Most businesses starting in Texas selling a product or offering certain services will need to register for a sales tax permit. This is commonly referred to as a seller’s permit, sales tax license, sales tax number, or sales tax registration.
Check out the rest of this guide to determine who needs a sales tax permit, what products and services are taxable, how to register for a permit, and reporting requirements.
Also See: Guide to Starting a Business in Texas
Who needs a sales tax permit in Texas?
A business must register for a sales tax permit in Texas when:
- A business has economic nexus. Economic nexus means having a physical presence in the state, such as having a physical location like a retail store or office or using a warehouse or fulfillment center to store inventory.
- A business sells tangible personal property in Texas;
- Leases or rents tangible personal property in Texas; or
- Sells taxable services in Texas; or
- A remote seller or an out-of-state business is selling over $500,000 of products and services to Texas residents.
What products and services are taxable in Texas?
There are a few exceptions, but almost all physical products are taxable when sold at retail in Texas. Common examples include:
- General merchandise like furniture, appliances, and clothing
- Titled or registered items like vehicles
Most food and health-related items are tax exempt in Texas, in addition to certain goods used for manufacturing.
Digital products are taxable, provided the same item is taxable in the physical format, such as books, movies, and music.
Most services aren’t taxable in Texas, however, there are a few exceptions, some of which include:
- Short-term lodging
- Amusement services such as movie theaters, sporting events, bowling alleys, health clubs, golf courses, etc.
- Personal property maintenance, remodeling, or repair services such as appliance repair, jewelry repair, dog grooming, etc.
- Taxable labor such as photography, artwork, sewing and tailoring, catering, assembling products, etc.
The Comptroller of Public Accounts has a guide on what services are taxable in Texas.
How to register for a sales tax permit in Texas
A sales tax permit can be obtained by registering through the Texas Online Sales Tax Registration Application System or by mailing in the Sales and Use Tax Permit Application (AP-201 Form).
A separate permit is required for each location.
Information needed to register includes:
- Type of business entity: Sole Proprietorship, Partnership, Corporation, Limited Liability Company (LLC)
- Texas corporation’s file number from the Texas Secretary of State (only corporations or LLCs)
- Legal name of the business
- Federal Employer Identification Number (FEIN) with the IRS. Will use the SSN if the entity is a sole proprietorship with no employees
- Name, addresses, phone number, social security number, and tile of owners/officers/members
- Physical address and mailing address
- Whether the business is home-based
- Expected monthly taxable sales
- North American Industry Classification System (NAICS) code
When registering for a sales tax permit in Texas, the phone number listed in the application is required by law to be used as public information. There will be a lot of calls from telemarketers, so consider getting an additional phone number to cut down on these calls!
How much does a sales tax permit cost in Texas?
There is no cost for a sales tax permit in the state of Texas, however, some businesses are required to post a security bond.
How long does it take to get a Texas sales tax permit?
Expect 2-3 weeks to process the sales tax permit when filing online and up to 4 weeks when submitting by mail.
Do you have to renew your Texas sales tax permit?
The sales tax permit is a one-time registration, and no renewals are needed. Be mindful that if any information about the business changes, such as the mailing address, additional locations, or change in ownership, those changes need to be updated with the Comptroller of Public Accounts.
Texas Resale Certificate
A business can purchase items to resell without paying state sales tax. The tax liability is passed from the wholesaler or supplier to the retailer, who will then charge sales tax to the end-user of the item.
Wholesalers and distributors will require a sales tax number. In many cases, they require the reseller to fill out a Texas Resale Certificate (also referred to as a sales tax exemption certificate) document the items being purchased are for resale.
Sales tax reporting
How is sales tax collected?
When a business makes sales of taxable items or services, the business charges the appropriate sales tax rate to the customer. This tax is collected by the business who then sends it to the Texas Comptroller of Public Accounts.
How much sales tax is charged?
The sales tax rate that is charged varies depending on the address of the business if the purchase is made in the store. When shipping in-state, the sales tax is based on the address of the purchaser.
In addition to the statewide tax, there are additional local sales taxes that may be added by cities, counties, special-purpose districts, and transit authorities. To find sales tax rates, see the sales tax rate locator from the Texas Comptroller of Public Accounts.
When are Texas sales tax returns due?
The Comptroller of Public Accounts will determine a filing frequency based on the expected sales volume, which will be monthly, quarterly, or annually. Generally, a business selling over $8,000 each month will file monthly.
Filings are due the 20th day of the month following the reporting period, unless the 20th falls on a weekend or federal holiday, which would move to the next business day.
Even if the business had no sales during the reporting period, a filing is still required indicating no sales.
In addition to registering for a sales tax permit, there may be other business licenses needed before starting a business in Texas. Learn what business licenses are needed in Texas.
If you have questions about the sales tax permit, the Texas Comptroller of Public Accounts has a sales and use tax guide, or they can be contacted by calling 800-531-5441 ext 3-0925 or emailing firstname.lastname@example.org.