If you sell goods or taxable services in Texas, the Texas seller tax you need to understand is really two obligations: a sales and use tax you collect from customers and remit to the Texas Comptroller, and, for most business entities, an annual franchise tax on the business itself. Texas has no state personal income tax, so these are the main ways the state collects from people doing business here. The combined state and local sales tax rate can reach 8.25%, and the franchise tax applies to entities with revenue above $2,650,000 for the 2026 report year.
Get a Sales and Use Tax Permit First
Any business selling or leasing tangible personal property or providing taxable services in Texas needs a Sales and Use Tax Permit before making its first sale. You apply through the Texas Comptroller’s online registration portal. You’ll need your Social Security number (sole proprietors) or Federal Employer Identification Number, the Social Security numbers of any partners, officers, or directors, and your North American Industry Classification System code.1Texas Comptroller of Public Accounts. Texas Online Tax Registration Application
Owners, partners, officers, or directors without a Social Security number can’t use the online system and must submit paper Form AP-201 by email or fax. Texas corporations also need their Secretary of State file number. The permit is issued for each place of business, must be displayed conspicuously at that location, and is nontransferable. It stays valid as long as you remain in business and keep filing returns.2State of Texas. Texas Tax Code Section 151.201 – Sales Tax Permits
What You Collect and at What Rate
Texas imposes a 6.25% state sales tax on retail sales, leases, and rentals of most goods and on certain services.3State of Texas. Texas Tax Code Section 151.051 – Sales Tax Imposed Cities, counties, transit authorities, and special purpose districts can add up to 2% on top, so the combined rate maxes out at 8.25%.4Texas Comptroller of Public Accounts. Sales and Use Tax You charge the combined rate for the location where the sale takes place, which means looking up the correct local rate for each business location.
Texas also taxes 16 categories of services. The ones sellers most often miss include credit reporting, data processing, debt collection, telecommunications and cable television, insurance-related services, and information services. Only 80% of the charge for data processing and information services is taxable; the other 20% is automatically exempt.5Texas Comptroller of Public Accounts. Taxable Services
Filing Returns and the On-Time Discount
You file through the Comptroller’s Webfile system in the eSystems portal, entering total sales, taxable sales, and tax collected for the period. Payment goes through ACH debit from a business bank account or by credit card.6Texas Comptroller of Public Accounts. File and Pay
The Comptroller assigns your filing frequency (monthly, quarterly, or annual) based on how much tax you collect. Monthly returns are due by the 20th of the following month. File and pay on time and you keep 0.5% of the tax collected as a timely filing discount. Monthly and quarterly filers can earn an additional 1.25% prepayment discount on top of that.7Texas Comptroller of Public Accounts. Texas Sales and Use Tax Frequently Asked Questions Miss the deadline and you forfeit the discount entirely.
Penalties for Late Filing
Even if you owe zero tax for the period, filing the return late triggers a flat $50 penalty.8Texas Comptroller of Public Accounts. Penalties for Past Due Taxes When you actually owe tax, the penalty scales with how late you are:
- 1 to 30 days late: 5% of the tax due
- Over 30 days late: 10%
- After a formal notice of tax due: an additional 10%, for a total of 20%
Interest starts on the 61st day after the due date at a variable annual rate. For 2026 that rate is 7.75%, which is the prime rate plus one percentage point.9Texas Comptroller of Public Accounts. Interest Owed and Earned Several months of neglect can push penalties and interest to 25% or more of the original tax owed. A zero-dollar return filed on time costs nothing; filed late it costs $50.
Use Tax on Your Own Purchases
If you buy something from an out-of-state vendor who doesn’t charge Texas sales tax, or if you pull inventory off your shelves for your own business use rather than resale, you owe use tax at the same combined rate up to 8.25%, remitted directly to the Comptroller.4Texas Comptroller of Public Accounts. Sales and Use Tax
Your regular sales tax return has a line for use tax, so no separate filing is needed. The common trigger is office supplies, equipment, or software ordered from an out-of-state vendor that ships without collecting Texas tax. You self-assess what you would have paid locally. Businesses purchasing at least $800,000 in taxable items annually for their own use can apply for a direct payment permit.
