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Maryland Sales Tax Guide
Maryland is a state deeply steeped in history, science, and, of course, sweet, delicious crabs :p The 42nd smallest state in the union, Maryland has...
🐄🐴🤠 Yeeeehaw! Texas is the second-largest state in the union by population, GDP, and land mass. Plus, they have that toast. So running a business in Texas is a go big or go home venture; with a very business-friendly legal environment and relatively high ease of entry, there can be stiff competition. This comprehensive Texas State Sales Tax Guide will prepare any of you folks with the grit and tenacity to make a Texas business thrive. Giddyup, pardners!
After reading this guide, you will know:
Our Texas Sales Tax Guide will give you the confidence to effectively manage your Texas state and local tax from beginning to end. If you have any other questions to help you navigate your way through Texas state and local tax, we are here for you.
Giddyup, pardners!
✅ Do you want to contact the Texas Department of Revenue?
✅ Are you unsure if you should call them, or email them through their website?
✅ Do you wonder what information you should have ready before you contact them?
If you answered “Yes” to any of these questions, you’re in the right place! Read on.
You may contact the Texas Comptroller of Public Accounts by calling 800-252-5555, or emailing at sales.maintenance@cpa.texas.gov to expedite your call.
If you are a glutton for punishment, you may opt to visit a Taxpayer Service Location. You will have to take a ticket and wait.
But who has time for that? Calling is the easiest option.
Before you call or email the Texas Department of Revenue, there are three things you need to have handy or included in the email:
If you are calling on behalf of someone else or another business, you need to have one more piece of information.... A signed Texas Power of Attorney
Why?
If you do not have this, they will not be able to talk to you. This document authorizes the tax authorities in Texas to discuss a third party’s taxes with you.
If you have any more questions, please feel free to contact us so we can assist you with your sales tax needs.
Do you have to register for a state and local use sales tax license in the state of Texas?
To know the answer to this question, you need to ask yourself two questions first.
Do you sell or lease tangible items?
Do you sell taxable services?
If you replied “Yes” to either, you need to register for a Texas sales tax account.
This may seem overwhelming if it is your first time. Just remember, you only need to register for an account one time. And you’ll be super prepared after reading this guide.
A few positive points to start us on the path of obtaining a Texas Sales Tax account! It’s completely free to register and there is no need to renew! 😲🎉 That’s right, you do not ever have to renew once you’ve obtained your [free!] Sales Tax Permit. Give it up for Texas :)
The registration process is quite simple as long as you are prepared.
We are going to walk you through it right now.
You will find out more information on:
As our clients frequently ask about these topics, we are going to give you all the information we can about these topics. Before diving in, you may find it easier to gather all the information you have now in one place. As we mentioned, preparation is key.
Being prepared means having any and all information accessible, when the moment arises. This information includes:
So, let’s get to it!
Registering starts with being well prepared so you can avoid half-starts in the registration process where you go back to go find the information. You want to be sure that you have the following information available:
You may already have this information easily accessible in a folder either in hard or soft copy. The next thing is to apply for a sales tax permit in Texas.
So, now you may be asking another frequently asked question by clients: How do I apply for a sales tax permit in Texas?
You can apply for your sales permit one of two ways:
Using Tx Comptroller Webfile site is the fastest way to set up your license.
We’ve got you!
If you are changing the mailing address, all you have to do is complete two forms.
You can also email Texas Tax Help to change your mailing information.
Whichever option you choose, the state will take care of the change for you.
Zero, zilch, zip. In Texas, everything is bigger. Except the registration fees. The toast is for real, though, folks.
Yes indeed, you do need a Federal Tax ID (EIN) to register for a Texas sales tax license.
No need to worry, though!
You can easily register for a Federal EIN here.
Because each business is different, you may wish to contact the Texas Comptroller of Public Accounts as well as any other potential government agencies to verify which ones you are required to register with.
