Sales tax is a cost added to various goods and services offered in Texas, the price set by state and local taxing authorities and applied in multiple ways to sales.
The use tax is similar to the sales tax. However, it is applied at establishments where goods are consumed and not where they are purchased. Texas is one of the largest states, so tax rates tend to vary.
Texas sales tax rates
Depending on where in Texas you provide your services, the tax rate will change. At the state level, the sales tax is 6.25%, but local jurisdictions such as cities, counties, transit authorities, and special purpose districts can impose up to 2% higher rates.
It is a state for in-state retailers, i.e., all sellers must charge the local rate on all orders placed within the State. On the other hand, you find sales tax nexus.
The nexus refers to a retailer having significant recognition within the State; if so, you must collect and remit sales tax on your company’s orders.
Any office with such status must collect retail sales tax, even in your home. Some specific activities create sales tax nexus in Texas; some recognized ones are:
- Having an independent salesperson within the State, even if you do not live in the State
- Having an employee or agent making partnerships or sales in the State under your authority
- Store merchandise in a Texas warehouse, even if the warehouses are Fulfillment by Amazon (FBA) warehouses
- Own a distribution center in Texas
Before starting your work as a company or business, you must request a list of activities with a nexus in Texas; this will avoid many problems in the future.
What is subject to Texas sales tax?
Tangible personal property is one of the things subject to sales tax in Texas, but certain services are also added, such as:
- Personal services
- Real estate services
- Security services
- Telecommunication services
- Telephone answering services
- Utility transmission and distribution services
- Taxable labor: photographers, drafters, artists, tailors, etc
- Entertainment services
- Cable and Satellite Television Services
- Credit reporting services
- Data processing services
- Debt collection services
- Information services
- Insurance services
- Internet access services
- Motor vehicle parking and storage services
- Repair, restoration, or remodeling services of non-residential real estate
- Maintenance, remodeling, or repair services of personal property
How to apply for a seller’s permit in Texas?
You can register your business tax license online through the Texas Comptroller of Public Accounts. To apply, you must add certain relevant information about your business:
- Business name, contact information, and address
- Federal A number
- Projected monthly sales
- Start date of your commercial activities
- Products you sell
- Projected taxable sales
Are any goods exempt from sales tax?
Unprepared food, medical supplies, and food stamps are some of the goods that are exempt from sales tax in Texas. They are listed accurately in state law.
Before starting any business activity, we recommend you review the rules and laws established by the Texas Comptroller of Public Accounts to determine what taxes apply to you.
Some merchants have discounts on sales taxes; they can claim the 0.5% discount of tax declared and paid on time. If you make payments in advance, you can claim the 0.5% discount along with the 1.25% discount for payment.