Combined state and local sales tax rate texas

Texas imposes a 6.25% state sales and use tax on all retail sales, leases and rentals of most goods, as well as taxable services.  Local taxing jurisdictions (cities, counties, special purpose districts and transit authorities) can also impose up to 2 percent sales and use tax for a maximum combined rate of 8.25%.

For more information on the Texas Sales & use Tax, please visit the Texas State Comptroller of Public Accounts. 

 If you cannot find the tax rate for the address you've entered, or if you received an error message or have a technical question, contact us at [email protected]. Be sure to send us the address you're looking for.

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The state sales tax rate in Texas (TX) is currently 6.25%. Depending on local municipalities, the total tax rate can be as high as 8.25%.

At the local levels, Texas city tax rates can range from 0.25%–2%; county tax rates vary from 0.5%–1.5%; transit tax rates from 0.25%–1%; and special purpose district tax rates from 0.125%–2%. However, the combined rate of local sales and use taxes cannot exceed 2%, making the highest possible combined tax rate 8.25%.

Not all Texas cities and counties have a local code. Cities and counties without a local code do not charge a local sales and use tax. An example of the complexity of Texas state law is Spring, Texas. Spring is unincorporated but is located within a special purpose district. Local sales and use tax collected is not reported to Spring but to one of two possible tax jurisdictions.

Amazon owns and operates several fulfillment centers in Texas. This physical presence, or nexus, creates a sales tax obligation for Amazon and many sellers participating in Amazon’s Seller Central and Fulfillment by Amazon (FBA) programs.

Texas sales tax is imposed on the retail sale, lease, and rental of most goods and many services. Anyone engaged in these areas of business is required to register with the state and collect and remit Texas sales tax.

To calculate the right sales tax in Ohio you’ll need to add up the state, county and city rates for your location. The easiest way to do this is by downloading our lookup tool to get the detail you need in seconds.

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Once you’ve found the correct sales tax rate for your area, you need to figure out how much to charge each customer on their purchases.

Use the sales tax formula below, or the handy calculator at the top of the page, to get the tax detail you need.

To make sure you are doing your taxes correctly and efficiently, we’ve compiled a quick guide to help online sellers navigate them.

In this chapter, we’ll cover ecommerce sales tax and compliance. Let’s dive in.

What is Ecommerce Sales Tax? 

Let’s start with the basics of ecommerce sales tax.

Sales tax is a small percentage of a sale tacked on to that sale by an online retailer.

Sales tax is a “consumption tax,” meaning that consumers only pay sales tax on taxable items they buy at retail.

45 U.S. states and Washington D.C. all have a sales tax.

On top of this, most of those states allow local areas such as cities, counties and other “special taxing districts” to have a sales tax.

That’s why you may see local areas, such as Rhinebeck, New York, that have an odd amount of combined sales tax.

Here are all the components of the Rhinebeck, NY sales tax rate:

Sales tax is governed at the state level. There is no “national” sales tax law in the U.S. 

Because of this, online sellers may find themselves dealing with quite different sales tax laws and rules when dealing with sales tax in the different U.S. states.

Do You Have to Charge Sales Tax for Ecommerce Sales?

As an online retailer, if you are responsible for sales tax in a state, it is your responsibility to charge your buyers the correct amount of sale tax and remit the taxes collected back to the state.

Let’s look at when and from which customers online sellers need to collect an internet sales tax.

The basic rule for online sellers when collecting sales tax is:

• Your business has sales tax nexus in the same state as your customer.
• The product is taxable in that state.

Let’s explore these concepts a bit more in-depth.

1. Sales tax nexus.

Sales tax nexus is just a fancy legalese way to say “significant connection” to a state.

If you, as an online retailer, have nexus in a state, then that state considers you on the hook for charging sales tax to buyers in the state.

You’ll always have sales tax nexus in your home state. However, certain business activities create sales tax nexus in other states, too.

