Texas has no income tax, which means sales tax carries far more of the state’s revenue — and gets far more of the Comptroller’s attention. It is also the tax small businesses most often get wrong, because the money never really belonged to you. You collect it on the state’s behalf, hold it, and hand it over. Get the mechanics right early and it is routine administration. Get them wrong and you are paying a liability out of your own margin.
Key Takeaways
- The state rate is 6.25%; local jurisdictions add up to 2%, for a maximum combined rate of 8.25%.
- A sales tax permit is free — and required before you make your first taxable sale.
- Texas taxes an enumerated list of services. If a service is not on the list, it is not taxable — accounting and legal services are not on it.
- Out-of-state sellers cross into Texas obligations at $500,000 of total Texas revenue in the preceding twelve months.
- File on time and you may keep 0.5% of the tax — plus a further 1.25% if you prepay.
The rate: 6.25% state, 8.25% all in
Texas imposes a 6.25% state sales and use tax on retail sales, leases and rentals of most goods, and on taxable services. On top of that, local jurisdictions — cities, counties, transit authorities and special purpose districts — may add up to 2%, giving a maximum combined rate of 8.25%.
Most of the DFW metro sits at that 8.25% ceiling, but not all of it, and the boundaries do not follow city limits neatly. A single ZIP code can span more than one taxing jurisdiction. If you deliver to customer addresses rather than selling over a counter, use the Comptroller’s address-level rate lookup rather than assuming a citywide rate — that assumption is one of the more common sources of under-collection.
Do you even need a permit?
You need a Texas sales and use tax permit if you sell or lease tangible personal property in Texas, or if you sell a taxable service here. That applies whether you are a corporation, an LLC, a partnership or a sole proprietor working from a spare room.
The services question is where the useful nuance is. Texas does not tax services generally. It taxes a specific, enumerated list set out in the Tax Code — and the logic runs the other way from what most owners expect: if a service is not on the list, it is not taxable. Data processing services and information services are on it. Real property repair and remodelling, security services, and several others are on it. Accounting and legal services are not.
Two traps follow from that. First, categories like “data processing” are broader than they sound and have caught out software and marketing businesses that assumed they were selling something untaxed. Second, both data processing and information services carry a partial exemption — 20% of the charge is exempt — which is easy to miss in either direction. If your offering sits anywhere near those lines, check the Comptroller’s taxable services publication against what you actually invoice, and get a written view before you decide not to collect.
Getting the permit
Registration is free. There is no application fee, though the Comptroller can require a security bond in some circumstances. You apply through the Comptroller’s eSystems portal and will need your entity details, Social Security number or EIN, NAICS code, and the date of your first taxable sale in Texas.
Get the permit before that first sale. Collecting sales tax without a permit is a problem in its own right, and so is the alternative — not collecting, then discovering later that you owed it. The state will still want the tax, and by then you cannot go back and add it to invoices your customers have already paid.
Nexus: when an out-of-state seller gets pulled in
Physical presence in Texas — an office, a warehouse, inventory, employees, sometimes a contractor — creates an obligation immediately.
Without physical presence, the test is economic. A remote seller crosses into Texas obligations once total Texas revenue exceeds $500,000 in the preceding twelve calendar months. Two details do most of the damage here:
- The threshold counts almost everything. It is gross revenue, not taxable revenue — taxable sales, nontaxable sales, exempt sales, sales for resale, and marketplace sales all count, even when the marketplace collects and remits the tax for you. A seller doing most of its volume through a marketplace can cross the line without a single dollar of tax having been its own responsibility.
- The clock is generous, so use it. Once you exceed the threshold, you must register and begin collecting by the first day of the fourth month after the month in which you crossed it. Cross it in May, and you are collecting from September 1. That is a real runway — but only if you are monitoring the trailing twelve-month figure rather than discovering it at year end.
There is also a simplification worth knowing: rather than tracking well over a thousand local jurisdictions, a remote seller may elect to collect a single local use tax rate of 1.75%, making a flat 8.00% on every Texas sale. For many out-of-state sellers, the administrative saving comfortably outweighs the small difference in rate.
How often you file
The Comptroller assigns your filing frequency when your permit is approved, based on how much tax you report:
- Monthly — if you owe more than $1,500 in state tax per quarter
- Quarterly — if you owe between $1,000 and $1,500 in state tax per quarter
- Yearly — if you owe less than $1,000 in state tax per year
Returns are due on the 20th of the month following the reporting period. For quarterly filers that means April 20, July 20, October 20 and January 20. Monthly filers file by the 20th of the following month; yearly filers by January 20.
Your frequency can change as you grow, and the Comptroller will notify you. Do not assume it is fixed — a business that files quarterly out of habit after being moved to monthly accumulates late-filing penalties quietly.
Two discounts most filers never claim
This is free money and it is routinely left on the table:
- 0.5% timely-filing discount. File and pay on time and you keep half a percent of the tax reported.
