Texas Sales Tax for Small Businesses: What You Need to Collect, Report, and Pay

If you sell products or certain services in Texas, you are required by law to collect sales tax from your customers and remit it to the Texas Comptroller of Public Accounts. Failing to do so — even unknowingly — can result in audits, back taxes, penalties, and interest.

Texas Sales Tax Rates

Texas imposes a 6.25% state sales tax on most taxable sales. Local taxing authorities can add up to 2% in local sales tax, for a combined maximum rate of 8.25%.

The combined rate varies by location:

• Dallas, Houston, Austin, San Antonio: 8.25% (6.25% state + 2% local)


• Smaller cities and unincorporated areas: often 6.25%–7.25%

What Is Taxable in Texas?

Taxable Items

Most tangible personal property sold in Texas is taxable, including retail merchandise, clothing, electronics, furniture, prepared food, soft drinks, and candy.

Taxable Services

Texas taxes certain services including amusement services, cable TV, telecommunications, data processing, information services, repair and maintenance of tangible personal property, landscaping, pest control, and janitorial services.

Exempt Items

Many items are not taxable in Texas, including most groceries (unprepared food), prescription drugs, agricultural items, manufacturing equipment, resale items (with a resale certificate), and most professional services (legal, accounting, consulting, medical).

Do You Need to Collect Sales Tax?

You must collect Texas sales tax if you have sales tax nexus in Texas — a physical or economic presence in the state.

Physical nexus includes a physical location, employees or contractors in Texas, or inventory stored in Texas.

Economic nexus: If you sell more than $500,000 in taxable Texas sales in the prior 12 months, you have economic nexus even without a physical presence.

How to Register for a Texas Sales Tax Permit

Register with the Texas Comptroller before you begin making taxable sales. Registration is free at Texas Comptroller eSystems.

How Often Do You File?

| Monthly Tax Liability | Filing Frequency | Due Date |

|---|---|---|

| $500 or more | Monthly | 20th of the following month |

| $100–$499 | Quarterly | 20th of the month after the quarter ends |

| Less than $100 | Annually | January 20 |

Common Sales Tax Mistakes Texas Businesses Make

1. Not registering before making taxable sales. You owe sales tax from your first taxable sale.

2. Charging the wrong rate. Always use the combined state + local rate for the location where the sale occurs.

3. Not collecting resale certificates. If you sell to another business for resale, get a completed Texas Sales and Use Tax Resale Certificate (Form 01-339) before the sale.

4. Missing filing deadlines. Late filing results in a 5% penalty (or 10% if more than 30 days late), plus interest.

5. Treating all services as exempt. Several service categories are taxable in Texas.

Get Help With Texas Sales Tax

Texas ClearTax Solutions helps small businesses throughout Texas register for sales tax permits, set up compliant collection systems, file returns, and resolve back-tax issues with the Texas Comptroller. We serve clients statewide — 100% online.

Contact us today or call (469) 897-6175 for a free consultation.