Texas Sales Tax

In the U.S. only 5 states have no sales tax. The rest of the states have this special tax on the majority of goods purchased within the state. Not all products and services are subject to tax, some are exempt from it. Apart from sales tax, federal excise tax covers alcohol and cigarette trade and some states practice use tax on goods bought online.

Sales taxes are imposed on the state level, there is no federal tax; however, it is also possible for some local governments to impose local sales taxes as well. The rates are different in every state and depending on the presence or absence of local sales tax they may also vary with regards to location.

There is no VAT, or Value Added Tax in the U.S.

In Texas the state as well as local jurisdictions such as counties, cities and transit authorities can impose sales taxes. They are collected by merchants on the behalf of the state and local tax units and transferred further to the corresponding authorities.

Texas state sales tax equals 6.25%. It’s a fixed rate statewide; however, with the addition of local sales takes it can reach the maximum of 8.25%. Having no state income tax, Texas have sales tax to rely on and for that reason the state is considered to have one of the highest sales tax rate nationwide – higher than 76.9% of other states.

There are 2,176 municipalities in Texas that have a right to collect sales tax. 123 counties collect county sales tax; besides, sales and use taxes are also imposed by the advanced transportation district (ATD), the county transit authority (CTA), 6 metropolitan transit authorities (MTAs) and 2 city transit departments (CTDs). All in all there are about 2176 special sales tax jurisdictions in Texas. The maximum rate is 2% and it is usually imposed above the fixed state sales tax.

Sales tax is imposed on the majority of retail goods and some services; however, some products are exempt from sales tax. Among them are groceries as well as all prescription and non-prescription drugs; automobiles and boats in Texas are only taxed on the state level. There is also a special hotel occupancy tax of app. 6% on room rent.

Texas also practices sales tax holiday annually at the beginning of August. This is the time for school preparation and patents are allowed to purchase goods under $100 tax-free.

Texas Local Sales Taxes

Apart from state sales tax, Texas allows local jurisdictions collecting their separate local sales tax. It is capped at 2% and can be imposed on all the goods that are non-exempt. These 2% are added to the fixed 6.25% state rate making the maximum total rate 8.25%. However, the rate varies from 6.25% to 8.25% depending on the location. Texas Comptroller’s office gives full information about sales tax rates by zip code, city as well as county.

Texas Sales Tax Exemptions

Groceries as well as most prescription and non-prescription medications are exempt from sales tax in Texas; however, all the other products aimed for purchase in retail are taxable. In other states clothes, groceries and drugs are taxed at lower rates; in others there are higher sales taxes on expensive goods, certain medications and junk foods.

Texas Excise Tax

Federal excise tax is also imposed on items such as alcohol, cigarettes and gasoline. Gas is taxed at the rate of 20¢ per gallon; cigarettes – at $1.41 per pack and alcohol taxes vary with regards to the type of drink and its strength. More information about Texas excise tax can be obtained from Texas Comptroller of Public Accounts.

Texas Use Tax

Use tax in Texas is imposed on the goods and services that are not subject for sales tax – for instant, on purchases made online. In this case a person must report and pay the tax to the Texas Comptroller office directly. More information about Texas use tax here.

Sales Tax Rates

  • State sales tax – 6.25%
  • County sales tax – 0.5% – 1.5%, with regards to local rate.
  • City sales tax – 0.25% – 2%, with regards to local rate.
  • Transit sales tax – 0.25% – 1%, with regards to local rate.
  • Special Purpose Districts sales tax – 0.125% – 2%, with regards to local rate.

Sales Tax Due Date

Sales taxes in Texas are reported on monthly, quarterly and yearly basis. 20th day that follows the end of the previous reporting period is a due date. For more detailed information about sales tax in Texas visit the office of Texas Comptroller of Public Accounts.