Selling Through a Marketplace
If you sell through a third-party platform like Amazon, Etsy, or eBay, the platform collects and remits Texas sales tax on those sales. Under Texas Tax Code Section 151.0242, marketplace providers take on the full rights and duties of a seller for any transaction processed through the platform, certify this to each marketplace seller, and report the sales to the Comptroller.10State of Texas. Texas Tax Code Section 151.0242
When you accept that certification in good faith, you exclude those sales from your own return. You still keep records of them, and you’re responsible for giving the platform accurate information about whether your items are taxable. If the platform collects the wrong amount because of incorrect product details you supplied, you owe the difference, not the platform.10State of Texas. Texas Tax Code Section 151.0242 Any sales outside the marketplace, through your own website or at a physical location, stay your responsibility.
Out-of-State Sellers and Economic Nexus
Not having a Texas storefront doesn’t get you off the hook. If your total Texas revenue over the prior 12 calendar months reaches $500,000, you have to get a Texas sales tax permit and start collecting. That revenue figure includes sales of both taxable and nontaxable items, plus handling, shipping, and installation fees.11Texas Comptroller of Public Accounts. Remote Sellers and Marketplace Frequently Asked Questions
Physical presence also triggers obligations. A warehouse, office, or employees in Texas (including remote workers doing sales, marketing, or support) create physical nexus. Storing inventory in a Texas fulfillment center, which is common with Amazon FBA, creates nexus regardless of revenue. Sellers with both marketplace and direct sales need to track each separately, because the marketplace only covers what flows through its platform.
Resale and Exemption Certificates
When a buyer purchases items for resale rather than personal use, they present a resale certificate so you don’t charge sales tax. In Texas, that’s Form 01-339. It needs the purchaser’s 11-digit Texas Sales and Use Tax Permit number, a description of the items, and the purchaser’s signature. Keep it on file; don’t send it to the Comptroller.12Texas Comptroller of Public Accounts. Sales and Use Tax Resale Certificate / Exemption Certification
Accepting the certificate in good faith generally protects you if the buyer ends up using the items instead of reselling them. A certificate claiming items for resale when the buyer knows they’re for personal use is a criminal offense, ranging from a Class C misdemeanor to a second-degree felony depending on the tax evaded.12Texas Comptroller of Public Accounts. Sales and Use Tax Resale Certificate / Exemption Certification For tax-exempt entities like nonprofits and government agencies, the Comptroller runs an online searchable database. Some government entities, including Texas school districts, aren’t required to register and may not appear there, so an absent entry doesn’t mean the buyer isn’t exempt.13Texas Comptroller of Public Accounts. Texas Tax-Exempt Entity Search
The Annual Franchise Tax
Beyond sales tax, most business entities doing business in Texas or organized under Texas law owe an annual franchise tax under Tax Code Chapter 171. It covers corporations, LLCs, partnerships, and other legal entities that benefit from the state’s liability protections. Each entity files a Franchise Tax Report and a Public Information Report listing officers, directors, or managers.14Texas Comptroller of Public Accounts. Franchise Tax Overview
For the 2026 report year, entities with total revenue at or below $2,650,000 can file a No Tax Due Report. They owe nothing but still have to file to stay in good standing.15Texas Comptroller of Public Accounts. Franchise Tax Entities above the threshold calculate tax on a margin basis at one of two rates:
- Retail or wholesale businesses: 0.375% of taxable margin
- All other businesses: 0.75% of taxable margin
Those rates apply for the 2026 and 2027 report years.15Texas Comptroller of Public Accounts. Franchise Tax Failing to file can lead to forfeiture of the entity’s right to do business in Texas and ultimately to loss of its charter or registration. When that happens, owners and officers can become personally liable for the entity’s debts.
Buying an Existing Business
If you’re purchasing an existing Texas business, its inventory, or even just its name and goodwill, you can inherit the previous owner’s unpaid tax debts. Under Tax Code Section 111.020, the buyer must withhold enough of the purchase price to cover any state taxes, penalties, and interest the seller owes. The way to release yourself is to obtain a Certificate of No Tax Due from the Comptroller before closing.16Texas Comptroller of Public Accounts. Buying an Existing Business
Buyer and seller jointly submit Form 86-114 to request the certificate. If escrow closes without it, the buyer is on the hook for the seller’s unpaid taxes up to the total purchase price, including any assumed debt. Submitting the request early in the transaction is the simplest protection.16Texas Comptroller of Public Accounts. Buying an Existing Business