- 1.25% prepayment discount. Prepay your estimated liability and you claim a further 1.25%, on top of the 0.5%.
On $400,000 of annual taxable sales at 8.25%, the timely-filing discount alone is roughly $165 a year for doing nothing except filing on schedule. It is not going to change your year, but it is a strictly better outcome than the penalty on the other side of the same date.
Zero returns still have to be filed
If you hold an active permit, you file for every period — including periods with no sales at all. This catches seasonal businesses and anyone who has wound an operation down without closing the permit. A run of unfiled zero returns produces penalties on tax you never owed, which is a genuinely irritating way to lose money.
If you have stopped making taxable sales for good, close the permit properly rather than letting it lapse.
Where Dallas businesses actually get caught
- Shipping and delivery charges. When you deliver a taxable item, the delivery charge generally forms part of the taxable sales price. Invoicing it as a separate untaxed line is a frequent and expensive assumption.
- Resale and exemption certificates. Selling tax-free to a reseller is fine — if you hold a valid certificate. Without one, on audit, the liability is yours. Collect certificates at onboarding, not when the auditor asks.
- Use tax on your own purchases. If you buy taxable goods for business use without paying Texas tax — equipment from an out-of-state supplier, for instance — you owe use tax at the same rate. Auditors look here first, because most businesses have never thought about it.
- Spending the collected tax. Sales tax sitting in your operating account is not working capital. It is money you are holding for the state. Businesses that dip into it during a slow month rarely have it when the return comes due.
Keeping it separate is a bookkeeping decision more than a tax one, and it is one of the things clean monthly bookkeeping is genuinely good at preventing.
Sales tax is not franchise tax
These get conflated constantly, and they have nothing to do with each other.
Sales tax is money you collect from customers and remit, on a monthly, quarterly or annual cycle, due the 20th. Franchise tax is a privilege tax on your own entity, reported annually by May 15, and most small businesses owe nothing on it — while still being required to file. The two have separate registrations, separate returns and separate penalties. Our Texas franchise tax guide covers that side.
Not sure whether you should be collecting Texas sales tax?
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Frequently Asked Questions
What is the Texas sales tax rate in 2026?
The state sales and use tax rate is 6.25 percent. Local jurisdictions including cities, counties, transit authorities and special purpose districts may impose up to an additional 2 percent, for a maximum combined rate of 8.25 percent. Because local boundaries do not follow ZIP codes neatly, sellers who deliver to customer addresses should use the Comptroller's address-level rate lookup rather than assuming a single citywide rate.
How much does a Texas sales tax permit cost?
Nothing. Registration for a Texas sales and use tax permit is free, although the Comptroller's office may require a security bond in some circumstances. You apply through the Comptroller's eSystems portal and will need your entity details, Social Security number or EIN, NAICS code and the date of your first taxable sale in Texas. Obtain the permit before making that first taxable sale.
Are services subject to sales tax in Texas?
Only specified ones. Texas taxes an enumerated list of services set out in the Tax Code rather than taxing services generally, so a service that does not appear on the list is not taxable. Data processing services, information services, real property repair and remodelling, and security services are among those that are taxable. Accounting and legal services are not. Data processing and information services also carry a partial exemption for 20 percent of the charge.
When does an out-of-state seller have to collect Texas sales tax?
A remote seller must register once total Texas revenue exceeds 500,000 dollars in the preceding twelve calendar months. That threshold counts gross revenue, including nontaxable sales, exempt sales, sales for resale and marketplace sales, even where a marketplace collects the tax on the seller's behalf. Collection must begin by the first day of the fourth month after the month in which the threshold was exceeded.
How often do I have to file a Texas sales tax return?
The Comptroller assigns your frequency when the permit is approved. You file monthly if you owe more than 1,500 dollars of state tax per quarter, quarterly if you owe between 1,000 and 1,500 dollars per quarter, and yearly if you owe less than 1,000 dollars per year. Returns are due on the 20th of the month following the reporting period, and a return is required for every period even when there were no sales.
Is there any discount for filing Texas sales tax on time?
Yes, and it is commonly overlooked. Permitted taxpayers may keep 0.5 percent of the tax that is timely reported and paid. Taxpayers who prepay their estimated liability may claim a further 1.25 percent on top of that. Both are claimed on the return itself, and neither is available once a filing is late.
Sources: Texas Comptroller of Public Accounts, Sales and Use Tax (state and local rates, permit requirements, filing frequencies, due dates, and the timely-filing and prepayment discounts), retrieved 2026-08-29, comptroller.texas.gov; Texas Comptroller of Public Accounts, taxable services guidance under Tax Code Section 151.0101 and Publication 96-259, retrieved 2026-08-29, comptroller.texas.gov; Texas Administrative Code Rule 3.286 as amended (remote seller safe harbour, the $500,000 threshold and the single local use tax rate), retrieved 2026-08-29. This article is general information, not individualized tax advice.