Texas sales tax information for businesses

Everything’s bigger in Texas—including the complexity of sales tax compliance across this vast state. The Texas sales tax landscape combines a state rate with local taxes that vary by jurisdiction. For Lone Star State businesses from El Paso to Houston and Dallas to San Antonio, keeping up with Texas sales tax regulations requires significant attention, particularly for those operating in multiple jurisdictions or selling through various channels. Here, we dive into the details.

What is the sales tax rate in Texas?

Texas has a state sales and use tax rate of 6.25%. Local jurisdictions, including cities, counties, special districts, and transit authorities, can add up to 2%, making the maximum combined rate 8.25%. For example, if you’re doing business in Austin, San Antonio, or Dallas, you’ll encounter the maximum rate of 8.25% once state and local sales taxes are combined. 

To find the exact rate for your location, you can use the Texas Comptroller’s Sales Tax Rate Locator on their official website.

What is sales tax in Texas?

Texas imposes a state sales and use tax on all retail sales, leases, and rentals of most goods, as well as servicios gravables. Local jurisdictions (cities, counties, special purpose districts, and transit authorities) can also impose sales and use tax, up to 2%.

Are all goods and services taxable in Texas?

Not all goods and services in Texas are subject to sales tax. Most goods like
clothing, furniture, electronics, and household items are taxable, along with many
taxable services. When it comes to services, Texas taxes certain types such as amusement services, cable and telecommunications, data processing, and repair
and maintenance services. However, there are some exemptions for both goods
and services.

What items are exempt from sales tax in Texas?

Essential items like unprepared food, prescription medicine, and some medical supplies are exempt from sales tax. Professional services like legal or accounting work are generally exempt as well.

Because Texas sales tax rules can be complex, businesses must carefully determine whether their products or services are taxable or exempt to stay compliant. For a list of what is taxable and what isn’t, visit the Sales and Use Tax page of the Texas Comptroller of Public Accounts’ website.

How to calculate sales tax in Texas?

Calculating sales tax in Texas starts with the statewide base rate of 6.25%. On top of that, local jurisdictions such as cities, counties, transit authorities, and special purpose districts may levy additional sales taxes, up to a combined maximum of 2%. This means the total sales tax rate in Texas will never exceed 8.25%.

To calculate the sales tax owed, businesses need to apply the correct combined rate (state + local) to the sales price of taxable goods or services. For example, if your business is located in Dallas, where the combined rate is 8.25%, a $100 taxable sale would result in $8.25 in sales tax.

Use our sales tax calculator

To determine how much sales tax you need to remit to the Texas Comptroller of Public Accounts, you can use our calculadora de impuestos sobre las ventas. Simply enter the sales amount and total sales tax, and the calculator will show you the correct amount of sales tax due.

Even with tools like a calculator, managing sales tax can be time-consuming. DAVO by Avalara can automatically set aside the sales tax you collect daily, file your returns on time, and make payments directly to the state. That way, you never have to worry about missed deadlines, penalties, or accidentally using tax money to cover business expenses.

Who pays sales tax in Texas?

In Texas, sales tax is a pass-through tax. While businesses are responsible for collecting and remitting it, the actual cost of the tax is passed on to the customer at the point of sale. The company simply acts as the collector, ensuring the proper amount is charged and sent to the Texas Comptroller of Public Accounts.

What am I responsible for?

Business owners in Texas are responsible for registering for a sales tax permit, charging customers the correct combined state and local rate, keeping accurate records, and filing sales tax returns with the Texas Comptroller of Public Accounts. Even if no sales were made during a filing period, businesses must still submit a return. Collecting and remitting sales tax on time is essential, as penalties and interest apply for late payments.

Managing these tasks can feel overwhelming, especially when balancing sales tax compliance with day-to-day operations. That’s where DAVO comes in. DAVO seamlessly integrates with your point-of-sale system to set aside the sales tax you collect daily and automatically files and pays it to the Comptroller on your behalf. This helps ensure you’re always on time and in compliance, while saving you the hassle of manually managing sales tax.

How to get a Texas sales tax permit?

Before you can collect sales tax in Texas, you’ll need to apply for a sales tax permit with the Texas Comptroller of Public Accounts. Registration is free and can be completed online through the Comptroller’s eSystems portal or by submitting a paper application (Form AP-201). For those who apply by mail, the completed Form AP-201 should be sent to: Comptroller of Public Accounts, 111 E. 17th St., Austin, TX 78774-0100.

When applying, you’ll be asked for details such as your business name, address, and contact information, along with your social security number (SSN), any partner social security numbers or federal employer’s identification numbers, Texas corporation’s file number, and a North American Industrial Classification System (NAICS) code. You’ll also need to provide information about the type of business you operate, ownership details, and the expected start date of business activities in Texas.

Once your application is approved, you’ll receive a Texas sales tax permit. It typically takes about 2 to 3 weeks to receive your permit. This permit authorizes you to collect and remit sales tax in the state, and it must be displayed at your business location. The good news is that Texas does not charge a renewal fee. Your permit remains valid for as long as you continue doing business.

