In this article
- What is sales tax in Texas?
- What is taxable in Texas?
- Exemptions and resale certificates in Texas
- Who must collect sales tax in Texas?
- Sales tax rates in Texas
- How to calculate sales tax in Texas
- Texas Sales Tax Holidays
- How to register for a Texas sales tax permit
- Filing and payment in Texas
- Penalties and compliance risks in Texas
- How Quaderno helps with Texas sales tax
- Sales tax guides for neighboring states
Texas has a 6.25% state sales tax with local taxes of up to 2%, bringing the maximum combined rate to 8.25%. You must register and collect sales tax if your annual sales into Texas exceed $500,000. SaaS is taxable in Texas as a data processing service, though 20% of the charge is exempt.
Whether you sell software, physical goods, or digital content into the Lone Star State, this guide covers everything you need to know — rates, taxability, nexus rules, registration, and filing. For step-by-step instructions, see the Texas Sales Tax Registration Guide.
What is sales tax in Texas?
Texas imposes a 6.25% state sales and use tax on most retail sales of tangible personal property and certain taxable services. Local jurisdictions — cities, counties, transit authorities, and special-purpose districts — can add up to 2% in additional taxes, bringing the maximum combined rate to 8.25%.
Texas uses an origin-based system for sellers located in Texas — you charge the rate based on your business location. For remote sellers without a Texas location, a destination-based rule applies, and you charge the rate at the buyer's address.
What is taxable in Texas?
Texas taxes most retail sales of tangible personal property. Texas also taxes certain services explicitly listed in state law — this is narrower than states like New Mexico that tax most services. Always verify with the Texas Comptroller for your specific product or service category.
Digital products and SaaS taxability in Texas
Texas taxes SaaS (Software as a Service) as a data processing service. Data processing services are taxable under Texas Tax Code, but 20% of the charge is exempt from sales tax. This means you calculate tax on 80% of a SaaS subscription. For example, on a $100/month subscription, you collect tax on $80.
Electronically delivered digital products — including downloaded software, e-books, digital audio, and video — are generally taxable in Texas. Streaming services (audio and video) are also taxable.
Sales tax on shipping charges in Texas
Shipping and handling charges in Texas are taxable when the item being shipped is taxable. If an item is exempt, the separately stated shipping charge is also typically exempt. Texas has specific rules on how to handle bundled shipping and handling charges and mixed shipments, so consult the Texas Comptroller if in doubt.
Exemptions and resale certificates in Texas
Texas provides a number of exemptions from sales tax. Key non-taxable items include:
- Most groceries and food for home consumption
- Prescription and over-the-counter drugs
- Agricultural equipment, supplies, and feed
- Manufacturing equipment and materials used directly in manufacturing
- Residential utilities (electricity, gas, water)
- Items purchased for resale, with a valid Texas Sales and Use Tax Resale Certificate
Businesses purchasing goods for resale should provide a completed Texas Sales and Use Tax Resale Certificate to the seller.
Who must collect sales tax in Texas?
Nexus is the legal connection between your business and Texas that creates a sales tax obligation. If you have nexus, you must register, collect, and remit sales tax on taxable Texas sales.
Economic nexus in Texas
You have economic nexus in Texas if your total sales of tangible personal property or taxable services in Texas exceed $500,000 in the preceding twelve calendar months. This threshold is among the highest in the US. Once you cross it, you must register within the next filing period.
To learn more, see the Ultimate Guide to US Economic Nexus.
Physical nexus in Texas
| Type of nexus | Definition |
|---|---|
| Physical presence | Having a store, office, warehouse, distribution center, or any other business location in Texas. |
| Employees or representatives | Having employees, agents, or contractors performing work on your behalf in Texas. |
| Inventory | Storing inventory in Texas, including through a third-party warehouse or fulfillment center. |
| Leasing tangible property | Renting or leasing tangible personal property to Texas customers. |
| Solicitation | Having sales representatives or agents solicit orders in Texas. |
Marketplace facilitator rules in Texas
Marketplace facilitators in Texas are required to collect, report, and remit sales tax on behalf of their marketplace sellers. If you sell through a marketplace like Amazon or Etsy, the marketplace handles the tax on those sales. Your marketplace sales generally do not count toward your $500,000 economic nexus threshold.
