Understanding Texas Sales Tax Requirements for Businesses

Texas businesses are responsible for sending the appropriate amount of sales tax to the state. It is not always clear what goods or services require taxing and how much to collect.

Understanding the local and state sales tax collection can help the business avoid unnecessary tax-related issues.

Taxable Business Items

Accounting Prose that the sales and use tax in Texas are on all taxable services, retail sales and the rent or lease of many goods. The state also taxes hosting and web development services.

The state charges taxes based on the origin of the goods. This can become tricky primarily when the business attends a trade show. The origin of goods also applies if the business has created a sales tax nexus by having a sufficient presence in the state.

Exempt items focus on health-related items and foods. However, there are some additional exemptions including those entities with tax-exempt status such as government organizations. Other goods and services exempt from taxes include containers, newspapers and resale goods.

Correct Payment Responsibility

According to the Texas Comptroller of Public Accounts, the responsibility of paying the correct amount of sales tax falls on the business. Failure to collect the correct amount and send it to the Comptroller’s office can result in interest and penalties.

Unfortunately, it may not always be clear how much sales tax to collect. The state has a sales tax of 6.25%. However, local jurisdictions can then add up to an additional 2% for a total of 8.25%. While this may be easy to find in larger municipalities, smaller ones may prove more difficult to determine the correct amount to collect.

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