Texas is one of the most business-friendly states in the nation, but its sales tax system is more nuanced than many assume. With a 6.25% state rate and local jurisdictions adding up to 2% more, the total can reach 8.25% in most major cities. Whether you're a small business owner, an e-commerce seller, or a consumer making a large purchase, understanding how Texas sales tax works can save you money and keep you compliant.
This guide covers everything you need to know about Texas sales tax in 2025 — from the legal authority and rate structure to exemptions, filing obligations, and what happens if you fall behind. All information is based on Texas Tax Code Chapter 151 and guidance from the Texas Comptroller of Public Accounts.
➡️ Need a quick calculation? Use our free Texas Sales Tax Calculator for instant results by city.
Texas Sales Tax Rates: State + Local
[Your content here — introduce the rate structure, explaining that Texas uses a two-tier system of state and local taxes. Mention that the state rate has been 6.25% since 1990 and is set by the Texas Legislature. Explain that local jurisdictions — cities, counties, transit authorities, and special purpose districts — can each levy their own tax, but the combined local rate cannot exceed 2%, per Texas Tax Code §321.101.]
| City | State Rate | Local Rate | Combined Rate |
|---|---|---|---|
| Houston | 6.25% | 2.00% | 8.25% |
| Dallas | 6.25% | 2.00% | 8.25% |
| Austin | 6.25% | 2.00% | 8.25% |
| San Antonio | 6.25% | 2.00% | 8.25% |
| Fort Worth | 6.25% | 2.00% | 8.25% |
| El Paso | 6.25% | 2.00% | 8.25% |
| Lubbock | 6.25% | 2.00% | 8.25% |
| Plano | 6.25% | 2.00% | 8.25% |
| Stafford | 6.25% | 1.00% | 7.25% |
| Unincorporated Area | 6.25% | 0.00% | 6.25% |
[Your content here — explain origin-based vs. destination-based sourcing: for intrastate Texas sales, tax is sourced to the seller's location (origin-based). For out-of-state remote sellers, tax is sourced to the buyer's Texas location (destination-based). This is an important distinction many competitors miss.]
What Is Taxable in Texas?
[Your content here — explain that under Texas Tax Code §151.005, "taxable item" includes tangible personal property and taxable services. Describe that unlike many states, Texas taxes most goods but has a narrower list of taxable services. Services are only taxable if specifically enumerated in the Tax Code.]
Taxable Goods
[Your content here — cover categories including: clothing and apparel, electronics, furniture, vehicles (taxed at 6.25% under a separate motor vehicle tax), digital products (music, movies, software downloads per §151.010), SaaS (taxed as data processing at 80% of the fee, with 20% exempt), and restaurant meals.]
Taxable Services
[Your content here — Texas only taxes specifically listed services. Cover: amusement services (concerts, sporting events, theme parks), telecommunications, cable TV, internet access, repair and maintenance services, pest control, landscaping, photography, and certain data processing services.]
"Texas is an 'origin-based' sales tax state for intrastate sales — meaning you charge the tax rate at your business location, not the customer's location, when both buyer and seller are in Texas."
Texas Sales Tax Exemptions
[Your content here — explain that Texas exemptions are governed by Subchapter H of Chapter 151. Emphasize that exemptions are not automatic — businesses must verify exemption eligibility and collect exemption certificates (Form 01-339) where required.]
Food Exemptions
[Your content here — explain the grocery exemption in detail. Unprepared food items like bread, milk, eggs, fresh produce, and meat are exempt. However, prepared foods (heated, sold with utensils, or combinations of more than two food items), candy, and most non-alcoholic beverages are taxable. Restaurant meals are always taxable. Bakery items sold without utensils from a grocery store are exempt.]
Medical Exemptions
[Your content here — prescription drugs, insulin, and most qualifying medical devices are exempt. Discuss the definition of "therapeutic device" and which OTC items qualify. Note that cosmetic items do not qualify even if a doctor recommends them.]
Manufacturing Exemptions
[Your content here — explain the manufacturing exemption under §151.318. Machinery and equipment used directly and exclusively in manufacturing, processing, or fabricating tangible personal property for sale is exempt. This is one of Texas's most valuable exemptions for industrial businesses.]
Agricultural Exemptions
[Your content here — feed, seed, fertilizer, and certain agricultural equipment are exempt when purchased by a qualified farmer or rancher with a valid agricultural exemption number. Cover Form 01-924 (Texas Agricultural Sales and Use Tax Exemption Certificate).]
