Texas Sales Tax: Rates, Calculator, Who Pays
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While Texas doesn’t have an individual income tax, it does have a state sales and use tax on goods and services. Here’s what you can expect if you’re making a purchase in Texas.
Texas state sales tax rate
The state sales tax in Texas is 6.25%. Local tax can’t exceed 2%, which means that 8.25% is the maximum combined sales tax that can be collected in Texas.
The local tax amount generally depends on the seller’s place of business — such as a store or an office — if they have one. Different rules apply for sellers shipping orders to customers, whether in-state or out of state, depending on where the order is fulfilled.
Calculate Texas state sales tax
Who pays TX sales tax?
Customers pay the Texas sales tax, which is calculated by sellers and service providers, during the sale.
For example, if you buy a $10 T-shirt in Austin, Texas, you’ll see a state tax rate of 6.25% and a local tax rate of 2% on the receipt, bringing the total to $10.83.
If you bought a good or service that’s taxable in Texas but didn’t pay sales tax at the time of purchase, you’ll owe Texas use tax instead. Individuals who don’t have a Texas Sales and Use Tax permit can pay this to the Texas Comptroller’s office and report it with Form 01-156.
What items are subject to Texas sales tax?
Taxable items in Texas include certain food items, such as soft drinks and candy, beer and wine, and prepared foods. Almost all retail sales, leases, rentals of most goods, as well as taxable services, are subject to Texas sales tax.
There are 17 categories of taxable services in Texas, including amusement services (think concerts, carnivals and sporting events), cable television services, laundry services and more. There are also industry-specific sales and use taxes, such as telecommunication services, tobacco and alcohol, and insurance taxes.
What is exempt from Texas sales tax?
Most groceries, over-the-counter drugs and medicine, as well as feminine hygiene and menstrual products are exempt from Texas sales tax.
Certain nonprofit and governmental organizations may be exempt from paying sales tax, but they will need to apply for exemption from the comptroller’s office and be approved before making purchases. The exceptions are federal and Texas government entities, which are automatically granted exemptions.
Individuals who buy items to directly donate to some nonprofit organizations may also be able to claim a sales tax exemption in Texas. There are certain requirements, and not every nonprofit qualifies, but the first step is to provide Form 01-339, Texas Sales and Use Tax Exemption Certification to the seller.
Who collects TX sales tax?
Sellers calculate and collect Texas sales tax for the items or services they sell. In Texas, permitted sales taxpayers can claim a 0.5% discount on the amount they’ve reported and paid on time, as well as an additional 1.25% if prepaying sales tax.
Sellers also can face penalties for reporting and paying taxes late. Each report filed after the due date is assessed a $50 penalty. On top of that, for taxes paid between one and 30 days late, there is a 5% penalty, and anything more than 30 days late gets a 10% penalty.
Texas sales tax holiday
Texas has four sales tax holidays in 2024. Each one is dedicated to a specific purpose, such as emergency preparation or back-to-school shopping, and related items under a certain dollar amount can be purchased tax-free.
Can you deduct TX sales tax?
It’s possible to deduct Texas sales tax from your federal income tax return if you itemize and take the SALT deduction. This deduction allows you to write off up to $10,000 worth of either state income taxes or state and local sales taxes paid throughout the year.
Taking the SALT deduction may not be a strategy that works for everyone. Consulting with a trusted tax expert, such as a CPA, or quality tax software can help you decide if it’s the best route for you.
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