Sales and Use Tax Permit before collecting any tax. The application is free and goes through the Comptroller’s office. Sole proprietors use their Social Security number; corporations and partnerships use their Federal Employer Identification Number. You’ll also need your NAICS code and the physical address of every location.9Texas Comptroller of Public Accounts. Texas Online Tax Registration Application The address matters because neighboring cities may not levy the full 2.0 percent local portion, and the Comptroller uses your location to route the local share correctly.
Filing and the Timely Discount
Filing happens through the Comptroller’s Webfile system. The agency assigns you a filing frequency (monthly, quarterly, or annual) based on how much tax you collect. High-volume collectors ($500,000 or more per tax type) have to pay through TEXNET, the state’s electronic funds transfer system.10Texas Comptroller of Public Accounts. File and Pay
File and pay on time and you can keep 0.5 percent of the tax you collected as a reimbursement for collection costs. Monthly and quarterly filers who also make prepayments can claim an additional 1.25 percent on top of that.11Texas Comptroller of Public Accounts. Texas Sales and Use Tax Frequently Asked Questions
Penalties for Late Returns
Miss the due date by even one day and the Comptroller adds a 5 percent penalty. After 30 days it climbs to 10 percent. If you still haven’t paid after receiving a formal Notice of Tax Due, another 10 percent is tacked on, bringing the total penalty to 20 percent. There’s also a flat $50 late-report penalty regardless of whether tax is owed, plus interest on any unpaid balance.12Texas Comptroller of Public Accounts. Penalties for Past Due Taxes
Buying an Existing Business
If you’re acquiring a business already operating in The Colony, Texas Tax Code Section 111.020 makes the buyer personally liable for any unpaid sales tax the seller owes, up to the full purchase price. The way to shield yourself is to jointly submit Form 86-114 with the seller before closing and get a Certificate of No Tax Due from the Comptroller. There’s no fee. Clean accounts usually produce a certificate within 10 business days; a required audit can take up to 90 days.13Texas Comptroller of Public Accounts. Buying an Existing Business