Resale Exemption
[Your content here — businesses purchasing goods for resale can use Form 01-339 to buy tax-free. Explain that the exemption applies only to items that will be resold in their present form or as a component of a taxable item.]
Online Sales & Economic Nexus
[Your content here — cover Texas's economic nexus threshold: remote sellers with more than $500,000 in Texas sales in the preceding 12 months must collect and remit Texas sales tax. Texas does not have a transaction-count threshold — it is purely revenue-based. Mention the optional simplified 8% remote seller rate available to qualifying online sellers.]
[Your content here — cover marketplace facilitator laws. Platforms like Amazon, Etsy, and Walmart Marketplace must collect and remit sales tax on behalf of third-party sellers on their platforms. However, if a seller also makes off-marketplace Texas sales and has nexus, they must still collect tax on those sales separately.]
[Your content here — cover SaaS and digital goods. Texas taxes SaaS as a "data processing service" — 80% of the subscription fee is taxable, and 20% is exempt. Downloaded music, movies, and software are taxable as tangible personal property in electronic form per §151.010.]
Filing & Deadlines
[Your content here — explain that filing frequency in Texas depends on your total tax liability. Monthly filers (over $1,500/month in tax due) must file by the 20th of the following month. Quarterly filers (less than $1,500/month) file by the 20th of the month following the quarter. Annual filers (less than $1,000/year) file by January 20. All filings and payments go through the Texas Comptroller's eSystems portal.]
| Filing Frequency | Threshold | Due Date |
|---|---|---|
| Monthly | > $1,500/month in tax collected | 20th of the following month |
| Quarterly | < $1,500/month in tax collected | 20th of the month after quarter |
| Annual | < $1,000/year in tax collected | January 20 |
[Your content here — cover what happens when a due date falls on a weekend or holiday: the deadline shifts to the next business day. Explain electronic filing requirements and how to use the eSystems portal.]
Penalties for Non-Compliance
[Your content here — Texas penalties for late filing start at 5% of the tax due. An additional 5% is added for each subsequent month of non-payment, up to a maximum of 10%. Interest accrues on unpaid balances at the rate set by the Texas Comptroller. For fraudulent non-payment, additional civil and criminal penalties may apply.]
[Your content here — cover the audit process. The Texas Comptroller can audit businesses for up to four years from the date a return is filed or due. During an audit, businesses must produce sales records, tax filings, and exemption certificates. Good recordkeeping is the best defense.]
Texas Sales Tax Holiday 2025
Texas holds an annual back-to-school sales tax holiday each August. In 2025, the holiday runs from Friday, August 8 through midnight Sunday, August 10. During this period, the following items are exempt from both state and local sales tax when priced under $100 per item:
- Clothing and footwear
- School supplies (pens, pencils, notebooks, backpacks, etc.)
- Backpacks and bookbags
[Your content here — cover what doesn't qualify during the holiday: clothing items $100 or more per item, accessories like watches and jewelry, and items not specifically listed as qualifying. Explain the implications for retailers and how to update POS systems.]
How to Get a Texas Sales Tax Permit
[Your content here — any business making taxable sales in Texas must obtain a Texas Sales and Use Tax Permit before their first sale. The permit is free and is obtained through the Texas Comptroller's eSystems portal. Cover what information is required: SSN or EIN, business address, type of business entity, and an estimated monthly tax liability.]
[Your content here — cover permit renewal (Texas permits don't expire, but businesses must keep information current), the difference between a seller's permit and a retailer's permit (Texas uses a single permit for both retail and wholesale), and how to handle nexus in multiple Texas locations.]
Summary: Key Texas Sales Tax Rules
[Your content here — write a strong closing summary paragraph that ties together the key points: the 6.25% + up to 2% rate structure, the major exemption categories, filing obligations, and the importance of recordkeeping. Encourage readers to use the calculator for quick checks and to consult a licensed CPA for complex situations.]
For quick, accurate sales tax calculations by Texas city, use our free Texas Sales Tax Calculator — no signup required, updated for 2025–2026.
⚖️ This article is for informational purposes only and is based on Texas Tax Code Chapter 151 and Texas Comptroller guidance as of April 2026. Always consult a licensed CPA or tax professional for advice specific to your situation.