See our state-by-state guide to marketplace facilitator laws for more information.
Sales tax rates in Texas
Texas has a 6.25% state sales tax rate, with local jurisdictions adding up to 2%. The combined maximum rate is 8.25%, which most major cities have reached.
How Texas sales tax is structured
| Level | Description |
|---|---|
| State sales tax | The statewide base rate is 6.25%. |
| City tax | Cities can impose up to 2% in additional sales tax. Most major cities charge the full 2%. |
| County tax | Counties may impose a limited additional tax in specific circumstances. |
| Transit / Special district tax | Metropolitan transit authorities and special purpose districts can add additional taxes, but total local taxes cannot exceed 2%. |
Texas sales tax by city
Most major Texas cities are at the 8.25% maximum combined rate:
| City | Combined rate |
|---|---|
| Houston | 8.25% |
| Dallas | 8.25% |
| Austin | 8.25% |
| San Antonio | 8.25% |
| Fort Worth | 8.25% |
| El Paso | 8.25% |
Some smaller cities and rural areas may have lower combined rates. Use Quaderno's Sales Tax Calculator to look up the exact rate for any Texas address.
How to calculate sales tax in Texas
For remote sellers, Texas uses destination-based sourcing — you charge the tax rate at the buyer's address.
Example for SaaS: You sell a $100/month SaaS subscription to a business in Austin. Texas taxes data processing services on 80% of the charge ($80). At Austin's 8.25% combined rate, you collect $6.60 in sales tax, making the total $106.60.
Example for goods: You sell a $200 item to a customer in Houston at the 8.25% combined rate. Sales tax is $16.50, making the total $216.50.
Use Quaderno's Sales Tax Calculator to find the exact rate for any Texas address automatically.
Texas Sales Tax Holidays
Texas holds several annual sales tax holidays when qualifying purchases are tax-free:
- Back-to-school (August): Clothing and footwear items under $100, school supplies under $100 per item.
- Emergency preparedness (April): Qualifying emergency preparation items under $300 (generators under $3,000).
- Energy Star and water-efficient products (May): Qualifying Energy Star and WaterSense products are tax-free during a specific weekend.
Check the Texas Comptroller for the current year's exact holiday dates.
How to register for a Texas sales tax permit
If your business has nexus in Texas, you must register before collecting sales tax. Register online through the Texas Comptroller's eSystems portal. Registration is free, and there is no waiting period — you can begin collecting sales tax immediately upon approval.
For a step-by-step walkthrough of the registration process, see the Texas Sales Tax Registration Guide.
Filing and payment in Texas
How often do you file sales tax in Texas?
Texas assigns your filing frequency based on your average monthly tax liability:
- Monthly (tax liability of $500/month or more): file by the 20th of the following month
- Quarterly (lower liability): file by the 20th of the month following the quarter
- Annual (very low liability): file by January 20th
When are Texas sales tax returns due?
Most filers submit returns by the 20th of the month following the reporting period. Check the Texas Comptroller for your specific due dates.
How to file and pay Texas sales tax
File and pay online through eSystems. Texas requires all businesses with more than $10,000 in annual tax liability to file and pay electronically.
For step-by-step filing instructions, see the Texas Sales Tax Filing Guide.
Penalties and compliance risks in Texas
Late filing or payment triggers penalty and interest charges. Common compliance mistakes to avoid:
- Missing the $500,000 threshold — the higher Texas threshold means many businesses don't register when they should have.
- Miscalculating the SaaS data processing exemption — only 80% of the SaaS charge is taxable; applying tax to 100% overcollects.
- Applying the wrong rate — using the state rate without adding applicable local taxes leads to undercollection.
For penalty details, see the Texas Comptroller.
How Quaderno helps with Texas sales tax
Quaderno automatically calculates the correct sales tax rate for every Texas address — including the SaaS data processing exemption — keeps your records organized, and helps you stay compliant. Stop worrying about whether you're charging the right rate and focus on growing your business.
Sales tax guides for neighboring states
If you sell across the South or Southwest, you may have sales tax obligations in these states too.
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.