Texas Sales Tax Guide
Chapter 1: An introduction to Texas sales tax management
Sales tax is a tax paid to a governing body (state or local) for the sale of certain goods and services. First enacted in the United States in 1921, sales tax dates back to ancient Egyptian times where paintings depict the collection of tax on commodities. Texas first adopted a general state sales tax in 1961. Since that time, the rate has risen to 6.25. In the second quarter of 2015, the Texas Comptroller of Public Accounts reported $11,802,852 in revenue from taxes on general sales and gross receipts; 71.8% of total Texas state taxes.
As a business owner selling taxable goods or services, you act as an agent of the state of Texas by collecting tax dollars from purchasers and passing it along to the state and local tax authority. This is an important point worth emphasizing. Any sales tax collected from residents belongs to the Texas Comptroller of Public Accounts. As a business owner, it is your responsibility to manage the taxes you collect to remain in compliance with state laws and avoid penalty and interest payments.When does Texas sales tax need to be collected?
In Texas, sales tax is collected on the sale of tangible goods and some services. The tax is collected by the seller and remitted to state and local tax authorities. The seller acts as a pseudo-tax collector.Do I need to collect sales tax in Texas?
To better understand whether you need to collect sales tax in Texas, we've created a simple three step checklist you can use to get a better feel for your Texas tax situation:
- Do I have nexus in Texas?
- Am I selling taxable goods or services to Texas residents?
- Is my buyer required to pay sales tax?
If the answer to all three of the questions above is "Yes", then you are required by the Texas Comptroller of Public Accounts to collect, file, and remit sales tax.Does sales tax accept out-of-state resale certificates?
Yes! At the time of publication, the Texas Comptroller of Public Accounts is accepting out-of-state resale certificates.What happens if I don't collect any sales tax?
If you meet the criteria for collecting sales tax (nexus in Texas and selling taxable goods or services to taxable residents) and choose not to collect sales tax, you will be held responsible for the tax due. As such it is extremely important that you set up tax collection at the point of sale. Attempting to contact customers to collect sales tax after the fact is time consuming and unlikely to be fruitful.Is Texas a Streamlined Sales Tax (SST) state?
At this time, Texas is not a member of the Streamlined Sales Tax (SST) Agreement.What state sourcing rules apply to Texas?
Texas is an origin-based state. Origin-based states are those where the transaction location is defined as the shipping location of the seller rather than the delivery location of the buyer. As a seller, this means you are responsible for applying the sales tax rate determined by the ship-from address on all taxable sales.