Some potential agencies include:
But this is obviously a non-exhaustive example of the agencies a business may need to inquire about before opening a shop. If you’re unsure and need help, we’re always here to chat.
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You’re ready to go!
You are now prepared to register for your sales and local use tax license in Texas because
Registering for your sales tax license will be smooth as long as you are prepared. We suggest keeping all the necessary information organized in one place. You should have it saved in hard-copy and digitally. And do take advantage of the resources available online and through your tax professional.
By now, you have probably contacted the Texas Comptroller of Public Accounts and possibly even registered for a sales tax license.
Now that you have finished the application process, you want to know when you are required to collect sales taxes. It is quite common for new business owners to have questions about this.
To know when you must collect sales taxes and from whom, we should discuss the basics of taxable goods in the state of Texas by looking at some frequently asked questions from my clients. This will help us illustrate the nuances of when a business needs to charge sales tax in Texas, and when a business doesn’t need to.
Let’s start with the first question…
Businesses want to collect a sales tax on anything taxable in Texas including:
It’s important to mention that Texas is one of the few states that taxes web development and hosting services- listed as “data processing services”. We work with a ton of web developers and this fact surprises all of them!
If you are questioning whether or not your services are taxable, check out the Comptroller’s site to dig deeper.
Businesses want to keep in mind the following tax rates when collecting taxes on taxable goods and services:
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Now that we have reviewed what kinds of goods or services are taxable (which includes “data processing services”) you will want to learn about the factors that establish a taxing connection with the state of Texas.
We are going to go over the following frequently asked questions:
Why do you need to know this information? It is very important for any business owner to be fully informed on the various requirements to collect and remit sales taxes where they do business.
In addition to considering whether the good is taxable, business owners like yourself must be aware of the ways they can establish a taxing connection with the state. By going over these common questions that our clients ask, you will be better able to assess whether your business has established such a connection with the state of Texas.
Texas is Origin Based Sales Tax State.
This means that you charge a Texas sales tax based on the seller’s location, which is easier because it never changes unless the seller goes to a trade show or is fair to sell their products.
Protip: Charge Texas sales tax based on the location of the seller.
To make managing your tax responsibilities easier, you should set up your eCommerce and Point of Sale software to appropriately charge sales taxes based on the type of sales tax state each one is. If you do not collect sales tax when you were supposed to, you risk under or overcollecting which can have tax implications at the time of filing a return.
Now that we know that Texas is an Origin Based sales tax state, we need to also consider other criteria that could trigger a sales tax requirement at the point of sale.
Texas recognizes several thresholds to trigger sales tax requirements, which can be explained using these four commonly asked questions:
Don’t get overwhelmed! After we finish discussing these four questions in more detail, you will feel more confident in recognizing if your business meets any of the criteria triggering a tax connection with Texas.
After explaining the basics we will go over the variety of thresholds recognized by the state of Texas that constitute a sales tax nexus.
Before answering this question, we want to stress one thing:
If you create a sales tax nexus with Texas, you are subject to sales tax.
What is a sales tax nexus again?
Sales Tax Nexus is also known as "sufficient business presence.” It means your business has established enough of a connection with the state to trigger a sales tax requirement. You then have to comply with the sales tax regulations in that state.
What if your main headquarters are in another state? You may still have to charge pay sales tax to the Texas Comptroller of Public Accounts even if you never step foot in Texas. For businesses located in Texas are not the only ones capable of creating a sales tax nexus with Texas. Out-of-state businesses are capable of the same.
So, how do you create a Sales Tax Nexus in Texas?
There are a few ways a business can create nexus in Texas.
If you are still scratching your head and wondering if you have sales tax nexus, you can fill out Form AP-114 Texas Nexus Questionnaire and the state can help determine whether or not you have nexus. If you are on the fence, we highly recommend going directly to the state to get their determination.
Yes, Amazon has twelve fulfillment centers in Texas. If your products are stored in one of them, you want to know.
