Sales Tax Guide

Disclaimer: This guide is provided for general informational purposes only and is not intended as legal or tax advice. I am not an accountant. For specific questions or guidance regarding your business’s sales tax obligations, please consult a qualified tax professional or contact the Texas Secretary of State directly. Their contact details are:

• Website: Texas Secretary of State

• Phone: 800-252-5555

• Mailing Address:

Texas Secretary of State

James Earl Rudder Office Building

1019 Brazos St

Austin, TX 78701

1. Understanding Sales Tax in Texas

What is Sales Tax?

Sales tax is a tax imposed on the sale of tangible personal property and certain services. In Texas, businesses are required to collect sales tax on taxable sales and remit it to the state.

Which Goods and Services Are Taxable?

• Tangible Personal Property: Most physical products are taxable in Texas. This includes items such as:

  • Electronics and appliances

  • Clothing and accessories

  • Home goods and furniture

  • Office supplies and equipment

    
    

    Essentially, if you’re selling a physical product, it’s likely subject to sales tax unless a specific exemption applies.

• Certain Services: While not all services are taxable, Texas does tax some services. It’s important to check the Texas Comptroller’s guidelines for details on service taxability.

• Exemptions: Some items and transactions are exempt from sales tax, such as:

  • Sales to resellers (with a valid resale certificate)

  • Certain food products, prescription medicines, and medical devices

  • Specific services and goods outlined by state law

For more detailed information on what is taxable and what isn’t, visit the Texas Comptroller’s website.

Sales Tax Rates

• State Rate: 6.25%

• Local Additions: Local jurisdictions (cities, counties, and special districts) can add up to an additional 2% (in Austin, for instance). The combined rate may be as high as 8.25%.

• Determining the Rate: Use online tools provided by the Texas Comptroller to determine the appropriate rate based on the sale’s location or the product’s delivery destination.

2. Registering for a Sales Tax Permit

Why a Permit Is Needed

Any business selling taxable goods or services in Texas must register for a Sales Tax Permit. This permit is essential for legally collecting and remitting sales tax.

How to Register

• Online Registration: Visit the Texas Comptroller’s website and select “Apply for a Sales Tax Permit.”

• Information Required:

  • Business name and physical address

  • Federal Employer Identification Number (EIN)

  • Business structure (e.g., LLC, sole proprietorship)

  • Estimated monthly sales figures

Cost

There is no fee to register for a Texas Sales Tax Permit.

3. Collecting and Remitting Sales Tax

Collecting Sales Tax

• On Each Sale:

  Add the appropriate state and local sales tax to each taxable sale of goods or services.

Filing Returns

• Frequency:

  File returns monthly, quarterly, or annually, depending on your sales volume and tax liability.

• Due Date:

  Returns are generally due on the 20th day of the month following the end of your reporting period.

Remitting Tax

• How to Pay:

  Use Texas’ online system, Webfile (this article can help), to file your returns and remit the collected sales tax promptly.

• 
  

  1. Go to https://comptroller.texas.gov/

  2. Click "Webfile eSystems Login"

  3. Open E-systems Dashboard

  4. My Taxpayer Accounts: Sales and Use Tax

  5. File Original Return (unless amending)

  6. Choose Return by dates

  7. "No, I'm not taking credits." (for prepaid taxes)

  8. "Did you refund sales tax...." (for international sales) NO

  9. Enter Total Texas Sales 

  10. Enter Taxable Sales(i.e. amount of sales for which tax wasn't collected by a third party platform like Etsy)

  11. Enter Taxable Purchases (usually 0)

  12. Continue and Select Pay by Electronic Check (to avoid fees)

  13. Enter bank details, Continue and Submit Payment

4. Recordkeeping

Importance of Records

Maintain detailed records of all sales transactions, the tax collected, and any exemption certificates. This information is crucial for both managing your business and in the event of an audit.

What to Keep

• Sales receipts and invoices

• Records of collected sales tax

• Copies of resale or exemption certificates

5. Additional Considerations

Online Sales

If you sell products online and ship them within Texas, you must collect Texas sales tax provided you have nexus (a business presence) in the state.

Staying Updated

Sales tax laws and rates can change. Regularly check for updates from the Texas Comptroller’s office to ensure compliance with current regulations.

Professional Advice

For tailored guidance or if your business has unique circumstances, consult a tax professional or accountant.

6. Summary

• Register for a Sales Tax Permit: Apply online at the Texas Comptroller’s website—registration is free.

• Collect the Correct Sales Tax: Charge the applicable state and local tax on each sale.

• File Returns and Remit Tax: File returns on time using the Webfile system, and remit the collected tax.

• Keep Detailed Records: Maintain thorough records of all transactions and tax collected.