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Texas Sales Tax Guide

Sales Tax by State Guide for Businesses
Are you a business owner wondering whether you need to collect and remit sales tax in Texas? With different tax designations, filing options and frequencies, understanding your obligations can be a complex task. In this article, we'll break down the key information you need to know about Texas sales tax, including the economic and physical nexus thresholds, taxable services and products, and filing options. We'll also cover the requirements for marketplace facilitators and offer tips on how to navigate the tax process. Whether you're a local Texas business or a remote seller, read on to learn about your sales tax obligations in the Lone Star State.

Sales Tax Faqs

Economic Threshold Sales: 500,000
Statewide Tax Rate: 6.25%
Marketplace Facilitator Law: Yes

Contact Information

Texas Comptroller

Do you need to collect and remit sales tax in Texas? 

There are two types of sales tax designations in Texas: 

  • Franchise Tax is a privilege tax on taxable entities doing business in Texas. This applies to Limited Liability Companies (LLCs), corporations, banks, etc…, and includes in-state and remote sellers with either physical or economic nexus in Texas. If you have a business that is considered a taxable entity, you will need to file both franchise tax and sales and use tax. 
  • Sales and Use Tax applies to in-state business, as well as remote sellers with a total annual Texas revenue of $500,000 or more. This number includes taxable and nontaxable sales on tangible personal property and services into Texas. If you are a remote seller and do not reach the $500,000 economic threshold in the previous calendar year, you do not have to collect and remit sales and use tax in Texas according to their safe harbor rule. 

Both tax designations are only applicable if a business has nexus in Texas. 

 

Do you have sales tax nexus in Texas?

So, what exactly is nexus? If a business has nexus, it means it has significant physical or economic presence in a state. What is significant enough depends upon each state’s tax laws and regulations. 

Physical sales tax nexus in Texas 

A few of the qualifications of physical nexus are: 

  1. Selling tangible personal property 
  2. Leasing or renting tangible personal property 
  3. Selling taxable services in Texas 

Texas defines tangible personal property as “personal property that can be seen, weighed, measured, felt or touched or that is perceptible to the senses.” 

Taxable services are less clear cut. Every state has their own rules on what services are taxable and which are exempt. A few examples of taxable services in Texas are: 

  1. Cable television 
  2. Data processing 
  3. Telecommunication services 

If you need a more thorough list, you can find it here. 

Economic sales tax nexus in Texas 

Businesses with economic nexus are most often remote sellers who have revenue from Texas sales of $500,000 or more in the past 12 months. Something to remember is that this dollar amount includes taxable and nontaxable sales or services. 

 

Are marketplace facilitators required to collect and remit sales tax in Texas? 

Marketplace facilitators (or Marketplace Providers) that are engaged in business in Texas must collect, report and remit sales and use tax on behalf of their sellers. That means that if you sell through a marketplace facilitator, you are not responsible for the taxes made on sales through that marketplace. However, marketplace providers must register through Texas before they can legally collect and remit your taxed sales for you. If you are concerned whether a marketplace facilitator is registered with Texas, ask for proof of certification. 

Note: If your business sells through a marketplace facilitator but has an LLC (Limited Liability Companies), is a corporation or a partnership, or is otherwise considered to be a taxable entity, you must still file Texas franchise tax. 

What platforms are marketplace facilitators? 

Some platforms that are considered marketplace facilitators are:   

  1. Amazon 
  2. eBay    
  3. Etsy    
  4. Walmart Marketplace 

Not sure what a marketplace facilitator is? A marketplace facilitator is an online platform that allows customers to purchase goods or services from various vendors in one convenient location. These platforms can benefit businesses by increasing product visibility and attracting a larger customer base. Additionally, marketplace facilitators often have the legal responsibility to collect and remit sales tax on behalf of sellers, which can help ease the sales tax burden for businesses.

 

Filing Texas Sales Tax 

Before you can file Texas sales and use taxes, you must apply for a Texas sales tax permit. This permit can be obtained one of two ways: 

  1. Apply for a sales tax permit via eSystems 
    • To apply for a sales tax permit online, you must create an account on the Texas Comptroller eSystems website. You will need to provide social security numbers or federal employer identification numbers, your Texas corporation’s file number from the Texas Secretary of State (if your business is a taxable entity), and an NAICS (North American Industrial Classification System) code. 
  2. Apply using a paper form 
    • Form AP-201 is provided for businesses who do not wish to apply for a permit via the online system. Note: if you are a sole owner, partner, officer or director of a business and do not have a social security number, you must apply for a sales tax permit using the paper form.  
    • Once completed, the form can be emailed to [email protected] or fax 512-936-0010. 

The estimated wait time of processing and being approved for a Texas sales tax permit is 2-3 weeks. Once you have a permit, you can report and pay your Texas sales and use tax one of four ways: 

  1. Webfile 
  2. Electronic Data Interchange (EDI) 
  3. Telefile 
  4. Tax Forms 

What filing option you choose will depend upon the amount of taxes paid in the preceding state fiscal year (September 1st – August 31st), how many jurisdictions you file in, and personal preference. More information on each filing method can be found here. 

Overwhelmed? Let us file for you! 

Taxes are overwhelming. Add filing sales tax returns on top of running a business, and it can be impossible to keep up. We at SalesTaxSolutions are here to make things easier! As a company, we help businesses like yours deal with the many state-by-state regulations and file your sales tax returns for you. We’ve got 20 plus years of knowledge and experience to help you get back to saving time and making money as soon as possible. Message, email or call us at 888-544-7730 for a free quote today!  

When are sales tax returns due in Texas?  

You will be sent a letter from the Texas comptroller with filing frequency assigned to you. For new taxpayers, Texas will assign either a monthly or quarterly filing frequency. Regardless of your frequency, sales taxes are due the 20th of the month, unless the due date falls on a Saturday, Sunday or legal holiday, in which case the due date is the next business day. 

STAY INFORMED

More Resources

Get informed on how each seller platform collects sales tax, marketplace facilitator laws, and more

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