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Texas Sales Tax, in a nutshell

Texas Sales Tax, in a nutshell

Longhorns and barbecue and cowboys, yee-haw! They say everything’s bigger in Texas. Let’s hope that doesn’t apply to the tax rates?!

If you’re selling in the Lonestar state, you might be on the hook for collecting and remitting sales tax. How much should you charge, and how much will you owe? Let’s explore the basics of Texas sales tax in this guide

Sales Tax Rates in Texas

Texas uses a state-wide sales tax rate of 6.25%, but most cities, counties or other local authorities apply an additional sales and use tax from .5 to 2%.

For instance, a small town like Francitas only charges 6.75% because its county, Jackson, adds an extra half percent. But a bigger city like Austin charges the full 8.25%, with one percent from the city and another one percent from the city’s public transportation authority.

Wherever your customer is located, that’s the total rate you should apply. To know for sure, check out the up-to-date list from the Texas Department of Revenue. They even have a Sales Tax Rate Locator that you can use for a specific address!

What is taxable in Texas?

  • Tangible products are generally taxable in Texas, with a few exceptions. You can find a list of examples in the next section!
  • Services are generally taxed, from shoe shining to dog grooming, appliance repair to photography. The state provides an extensive list here.
  • Digital products like mobile apps and video/audio streaming services are taxed in Texas.
  • SaaS is taxed, but with a quirky discount. Because SaaS products are considered "data processing and information services," 20 percent of the value of those charges are exempt from sales tax.

Sales Tax Exemptions

Some purchases in the Lonestar State are exempt from sales tax collection. A few include:

  • Most groceries, such as butter, milk, and canned goods (candy and soda don’t count!)
  • Vitamins, minerals, and medicine
  • Religious items
  • Newspapers
  • Construction or manufacturing equipment
  • Tangible property that’s required to run a data center
  • Any service that’s repairing an item to a useful condition
  • 20% of SaaS sales (as stated above)

Certain types of customers are exempt from Texas sales tax, too. Government agencies, religious organizations, health facilities, and some non-profits might not have to pay sales tax to you.

Making Sense of Texan Taxes

If you’re confused about whether your goods are subject to sales tax in Texas, we hear you. Collecting and remitting the correct amount of tax in the state is complicated – especially when you add the economic nexus and Amazon service into the equation.

Fortunately, you don’t have to go it alone. Sign up for a free trial with Quaderno to see how easy and pain-free tax collection can be with the right partner by your side.

Note: At Quaderno we love providing helpful information and best practices about taxes, but we are not certified tax advisors. For further help, or if you are ever in doubt, please consult a professional tax advisor or the tax authorities.