Unsure where you owe sales or use tax or dealing with legacy compliance pain?
Check Your ExposureTexas has one of the most complex and commonly misunderstood sales and use tax systems in the United States. While the state rate appears straightforward, the interaction between state, local, and special purpose jurisdictions creates real exposure for businesses operating in or selling into Texas.
This guide explains how Texas sales and use tax actually works, where businesses get it wrong, and how exposure builds over time.
Businesses expanding into Texas often begin by estimating sales tax exposure and confirming whether Texas sales tax nexus exists before registering.
Estimate Texas sales tax exposure | Review Texas use tax exposure | Determine Texas sales tax nexus
Texas imposes a statewide sales tax rate of 6.25 percent. Local jurisdictions are permitted to add additional taxes, subject to statutory caps. These local taxes include city taxes, county taxes, transit authorities, and special purpose districts.
The combined sales tax rate in Texas varies by location and can change based on overlapping jurisdictions and effective dates. A single address may be subject to multiple taxing authorities.
If you’re a retailer, B2B business, or manufacturer in Texas, understanding your sales tax exposure is critical. Visit our Sales Tax Exposure for Retailers in Texas page for more.
Texas is an origin based state for most sales of tangible personal property, but sourcing rules vary depending on the transaction type and delivery method.
Special districts are the most common source of incorrect tax calculations in Texas.
Texas uses special purpose districts extensively. These districts often overlap with cities and counties, and they frequently change due to voter approval or legislative action. Examples include transit authorities, municipal development districts, and local improvement zones.
Most rate tables do not accurately capture special district applicability at the address level. This leads to under collection or over collection, both of which create audit risk. Understanding special districts requires jurisdiction level mapping, not static rate lists.
Texas primarily follows origin sourcing for in state sales of tangible personal property. However, exceptions apply based on product type, delivery method, and transaction structure. Remote sellers, marketplace transactions, and digital delivery introduce destination based considerations that override standard origin rules. Improper sourcing is one of the leading causes of Texas sales tax assessments.
Use tax applies when taxable items are purchased without paying Texas sales tax and are used, stored, or consumed in Texas.
Common use tax exposure scenarios include:
Texas actively enforces use tax through audits and data matching programs. Use tax liability often accumulates silently until discovered during an audit.
Texas enforces economic nexus for remote sellers. Businesses without physical presence may still be required to register and collect Texas sales tax based on sales volume into the state. Economic nexus applies regardless of where the business is headquartered. Marketplace facilitators have separate obligations, but sellers remain responsible for understanding gaps and exemptions.
Learn how nexus affects B2B businesses in Texas by reading our Sales Tax Exposure for B2B Businesses in Texas page.
Businesses frequently make the following errors in Texas:
These mistakes compound over time and increase audit exposure. Nonprofits and educational institutions in Texas must also understand their sales tax exposure. Check out our Sales Tax Exposure for Nonprofits in Texas and Sales Tax Exposure for Educational Institutions in Texas pages.
Texas sales tax returns are filed with the Texas Comptroller. Filing frequency depends on tax liability and business activity. Late or incorrect filings can result in penalties and interest. Texas audits often span multiple years and focus heavily on local tax accuracy. Registration, reporting, and reconciliation must align with jurisdiction level data.
TaxMap evaluates Texas sales and use tax at the jurisdiction level.
Instead of relying on static rate tables, TaxMap:
This approach provides clarity before filing and before audits.
Texas tax exposure is rarely obvious from surface level reporting. It builds through small inaccuracies across many transactions and jurisdictions. Understanding Texas sales and use tax starts with accurate jurisdiction mapping and rule application. TaxMap helps businesses see where exposure exists and what actions to take next.
Texas uses special purpose districts extensively. These districts often overlap with cities and counties, and they frequently change due to voter approval or legislative action. Examples include transit authorities, municipal development districts, and local improvement zones.
Most rate tables do not accurately capture special district applicability at the address level. This leads to under collection or over collection, both of which create audit risk. Understanding special districts requires jurisdiction level mapping, not static rate lists.