How to Figure the Amount of Sales Tax in Texas

If you do business in Texas, you may be required to collect and submit state sales taxes. Texas law mandates the collection of taxes on most retail goods and services, and also allows local jurisdictions to impose sales taxes as well. Owners of new businesses in Texas, as well as mail order or e-commerce companies that sell a significant amount of merchandise to Texas consumers, must register to collect and submit Texas sales taxes.

Sales Tax in Texas

The state of Texas - as well as some jurisdictions, such as counties and cities - imposes sales taxes:

State sales and use tax: As of 2019, Texas levies a 6.25% tax on the retail sale, lease and rental of goods. This tax also applies to taxable services.

Jurisdictions within Texas: Texas law allows tax jurisdictions such as cities, counties and transit authorities to impose a sales tax of up to 2% on goods and services. But not all jurisdictions elect to impose sales taxes - as a small business owner, it is your responsibility to determine whether the jurisdiction or jurisdictions in which you do business levy sales taxes.

Remote sellers: Texas law requires that remote sellers - such as companies that sell goods at retail via websites, online marketplaces or mail order - collect and submit Texas sales taxes. Not all retailers will have to collect this tax, however, because Texas law offers a safe harbor provision that limits tax collection responsibilities to retailers with Texas revenues of $500,000 or more over the previous 12 months.

Single local tax rate: Another aspect of the remote seller tax obligation is the single local tax rate option. Texas recognizes that it might be difficult for some remote sellers to keep track of a number of different local jurisdiction tax rates throughout the state. Remote sellers can opt to pay a single tax rate (1.75% as of 2019) on purchases within taxing jurisdictions rather than trying to adjust the amount for each location.

Goods Exempt from Sales Tax 

Most goods sold in Texas are subject to sales tax, but there are some exceptions. While not exhaustive, this list gives you an idea of the types of products that are not subject to sales tax in Texas:

Food: Most foods are exempt from sales tax in Texas. There are exceptions, however, such as candy, gum, snack food sold as single items or in vending machines, prepared foods and some types of frozen treats.

Beverages: Milk, tea and coffee are not taxed, but beer and wine are. Most soft drinks are taxable, unless they contain more than 50% fruit juice, dairy milk or soy milk.

Newspapers and periodicals: Magazines are subject to sales tax in Texas. Many newspapers are not. As long as a newspaper contains general interest news and advertisements, and does not exceed an average cost of $3 per day, you won't have to charge sales tax to purchasers or subscribers.

Over the counter (OTC) medications: Over-the-counter medications and treatments that are required by the FDA to print a Drug Facts Panel are exempt from sales taxes in Texas. These include items such as acne treatments, cold remedies, pain relievers and medicated eye drops.

First aid supplies: Bandages, tape, gauze and other wound-care products are exempt from sales taxes.

Nutritional supplements: Vitamins, minerals and other dietary supplements that are labeled as such are exempt from Texas sales taxes.


Shipping and delivery costs are also taxable in Texas and should be included in your tax calculations.

Taxable Services

Many services in Texas are subject to taxation. These include, but are not limited to:

  • Places of amusement, such as bowling alleys, movie theaters, concerts, sightseeing tours, health clubs and sporting events;
  • Cable and satellite TV service;
  • Internet access service;
  • Security services;
  • Cell-phone services; and
  • Services such as tailoring, photography and furniture assembly.

Sales Tax Holidays

The state of Texas has instituted annual sales tax holidays for the purchase of specific products during the seasons when they might be most needed as a mean of reducing the financial strain on consumers. During the tax holiday, which lasts for three days, taxes are waived on certain purchases. There are usually limits on the dollar value of products or total product purchases eligible for the tax waiver.

Severe weather tax holiday: Texas announces an annual tax holiday each year to allow consumers to purchase items that may be necessary when severe weather occurs. These items include portable generators, emergency ladders and other emergency supplies.

Energy Star holiday: Home appliances with an Energy Star qualification and water-saving devices such as rain barrels, moisture control for an irrigation system or compost are included in this holiday; and

Back to school holiday: School supplies, clothing and backpacks.

Calculating Sales Tax

The sales tax is calculated by multiplying the sales tax percentage by the dollar amount of the retail cost of the product or service. For example, if someone were to purchase a necklace for $100 in an area of Texas that does not charge a local tax, the calculation would be 6.25% multiplied by $100 for a sales tax amount of $6.25.

Texas requires sellers to calculate sales tax to the third decimal place. When the third decimal place is equal to or greater than five, the seller must round up to the next cent. When the third decimal is less than four, a seller must round down to the next cent.

Modern sales software that is integrated with your register or online storefront can make these calculations for you. However, it is a good business practice to train employees in manual sales tax calculations in case your systems go down. While it is possible to find a Texas tax calculator online, Texas also provides sales tax rate charts that can be used when point-of-sale software is not available.

Sales Tax Registration and Collection

Businesses can apply for a sales tax permit via the Texas comptroller's website. Once a business is registered, it is obligated to file a sales tax report regularly with the state, even if the business has not collected any sales tax during a time period. The state will inform the business about the frequency of required sales tax reports and submissions.

Sales Tax Exemptions

There are some businesses and organizations from which you will not need to collect sales taxes:

Exempt organizations: These organizations are exempt from having to pay sales taxes on the supplies and materials needed to support the function of the organization. Types of exempt organizations include religious groups, charities and schools.

Resale: If you are selling products at wholesale to a business that will resell those goods to an end consumer, you won't have to collect sales taxes on those products. The business you sell to should provide you with a resale certificate, which you should keep on file in case you are asked to account for your sales tax collection practices.

The bottom line for figuring sales tax in Texas is that it is your responsibility to know what is taxable, at what rate and when it is due to the proper authority.