For your convenience, here are the addresses of the Amazon fulfillment centers in Texas:
So, why do you want to know this? You want to know this if you sell your products on Amazon or are recognized as an Amazon FBA (Fulfillment by Amazon). When Amazon stores your products in one of its fulfillment centers in any state including Texas, this may trigger a sales tax requirement. If Amazon is storing your products in a warehouse in Texas, you have created a taxing connection with the state of Texas.
PROTIP: You create sales tax nexus by holding your goods in a warehouse (including one of Amazon’s) in the State of Texas.
Considering Amazon has many fulfillment centers throughout the United States, you may feel overwhelmed with determining your tax obligations in Texas as well as in other states.
We can help you with this process of identifying where your products are stored and what are the resulting tax implications.
We often use A2X + Wherestock to find out where our clients' inventory is currently being held and shipped from. This helps us determine what our clients need to do to be in compliance with any tax laws, including those in Texas.
Yes! Going into effect in January 2019 (but enforced starting October 2019), Texas now has economic nexus thresholds that require out-of-state businesses with a significant enough presence to register to collect and remit sales tax.
Out-of-state sellers with revenues above $500,000 will be taxed going forward, though the Wayfair Rule Updates indicate a grace period for enforcement:
To allow time for remote sellers to prepare for these changes, the amendments postpone the permitting and tax collection requirements for remote sellers until Oct. 1, 2019. The initial 12 calendar months for calculating a remote seller’s Texas revenues will be July 1, 2018, through June 30, 2019.
No, Texas does not have click-through nexus.
No. Some states have implemented this program, but Texas is not one of them. At least not yet!
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It’s time to wrap it up.
As long as you know if your products are considered taxable goods and if you reached any thresholds that create a sales tax nexus with the state of Texas, you will be able to confidently and effectively handle your business’ tax obligations.
Having this information accessible will help you handle your tax needs more efficiently in less time.
Once you recognize your business has established a sales tax nexus with the state, you may have some questions about how to go about collecting sales taxes.
Many clients tend to ask me the following four questions:
After reading this, you will be better equipped to collect Texas sales taxes.
Because Texas is an Origin Based Sales Tax State, you collect Texas sales taxes based on the seller’s address. If the seller’s address is within the state of Texas, you must collect Taxes sales taxes. Your Point of Sale or eCommerce software can manage collection easily for you.
At the time of this writing, the state of Texas imposes a 6.25 percent state sales and use tax on:
Local jurisdictions may impose up to a 2 percent sales and use tax.
Keep in mind, buyers and sellers should know that local taxes can not exceed 8.25 percent when combined.
Sales Tax Rates change all of the time- and can vary by what is being sold! It's best to use the Sales Tax Rate Locator to search for sales tax rates by address for the most up to date and accurate information.
Common Texas sales tax exemptions are offered for the necessities of life which includes most food and health-related items.
Some other items exempt from sales tax:
In addition to goods, sellers want to keep in mind who can enjoy a tax exemption. They include:
There are too many specific exemptions to mention all of them here. Be sure to give the list there a look to make sure you’re not missing out on an exemption relevant to your business (or reach out to us and we can help! :p).
Even though some goods are taxable under Texas law, some buyers are exempt from paying sales taxes depending on:
Example: Wholesalers are merchants who are exempt, according to the Texas Comptroller of Public Accounts, from paying sales tax because they buy products with the intention of reselling them. Other groups are also exempt:
As a business owner, you will eventually encounter a tax-exempt buyer. As the seller, you are responsible for collecting the tax exemption certificate, just as you would be responsible for collecting the sales tax. You want to make sure you keep a copy on file, in the event of an audit by the tax authorities. Otherwise, you could be responsible for paying taxes that you otherwise would not have been required to (spooky foreshadowing for our next question).
This is a really serious matter! For retailers, it is crucial that you keep a copy of the certificate on file so you can verify the buyer’s tax exemption status. If you can not verify this because you lost a copy of the certificate, you are still liable to pay the sales tax as the retailer.
