Austin Sales Tax Guide for Businesses

No matter where you live or where your online business is based — if you have customers in Austin, Texas, you must follow city and local sales tax rules in addition to Texas’ rules. That’s what this guide is for! This guide includes everything you need to know about digital tax laws in Austin, whether your customers live in Hyde Park or South Congress.

Austin Tax Jurisdiction Breakdown for 2024

• Texas State Sales Tax: 6.25%
• Travis County Sales Tax: 0.00%
• Williamson County: 0.00%
• Hays County: 0.00%
• Bastrop County: 0.50%
• Austin City Sales Tax: 1.00%
• Austin MTA Transit Tax: 1.00%

What is the sales tax rate in Austin, Texas?

The minimum combined 2024 sales tax rate for Austin, Texas is 8.25%. This is the total of state, county, and city sales tax rates. The Texas sales tax rate is currently 6.25%. The County sales tax rates vary from 0-0.50%. The Austin sales tax rate is 1.00%. Other local sales taxes in Austin are an additional 1%.

These other local taxes are not “city sales taxes” exactly, but they fund public projects in the Austin area:

• Austin Metropolitan Transportation Authority (MTA) tax: This local sales tax goes toward funding public transportation in and around the city..

These rates go for standard taxable products. But other rates might apply to your business.

If you’re selling “vice” products like tobacco or alcohol, you might have an increased rate. If you’re selling essential items, such as medicine or clothing, or educational materials, you might have an exempt or reduced rate. More on that next!

What products are exempt from Austin sales tax rate?

• Most groceries and food products you eat at home
• Prescription drugs and medications
• Medical and dental care services
• Educational services
• Sales by non-profit organizations
• Agricultural supplies (e.g., livestock feed, certain plants and seeds)
• Water conservation items
• Certain items during Texas's tax-free weekend in August, including:
  • Most clothing and footwear priced under $100
  • School supplies
  • Backpacks priced under $100

What digital products are taxed in Austin?

First, let’s confirm what you’re trying to sell in Austin. Are you selling digital products?

A digital product is any product that’s stored, delivered, and used in an electronic format. These are goods or services that the customer receives via email, by downloading them from the Internet, or through logging into a website.

You’re probably consuming and using digital products all day long, whether or not you realize it. Here are some common ones on the market today:

• E-books, images, movies, and videos, whether buying a copy from Shopify or using a service like Netflix. In tax language, these products are in a category usually called, “Audio, visual, or audio-visual products.”
• Downloadable and streaming music, whether buying an MP3 or using a service like SoundCloud or Spotify. Of course, these products also fall in the audio category.
• Cloud-based software and as-a-Service products, such as Software-as-a-Service (SaaS), Platform-as-a-Service (PaaS), and Infrastructure-as-a-Service (IaaS).
• Websites, site hosting services, and internet service providers.
• Online ads and affiliate marketing. Income from these services can be considered taxable under digital tax policies.

Some US states can have more specific definitions or exceptions. In Texas, digital products may be subject to the same sales tax rates as physical products, depending on the type of digital product and how it is accessed by the consumer.

How does Austin sales tax compare to the rest of Texas?

Compared to the rest of Texas, Austin's combined sales tax rate is fairly typical, as Texas allows local jurisdictions like cities and counties to add to the state sales tax rate, with the total combined rate capped at 8.25%

Some smaller towns and rural areas might have lower combined rates if the local government chooses not to impose an additional local sales tax or only imposes a partial tax.

That said, most of the state's populous counties and cities, like Dallas, Houston, San Antonio, and Fort Worth, also have combined sales tax rates at or very near the 8.25% cap, mirroring the situation in Austin.

Learn more about sales tax rules state-wide in this business guide to sales tax in Texas.

What creates sales tax nexus in Austin?

Since Austin is located in Texas, it follows the same state-level sales tax nexus rules.