When is Texas state sales tax due?

Once your Texas Sales Tax Permit has been approved, the Comptroller will let you know whether you are required to file monthly, quarterly, or annually. Most businesses fall into the monthly or quarterly filing categories, with annual filing being less common.

• Monthly filers: Returns and payments are due on the 20th of each month for the previous month’s sales.
• Quarterly filers: Returns and payments are also due on the 20th, but only four times a year in April, July, October, and January, to cover the prior three-month period.
• Annual filers: If assigned, your due date will also be provided in your permit approval letter.

If the 20th falls on a weekend or legal holiday, the due date is automatically extended to the next business day.

Texas sales tax discount for timely payments
Texas rewards retailers who pay on time. Businesses that file and pay by their due dates can claim a 0.5% discount on the amount of sales tax due. In addition, monthly and quarterly filers may be eligible for an extra 1.25% discount on prepayments. For a full overview of states that offer sales tax discounts, visit our guide to sales tax discounts by state.

How to pay Texas sales tax?

Texas offers multiple ways to file and pay sales tax, though the options available depend on your total sales for the reporting period. Generally, businesses with higher sales are required to file and pay electronically. Filing can be done through Webfile, Electronic Data Interchange (EDI), Telefile, or using paper tax forms, while payments can be made via Web electronic funds transfer (EFT) or credit card through Webfile, EDI, TEXNET, or by check.

Not all options are available to every business. For instance, if your taxable sales reach $500,000 or more, you must file using Webfile, EDI, or Telefile, and payments can only be made through EDI or TEXNET.

For complete details on the filing and payment methods that apply to your business, visit the Texas Comptroller’s reporting and payment requirements.

How do I know how much sales tax to charge in Texas?

Texas sales tax is a combination of the state rate and any applicable local rates. To find the most accurate rates, visit the Texas Comptroller of Public Accounts website for up-to-date rates for your location. Keep in mind that rates posted elsewhere may be outdated or incorrect, so it’s always the merchant’s responsibility to charge the correct sales tax.

Where does Texas sales tax money go?

In Texas, sales tax revenue is split between the state and local governments and supports a wide range of public services and programs. The state portion, which is 6.25%, is primarily directed to the General Revenue Fund to pay for statewide programs. Part of this revenue also helps fund public education, with allocations influenced by local property taxes. Another part of it contributes to other state services such as road construction, university research, prisons, and professional licensing.

Local governments, including cities, counties, and special-purpose districts, can add sales tax on top of the state tax. These local funds are used to support city and county operations, public transit systems like Dallas Area Rapid Transit (DART), emergency services, street maintenance, crime prevention programs, public libraries, and, in some cases, to provide property tax relief for residents.

How to manage tax-exempt sales in Texas?

In Texas, handling tax-exempt sales means understanding which customers and transactions qualify for exemption and keeping proper documentation. Sales tax is generally passed on to the buyer, but certain customers, such as charities, educational institutions, and religious organizations, may be exempt. To make a tax-exempt sale, the business owner must obtain a valid exemption certificate from the customer and retain it as part of their records. If you question the validity of a certificate, you can choose to deny the exemption. Instead, the customer can always request a refund directly from the Texas Comptroller’s office. You can verify an organization’s tax-exempt status by visiting the Texas Comptroller’s site and performing a tax-exempt entity search. 

It’s important to remember that exemptions apply only to qualifying sales. Items purchased for personal use by exempt organizations may still be taxable unless specifically covered under Texas law. Always verify the certificate and the type of transaction before collecting or remitting sales tax to avoid potential penalties.

What happens if I pay my sales tax late in Texas?

Failing to file or pay Texas sales tax on time can result in penalties and interest. A $50 penalty is assessed for each report filed after the due date. If the tax is paid within 1–30 days after the due date, a 5% penalty applies. For payments made more than 30 days late, the penalty increases to 10% of the tax due. In addition, past-due taxes begin accruing interest 61 days after the original due date. For the latest interest rates and to calculate what you owe, visit the Texas Comptroller’s Interest Owed and Earned page.

Make Texas sales tax simple with DAVO

Ever find yourself scrambling to meet a Texas state sales tax deadline? Or confused by the varying county and municipal rates? Do you stress about setting aside enough for your quarterly Texas sales tax payment, or question whether your bookkeeping costs are justified?

If so, DAVO is the solution you’ve been looking for. It’s built for business owners throughout the Lone Star State who recognize their time is better invested serving customers than managing tax obligations. 

DAVO brings automation to the Texas sales tax process—from daily collections across multiple jurisdictions to accurate filings and timely payments. It synchronizes perfectly with your current POS system, operating invisibly in the background. And because DAVO ensures your Texas sales taxes will be filed correctly and paid on schedule, you can redirect your energy toward building your Texas-sized business dreams.

Choose your POS system to get started with DAVO today.

Ayuda en relación con el impuesto sobre las ventas y el uso de Texas:

Impuesto sobre las ventas del Departamento de Hacienda de Texas

(800) 252-5555