Important Facts About Texas Sales Tax

Erik Wallin
May 10, 2023

This blog was last updated on May 10, 2023

Texas is not the most complicated state when it comes to sales tax. Like Alabama, there are a plethora of local rates, but there aren’t the same tapestry of special rates and rules. Nonetheless, Texas has adopted a Single Local Use Tax rate and allows any remote seller (aside from marketplace facilitators) to use this simplification once they provide Texas with the proper advance notice.

Texas is an “origin” state for purposes of sales tax sourcing. This means that businesses making intrastate sales in Texas are required to collect sales tax at a “Texas place of business,” which is usually a sales location or fulfillment location where goods are shipped from. Unlike intrastate transactions, businesses operating outside of Texas and shipping goods into Texas are required to collect and remit sales and use tax at the location in Texas where orders are shipped, or delivered when an order is not received or fulfilled from a Texas place of business.

In Texas, local taxing jurisdictions (cities, counties, districts, etc.) may impose sales and use tax up to 2%. As rates vary between local taxing jurisdictions, compliance burdens for remote sellers could get complex as Texas sales volumes increase. The Single Local Use Tax is an alternative local tax rate that remote sellers can use instead of collecting and remitting the total local tax in effect at the destination address. The current single local use tax rate is 1.75% (published in the Texas Register by January 1 of each year).

It is important to note the Single Local Use Tax is only available to remote sellers (those with economic nexus) and not businesses located in Texas or marketplace providers collecting on behalf of marketplace sellers, as such businesses are required to remit using standard rates. Additionally, remote sellers must notify the Texas Comptroller of the election to collect the Single Local Use Tax by submitting Form 01-799.

For those remote sellers who qualify, using the Single Local Use Tax can reduce the compliance burden of tracking local rates and ensures a standard predictable rate applies across sales into Texas.

Take Action

Still curious about Texas sales tax? Reach out to our team for more information.

Sign up for Email Updates

Stay up to date with the latest tax and compliance updates that may impact your business.

Author

Erik Wallin

Erik Wallin is a Senior Tax Counsel on the Tax Research Team at Sovos Compliance. Erik has been with Sovos Compliance since 2011, and his main areas of focus are on U.S. Transaction Tax Law which includes special expertise in the taxation of technology and the taxation mechanisms that apply throughout the Colorado home rule jurisdictions. Erik is a member of the Massachusetts Bar, has a B.A. from York College of Pennsylvania, a J.D. from New England School of Law, and an LL.M. in Taxation from Boston University.
Share this post

North America Unclaimed Property
February 10, 2025
Delaware Announces 2025 VDA Invitation Dates

This blog was last updated on February 10, 2025 Mark your calendars – April 11, 2025 and August 15, 2025 are this year’s anticipated release dates for the Delaware’s Secretary of State (SOS) VDA program invitations. In the event that an organization receives an invitation to participate in the Voluntary Disclosure Agreement (VDA) program  , […]

North America Sales & Use Tax
February 6, 2025
The Tariff and Sales Tax Mishmash – Untying the Mess

This blog was last updated on February 6, 2025 Talk of tariffs dominates the current news cycle with some commentators suggesting that tariffs will spell disaster for our economy while others say the exact opposite. We’ve seen the stock market sometimes fluctuate as tariffs are announced but later suspended, leaving us to wonder whether an […]

retailer dtc wine shipping
North America ShipCompliant
February 6, 2025
Retailer DtC Wine Shipping: The Time Has Come

This blog was last updated on February 6, 2025 By Tom Wark, Executive Director, National Association of Wine Retailers We are often reminded by the media and those in the wine industry—as well as by wine enthusiasts—that the three-tier system of alcohol distribution in most states hinders consumer access to the expansive number of wines […]

Montana 1099-DA
North America Tax Information Reporting
February 5, 2025
State Filing Alert: Montana’s New 1099-DA Requirements for Crypto Brokers

This blog was last updated on February 5, 2025 Reporting digital asset transactions on Form 1099-DA just got a little more complicated. For 2025 transactions, crypto brokers that file Form 1099-DA with the IRS will be required to file the 1099-DA with the State of Montana. This makes Montana the first state to introduce a […]

North America ShipCompliant
January 23, 2025
DtC Wine Shipping in 2024: A Year-in-Review

This blog was last updated on January 28, 2025 The direct-to-consumer (DtC) wine shipping channel faced a storm of challenges in 2024, navigating some of the toughest market conditions in over a decade. As inflation tightened wallets and consumer behaviors shifted, the industry recorded its steepest declines in shipment volume and value since the inception […]