Ways to Have Sales Tax Nexus in Different States

• A location: an office, warehouse, store, or other physical presence of business.
• Personnel: an employee, contractor, salesperson, installer or other person doing work for your business.
• Inventory: Most states consider storing inventory in the state to cause nexus even if you have no other place of business or personnel.
• Affiliates: Someone who advertises your products in exchange for a cut of the profits creates nexus in many states.
• A drop shipping relationship: If you have a 3rd party ship to your buyers, this may create nexus.
• Selling products at a trade show or other event: Some states consider you to have nexus even if you only sell there temporarily.
• Economic nexus: You exceed a state-mandated dollar amount of sales in a state, or you make over a certain state-mandated number of transactions in a state.

2. Sales tax nexus conditions for each state

Most definitions of nexus include the terms “doing business” or “engaged in business.”

Nexus Requirements By State:

The below is the current list up to the point of this writing. Please consult the state websites to confirm.

3. Product taxability.

Most tangible personal property – like furniture or toothbrushes – is taxable.

But some states make exceptions for certain products.

For example, clothing is not taxable in Pennsylvania. So if you sell clothing to a customer in Pennsylvania, don’t charge them sales tax!

As another example, the state of Illinois charges sales tax at a reduced rate of 1% on grocery items.

So if you have nexus in Illinois and sell grocery items, make sure you charge that 1% sales tax rate instead of the full Illinois sales tax rate. The usual Illinois sales tax rate is 6.25% + any local rates that apply.

Each state decides which items are and are not taxable. If you think you may be selling an item that isn’t taxable, check with your state.

If you have sales tax nexus in a state, and the products you are selling are taxable in that state, then you are required to register for a sales tax permit and collect sales tax from buyers in that state.

3 Steps to Sales Tax Compliance

Once you’ve determined that you have nexus in a state and that you’re selling taxable items in that state, your next step is to get compliant.

1. Register for a sales tax permit.

Before you do anything else, get compliant by registering for a sales tax permit in your nexus state.

You do this by contacting your state’s taxing authority (usually called the “[State] Department of Revenue.”) The state will require identifying information from you and your business and information about your business activities.

You can find out how to register for a sales tax permit in every state here.

Don’t skip this step!

Most states consider it illegal to collect sales tax without a permit.

In their point of view, if you collect without a permit you are representing to your customers that you’re collecting sales tax, but pocketing the money for yourself.

Always have a valid sales tax permit before you begin collecting.

When they issue your sales tax permit, your state will also assign you a sales tax filing frequency. This is generally either monthly, quarterly or annually.

As a rule of thumb, the higher your sales volume in a state, the more often the state will want you to file a sales tax return and remit the sales tax you’ve collected.

2. Collect sales tax.

Next, set up and start collecting sales tax online for all of your online shopping carts and marketplaces.

Each shopping cart and marketplace will have a way for you to collect sales tax, though some sales tax collection engines are more robust than others.

For example, Amazon has a very detailed and exact sales tax collection engine.

eBay, on the other hand, only allows online sellers to collect one sales tax rate from buyers in each state.

Why is it important to be able to collect more than one sales tax rate per state? It’s because of a concept called “sales tax sourcing.”

Let’s go over the basics.

Origin & Destination-Based Sales Tax Sourcing

We already mentioned that each state is allowed to make its own sales tax rules and laws.

One choice states get to make is whether or not to use “origin-based” or “destination-based” sales tax sourcing.

This simply means that states get to decide whether online sellers charge sales tax based at the sales tax rate of their business location (origin-based sourcing), or whether online sellers are required to collect sales tax at the customer’s ship to address (destination-based sourcing.)

The majority of states are destination-based.

From the state’s point of view, this assures that every local area receives the exact amount of sales tax collected from buyers in their jurisdiction.

But it can make sales tax collection, reporting and filing very difficult for online sellers who have nexus in destination-based states.

Origin-based sales tax collection example

Lou lives in and sells online from his home in Irving, Texas. Texas is an origin-based sales tax state, so when Lou makes a sale to a buyer in Archer City, Texas he charges that customer his home rate of 8.25% in Irving.

He does not charge the customer the Archer City rate.

Destination-based sales tax collection example

Amanda lives in and sells from her home in Stamford, New York. New York is a destination-based sales tax state, so when Amanda makes a sale and ships an item to a buyer in Buffalo, she is required to charge her customer the Buffalo sales tax rate.

