Texas Sales and Use Tax Frequently Asked Questions

Sales Tax Collection

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

Yes, you must separately state the sales tax amount you charge to your customer, unless you:

  • provide this written statement to the customer: “Texas state and local sales and use tax is included in the sales price;” and
  • prominently display a sign stating the above information for your customers to see.

If you include tax in the sales price, you must report the tax collected using this formula:

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

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

EXAMPLE: Your t-shirt business is in Austin where the sales tax rate is 8.25 percent. You charge a customer $20 for a t-shirt, and your invoice states that the price includes sales tax.

$20 ÷ 1.0825 = $18.48

$20 – $18.48 = $1.52

The t-shirt price was $18.48, and you collected $1.52 in tax.

Out-of-state sellers with a Texas sales and use tax permit must identify the tax as “Texas sales and use tax” on invoices to their customers.

Is it ok to round the tax amount?

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

EXAMPLE: You sell a taxable item for $250 and must charge 8.25 percent tax. The tax rate multiplied by the sales price equals $20.625. Because the third decimal place is a five, round up and charge $20.63. You can also use a rate chart.

What happens if I do not collect tax or collect the wrong amount?

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

Are barters and exchanges taxable?

Yes. Barters or exchanges are the same as buying and selling items. Tax is calculated on the item’s or service’s retail value.

Are delivery or shipping charges taxable?

Delivery and shipping charges connected with taxable items or services sold are taxable.

EXAMPLE: You sell a sofa 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 must collect sales tax on $550.

EXAMPLE: You sell a sofa for $500 with a $50 delivery charge to a customer who gives 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.

When a seller pays for delivery and shipping charges at the customer’s request using a third-party provider to deliver the item (such as drop shipments), the separately stated charges for the shipping are not taxable.