taxes

Texas Sales and Use Tax Frequently Asked Questions

Sales Tax Collection

What is taxable?

According to Texas tax law, tangible personal property and taxable services are taxable items. Each sale of a taxable item is taxable unless an exemption applies.

How much sales tax do I collect from my customers?

Calculate the amount of sales tax due by multiplying the tax rate by the sales price of the taxable item. Rate charts are located on the Sales Tax forms page.

Sales price of a taxable item • tax rate = sales tax

If you sell multiple taxable items on one invoice, then you must compute the tax on the total sum of the sales prices of the taxable items sold.

EXAMPLE. You sell three T-shirts for $10, $25 and $50. The total sum of the sales prices is $85. You would apply the tax rate to $85 to calculate the sales tax.

What tax rate do I use?

The Texas state sales and use tax rate is 6.25%, but cities, counties, special purpose districts and transit authorities can also impose local sales and use tax up to 2% for a total maximum combined rate of 8.25%. You must collect both state and local sales and use tax. For information about the tax rate for a specific area, see Local Sales and Use Tax Rates on our sales and use tax web page.

We have additional tax rate resources on our website:

Am I required to separately state the sales tax amount to my customers?

Yes. You must separately state the sales tax amount on your invoice or receipt unless you provide a written statement to the customer that the sales price includes sales tax. The "tax included" statement must be displayed where people would normally be advised of the terms of the sale (e.g., brochures, invoices, contracts, signage). If you use a written statement that sales tax is included in the sales price, you have collected sales tax and must report the collected tax. Calculate the amount of tax you collected by using the following formula:

Price ÷ (1 + tax rate) = sales price of the item

Price – sales price of the item = tax to be reported on the item

EXAMPLE. You sell T-shirts. You are located in Austin where the sales tax rate is 8.25%. You charge a customer $50 for a T-shirt, and your invoice contains a written statement that the price includes sales tax.

50 ÷ 1.0825 = 46.19

50 – 46.19 = 3.81

Your sales price for that T-shirt was $46.19, and you collected $3.81 in tax.

Out-of-state sellers that are permitted to collect Texas sales and use tax must identify the sales and use tax as "Texas sales and use tax" on invoices to their customers.

Is rounding permitted when computing sales tax?

When you compute the sales tax by multiplying the tax rate by the sales price, calculate to the third decimal place. If the third decimal place is equal to or greater than 5, round up to the next cent. If the third decimal place is 4 or less, round down to the next cent.

EXAMPLE. You sell a taxable item for $250 and must charge 8.25% tax. If you multiply the tax rate by the sales price, it is $20.625. Because the third decimal place is a 5, round up and charge $20.63. You can also use a rate chart.

What happens if I do not collect the sales tax or collect an incorrect amount?

As a seller, you are responsible for collecting and remitting the correct amount to the Comptroller's office. If you do not collect and remit the correct amount, you can owe any additional tax, plus applicable penalties and interest.

Are barters and exchanges taxable?

Yes. Barters or exchanges are considered the same as making sales or purchases. Tax is calculated on the retail value of the property or services received.

EXAMPLE. Assume that you are an electronic equipment retailer and owe $500 for dental care. In place of cash, you provide a television set from your inventory as full payment. The transfer of the television is considered a taxable sale, and you must collect tax on the $500.

Are delivery or shipping charges taxable?

Shipping and handling charges are taxable if the charges are associated with the sale of taxable goods or services.

EXAMPLE. You sell a sofa to a customer for $500. You agree to deliver the sofa and charge a separate fee of $50 for delivery. Because the sale of the sofa is taxable, the $50 delivery charge is also taxable. You should collect sales tax on $550.

EXAMPLE. You sell a sofa for $500 to a customer who issues you a resale or exemption certificate. Because the sale of the sofa is exempt, the delivery charge is also exempt. You do not collect sales tax on the $550.

Note: Delivery, shipping or postage on an invoice represents delivery charges. However, when a seller pays postage at the client’s request to distribute tangible personal property to third-party recipients the client designates, the separately stated charges for the postage are not taxable.