She does not charge the buyer her home sales tax rate in Stamford.

Didn’t pass the 2 question test above? You can read a whole lot more about origin vs. destination-based sales tax sourcing here.

3. Report and file sales tax.

When they issued your sales tax permit, your state assigned you a sales tax filing frequency.

This means your sales tax due date will roll around either monthly, quarterly or annually (and sometimes semi-annually.)

Keep in mind that every state’s sales tax due dates are slightly different.

Most states want to hear from you on the 20th day of the month after the taxable period, but others want to hear from you on the last day of the month, or the 15th, or the 23rd, etc.

When your due date rolls around, your job is to report how much sales tax you’ve collected in each state.

If the state just wanted to see one number, your job would be easy.

But to complicate matters, most states want to know how much sales tax you collected from buyers in each taxing jurisdiction.

This means figuring out how much sales tax you collected in each state, city, county and other special taxing jurisdiction in all of your nexus states. (And who on earth knows which city is in which county in a state without looking it up?)

This process becomes especially painful if you sell on multiple channels, and have to attempt to integrate more than one sales tax report.

Fortunately, we live in a time where ecommerce sales tax software automation technology exists to make this process simple.

Whew!

TaxJar is one sales tax automation app you can use within the BigCommerce dashboard.

Once you’ve reported how much sales tax you’ve collected, your next step is to file your sales tax return and remit the sales tax you’ve collected from customers.

There are a couple of important considerations here:

• Always file “zero returns:” File a sales tax return by your due date, even if you didn’t collect any sales tax from your buyers over the taxable period. States want to hear from you even if you don’t have any sales tax to remit. Some states will even levy a penalty on you for failing to file a zero return.
• Take advantage of discounts: About half the states with a sales tax realize that asking retailers to act as tax collection agent is a burden. These states allow you to keep a very small percentage (usually 1-2%) of the sales tax you collect from buyers. Be sure to take advantage of this discount when filing in one of these states with a sales tax discount.

To be fully sales tax compliant, register for a sales tax permit in the states where you have sales tax nexus, then file and remit sales tax due by each of your sales tax due dates.

Other Important Ecommerce Sales Tax Facts for Online Sellers

With that, you have the basics you need to be sales tax compliant.

There are a couple of other interesting things to note about sales tax.

1. Resale certificates.

In most states, your sales tax permit also serves as a resale certificate or seller’s permit.

If you do retail arbitrage – buying items at retail with the intent to resell them yourself – then you are not required to pay sales tax on those items if you present your resale certificate to a participating retailer.

Now keep in mind that retailers are not obligated to accept your resale certificate.

So if you do have a valid resale certificate, but the retailer from which you are buying items to resell charges you sales tax, you are often able to reclaim the sales tax you paid on your next sales tax filing.

Also, keep in mind that resale certificates are strictly to be used to buy items you truly plan to resell. It is unlawful to use your resale certificate to buy items like office or packing supplies, or items for personal use.

The state considers this fraud and both you, as the reseller, and the retailer who sold items to you could face fines and penalties.

2. Periodic “sales tax checkups.”

You should double-check your sales tax compliance periodically.

Business activities such as hiring an employee in another state, or opening a location in another state, or simply making over a certain amount of sales or making a certain number of sales transactions in a state may mean that you now have sales tax nexus in new states. TaxJar’s Sales Tax Insights report will warn you if you are about to hit a threshold.

Conversely, you may also close a location or have an employee leave your company, which means that you no longer have nexus in a state.

If your sales tax liability changes, be sure to update your sales tax permits with each state, and also to update your sales tax collection on your various shopping carts and marketplaces.

A periodic review will ensure that you are fully sales tax compliant.

For more information about internet sales tax, you can check with your state’s department of revenue or a qualified sales tax professional.

Conclusion

It’s essential to understand how taxes affect your business — and what tax software is best to use. If you use a tax software like TaxJar, you can easily integrate your account with BigCommerce to automate sales tax calculations, reporting, and filings.

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