Unsure where you owe sales or use tax or dealing with legacy compliance pain?
Check Your ExposureTexas enforces economic nexus rules that require certain remote sellers to collect and remit Texas sales tax even if they have no physical presence in the state. These rules apply to businesses selling taxable goods or services into Texas based on economic activity rather than location. Understanding how Texas economic nexus works is critical for remote sellers, ecommerce companies, and SaaS businesses selling into Texas.
Economic nexus means a business can be required to collect Texas sales tax based solely on its sales activity in the state. Physical presence is not required. Texas evaluates nexus using revenue thresholds. Once the threshold is met, the seller must register and begin collecting tax on taxable transactions delivered into Texas. Economic nexus applies equally to in state and out of state businesses.
A remote seller is a business that sells taxable items into Texas but does not have a physical location in the state.
Remote sellers may include:
Remote seller status does not eliminate tax responsibility once economic nexus is established.
Economic nexus begins when a seller exceeds the Texas threshold based on total Texas sales during the applicable measurement period.
Once nexus is established, the seller is required to:
Failure to act promptly can result in back tax exposure.
Remote sellers must generally collect tax based on the destination of the sale. This means the tax rate is determined by where the customer receives the product or service.
Destination based sourcing requires applying:
This creates complexity because local tax rates vary significantly across Texas. More detail on local layering is covered in the Texas sales tax overview and the Texas special tax districts guide.
Texas requires marketplace facilitators to collect and remit tax on behalf of third party sellers in many situations. However, marketplace collection does not eliminate all seller responsibility.
Sellers may still be responsible for:
Assuming the marketplace handles all obligations is a common compliance error.
Economic nexus focuses on sales tax collection, but it does not eliminate use tax obligations.
Remote sellers operating in Texas may still incur use tax liability related to:
Understanding buyer side exposure is covered in the Texas use tax guide.
Businesses often make these mistakes:
These errors commonly surface during audits.
Texas audits remote sellers using transaction sampling and data analysis.
Auditors typically review:
Errors related to economic nexus often result in multi year assessments.
TaxMap analyzes economic nexus as part of a broader Texas sales and use tax evaluation.
TaxMap:
This allows businesses to understand obligations before audits or enforcement actions.
Economic nexus is not a one time event. Sales activity changes, thresholds are crossed, and obligations evolve. Remote sellers must continuously monitor Texas sales activity and jurisdiction level tax application. Failing to do so creates growing exposure over time.
Economic nexus determines when tax must be collected. Compliance ensures it is collected and reported correctly. Understanding both is essential for managing Texas sales tax risk. TaxMap helps businesses identify when nexus applies and how to comply accurately across Texas jurisdictions.