There is no reason to worry if you are working with us. We will be sure to keep your sales tax exemption certificates safe and sound in our shared Box.com account.
There are four annual sales tax holidays you may want to remember:
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Now you know should feel prepared to collect the required sales taxes exempting that and those that and who are not taxed. Once again, remember to document anytime you do business with a buyer who has a certificate of exemption. Being prepared and organized makes collecting and sales tax and filing a return in Texas easy, as well as answering to any potential audits.
It is time to talk about filing and paying your sales taxes in Texas. In this section, I am going to cover the following frequently asked questions from my clients:
By the time you finish reading this, you will feel confident enough to file and pay your Texas sales tax.
The Texas Comptroller of Public Accounts requires all sales tax filing to be completed on the 20th of the month, following the assigned filing period.
There are three thresholds you need to know about.
Not sure how to determine your tax filing frequency?
You can review your eCommerce or Point of Sale Software to see the volume of sales you have generated.
Don't worry though! The state will let you know when your due dates change. :)
Watch your mail for a letter from the State of Texas so that you don't miss any deadlines.
You can file and pay your taxes on the next business day, typically the Monday following the weekend or the day after the holiday. But remember, filing early is always better than risking being late.
Paper: Complete form 01-114 long form (PDF) or 01-117 short form (PDF). Please see the forms for long v. short form criteria. Enclose payment and mail to:
Comptroller of Public Accounts
PO Box 149355, Austin TX 78714-9355.
Electronic: File online at Texas Comptroller eSystems and submit payment via EFT.
Here’s a video on how to file a Texas sales tax return.
Paper: Make a copy of the previously filed return, and write ‘Amended Return’ on the top of the form. Cross out and revise the incorrect amounts.
Then mail it off to, you guessed it:
Comptroller of Public Accounts
111 E. 17th St, Austin TX 78774-0100.
Electronic: Amend your original return at Texas Comptroller eSystems and submit payment via EFT
Here is a video on how to file an amended Texas state sales tax return.
If sales tax was not collected but should have been, the business is responsible for the tax due. To prevent having to pay yourself for taxes due, you should make sure that all sales tax collection rates should be set up in each point of sale system. Attempting to contact customers after the point of sale is often not possible.
Protip: You still owe The Texas Comptroller of Public Accounts for sales taxes if you did not collect them from the buyer.
If you file and pay your sales tax return late, you need to be aware of the corresponding penalties and interest.
Penalties are imposed initially and further incurred based on how late you are.
At first, you will incur a $50 penalty for each report filed past the due date. If you are between 1-30 days late in paying the taxes, a 5 percent penalty is assessed. Once you are late past 30 days, the penalty increases to 10 percent.
Interest is also assessed once you have been late for 61 days. In order to determine how much interest has been incurred on your past-due taxes, visit Interest Owed and Earned section of the Texas Comptroller’s website to do so.
Yes, in Texas a tax return must be filed even if the tax due is zero. When no return is filed, the department considers that to be a "nonfiler" situation. When you don't file a return, you will receive nonfiler billing notices by mail and an automatic account/license closure. You do not want this to happen.
Yes. You have to file a final sales tax.
You also want to keep in mind your permit is only valid if you are “actively engaged in business as a seller.” It is best to notify the Comptroller if you are not in business anymore so they can cancel your permit. If they find out on their own that you are no longer in business, they could also cancel your permit.
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Now that we covered all our bases for filing and paying sales taxes in the state of Texas, you should feel more at ease about the process.
Some things to remember:
Let’s leave the good news for last (even though I know you will remember this).
Now, you are ready to file and pay your sales tax in Texas. If you have any more questions, feel free to contact us.
Please note: This blog is for informational purposes only and the information is accurate as of 05/09/2019 If you want legal advice on sales tax law for your business, please contact a Sales and Use Tax professional. Keep in mind that sales tax regulations and laws are subject to change at any time. While we strive to keep our blog current, this blog may be out date by the time you review it.
Last Updated: 05/09/2019
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