Forms of Texas state sales tax nexus include:

• Economic nexus: When a business sells goods worth $500,000 in the state within the previous or current tax year. More on that below!
• Physical location: This could be an office or a warehouse holding your inventory.
• Employee location: If you have an employee or any other type of representation based in a particular state or city, your business must register for sales tax there.
• Affiliate nexus: If you rely on in-state businesses to promote and refer your business, and you receive a substantial amount of income through these affiliates, then you have sales tax nexus.
• Trade Shows: Even if you don’t have real estate in a place, if you visit trade shows or markets for more than 15 days in the calendar year, that’s enough of a physical present to constitute sales tax nexus in Texas.

Austin economic nexus as a remote seller

If your business is fully located outside of Texas, then economic nexus is your main concern. Here’s how it works.

The economic threshold amount refers to your total sales in the whole state, during any 12-month period. This can be a calculation of sales in the last twelve months, or a prediction of sales in the next twelve months — any rolling year-long period, past or future.

Basically, if your annual sales in California remains below $500,000, then you don’t need to worry about sales tax at all. Phew!

But once your sales do surpass $500,000, then you must register for sales tax and comply with all of the California rules around tax rate and collection, invoices, and filing returns.

Who needs a seller’s permit in Austin?

Any business with sales tax nexus, according to the rules above, must apply for a seller’s permit in Texas right away.

The seller’s permit comes with a sales tax registration number, which establishes you in the Texas tax system as a legal business. This number tracks your business through the system: the taxes you pay, the tax credits you receive, plus the tax you charge from customers.

How to get a seller’s permit in Austin

So, it turns out you do need to register for tax in Austin. Don’t worry! Just follow these instructions on how to register for sales tax in Texas and that will cover you across the state.

How to calculate Austin sales tax?

Once you’re registered for taxes, you’re expected to apply sales tax to every taxable sale to an Austin resident. That means 8.25% for most products.

If your customer is a fellow business, and they’ve provided a valid sales tax exemption certificate, then adding and collecting tax isn’t necessary.

How to collect sales tax in Austin

Tax-compliant receipts in Austin

In order to comply with tax laws, you should include the following information on your receipts or invoices to customers in Austin:

• Your business’ name and address
• Your business’ sales tax registration number
• Invoice date
• Invoice sequencing number
• Buyer’s name and address
• Buyer’s sales tax registration number, if they have one.
• sales tax (amount and rate) applied to each item
• Final amount after tax is added

The easiest solution for the sales tax receipt would be to use a sales tax software that automatically generates and sends all invoices (as soon as the sale is complete), and also stores them in the cloud for you.

Quaderno provides automatic tax invoicing for every transaction. The app sends tax-compliant receipts, invoices, and credit notes automatically, on the spot. You can also set up recurring invoicing.

In fact, Quaderno helps automate many other parts of tax compliance, from adding the correct tax rate calculations to your sales to providing instant reports for filing returns. Give it a try for free.

How to file and pay sales tax in Austin

Charging and collecting tax is only the first half of staying compliant. The second half is filing returns and paying whatever you might owe to the government.

In Texas, the due dates for sales tax returns depend on the assigned filing frequency for your business, which is typically based on the volume of your sales. Here’s how it breaks down:

• Monthly Filers: If your business is assigned a monthly filing status, due to a higher volume of sales, your sales tax returns are due on the 20th of the month following the reporting month. For example, sales tax collected in January should be reported and paid by February 20th.
• Quarterly Filers: Smaller businesses with less sales volume might be assigned quarterly filing. Quarterly sales tax returns are due on the 20th of the month following the end of the quarter. So, for the first quarter (January - March), the due date is April 20th; and so on. For the fourth quarter (October - December), the due date is January 20th of the following year.
• Yearly Filers: Some businesses, usually those with very small amounts of sales tax to remit, may be assigned a yearly filing status. Annual Texas sales tax returns are typically due on January 20th of the following year.

If the due date falls on a weekend or holiday, then your sales tax filing is generally due the next business day.

You can usually file and pay online! Check out more instructions on how to file sales tax in Texas.