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The short version
- Texas charges a 6.25% state sales and use tax. Local jurisdictions can add up to 2%, for a maximum combined rate of 8.25%.
- Businesses engaged in business in Texas that sell taxable goods or services need a sales tax permit.
- Sellers outside Texas have to collect once their total Texas revenue reaches $500,000 over the preceding twelve calendar months.
- Marketplace providers collect on sales made through their marketplace.
Who has to collect
According to the Comptroller, you complete the permit application if you are engaged in business in Texas and you sell or lease tangible personal property in Texas, or sell taxable services in Texas.
Remote sellers - businesses selling into Texas from elsewhere - are covered by a safe harbor: below $500,000 in total Texas revenue in the preceding twelve calendar months, they are not required to collect. That revenue counts more than taxable sales. It includes nontaxable sales, sales for resale, sales to exempt buyers, and charges such as handling, transportation and installation.
Once a remote seller goes over $500,000, it must get a permit and start collecting state and local use tax no later than the first day of the fourth month after the month it went over.
State and local rates
The Comptroller runs a Sales Tax Rate Locator for looking up the rate at a specific address.
| Rate | Amount | Notes |
|---|---|---|
| State sales and use tax | 6.25% | On retail sales, leases and rentals of most goods and taxable services |
| Local taxes | Up to 2% | Added by local jurisdictions |
| Maximum combined | 8.25% | State plus the maximum local rate |
| Single local use tax rate | 1.75% | Optional, for remote sellers only, instead of each local rate |
What is generally taxable
The state tax applies to retail sales, leases and rentals of most goods, as well as taxable services. For an online store selling physical products, that usually means most of the catalog.
Which services are taxable is defined by the Comptroller, which publishes a separate guide to taxable services. If you sell services, digital products or anything unusual, check how your specific items are treated before you start collecting.
Permits and filing
- Apply online through the Comptroller's eSystems. The Comptroller says it typically takes 2 to 3 weeks to receive a permit.
- Remote sellers can also apply with Form AP-201, and sellers outside the US can apply by email.
- After approval, the Comptroller tells you by letter whether you file monthly or quarterly.
- Monthly returns are due on the 20th of the following month. Quarterly returns are due April 20, July 20, October 20 and January 20.
- A remote seller choosing the single local use tax rate indicates it on the application or with Form 01-799.
Selling through marketplaces
Marketplace providers engaged in business in Texas must collect, report and remit state and local sales and use tax on all sales made through their marketplace, and certify to their sellers that they will do so.
If you are a Texas seller, you still need a permit and still file returns, even if you only sell through marketplaces. A remote seller does not need a Texas permit for marketplace sales when the provider has certified it collects on its behalf. Either way, the Comptroller asks all sellers to keep records of marketplace sales for at least four years.
Sales on your own website are yours to collect on. That is where Stripe Tax comes in.
How Stripe Tax handles it on your store
Stores we build on our engine can take payments through Stripe, and on Stripe checkout Stripe Tax calculates sales tax automatically from the product type and where the buyer is, adds it at checkout and shows it on the receipt.
Stripe Tax only collects where you have told it you are registered. You register with Texas first (or ask Stripe to register for you), then add the registration in the Locations tab of your own Stripe account. Stripe also tracks your sales against state thresholds and alerts you when you may need to register.
You stay responsible for filing and paying the tax you collect. Stripe offers automated US filing through partners at an extra cost, but the obligation is yours. Stripe Tax works only on Stripe checkout, not on Wompi or Bold.
All guides
Questions
What is the sales tax rate in Texas?
The state rate is 6.25%. Local jurisdictions can add up to 2%, so the combined rate can reach 8.25% depending on where the sale is taxed.
I sell from outside Texas. When do I have to collect?
Under the Comptroller's remote seller rules, once your total Texas revenue passes $500,000 in the preceding twelve calendar months. You then have until the first day of the fourth month after you went over to get a permit and start collecting.
Does the $500,000 include nontaxable sales?
Yes. The Comptroller counts gross revenue from taxable and nontaxable sales, sales for resale, sales to exempt entities, and charges such as handling and transportation.
Do I need a permit if I only sell on a marketplace?
Texas sellers do. Remote sellers do not need a Texas permit for those sales if the marketplace provider has certified that it collects and remits on their behalf.
Will my store charge Texas sales tax automatically?
Yes, on Stripe checkout, once you add your Texas registration in your own Stripe account. Stripe Tax calculates the rate from the buyer's location. Filing and paying the tax is still up to you.
Sources
- Texas Comptroller - Sales and Use Tax
- Texas Comptroller - Remote Sellers
- Texas Comptroller - Marketplace Providers and Marketplace Sellers
- Texas Comptroller - Apply for a Sales Tax Permit
- Stripe Docs - Stripe Tax
- Stripe Docs - Register for sales tax, VAT, and GST
- Stripe Docs - File and remit
This guide is general information, not tax or legal advice. Tax rules and rates change, and your situation may differ. Confirm with the state tax agency or a tax professional before you register, collect or file.
