Texas Sales Tax and Invoicing Rules for 2026

State sales tax rate

Texas imposes a 6.25% state sales tax on retail sales, leases, and rentals of most tangible personal property and certain services.

Local jurisdictions — cities, counties, transit authorities, and special purpose districts — can add up to 2%, bringing the maximum combined rate to 8.25%. Major cities like Houston, Dallas, and San Antonio typically hit the 8.25% cap.

Texas uses origin-based sourcing for in-state sellers, meaning you charge the rate where your business is located. Out-of-state remote sellers use destination-based sourcing.

Nexus rules

Physical nexus exists if you maintain an office, warehouse, inventory, or employees in Texas. Storing goods in a Texas fulfillment center (including third-party logistics) creates nexus.

Economic nexus applies if your total Texas revenue exceeds $500,000 in the preceding twelve months. Texas adopted economic nexus following the Wayfair decision effective October 2019.

Marketplace providers (Amazon, eBay, etc.) are required to collect and remit tax on behalf of marketplace sellers — but direct sales through your own website or channels still require you to manage your own obligations.

Invoice requirements

Texas does not prescribe a specific invoice template, but the Texas Comptroller requires sellers to keep records showing:

• Date of transaction
• Seller and buyer information
• Description of items sold
• Sales price
• Tax collected
• Exemption documentation when applicable

Invoices should show sales tax as a separate line item. For exempt sales, you must retain a completed Texas Sales and Use Tax Exemption Certificate (Form 01-339). The Comptroller recommends keeping all records for at least four years from the date the tax becomes due.

Exemptions and special cases

Grocery food (non-prepared) is exempt from state and local sales tax. Prescription medications and over-the-counter drugs are exempt. Manufacturing machinery and equipment used directly in production qualifies for exemption.

Texas holds three annual sales tax holidays: back-to-school (clothing, school supplies), emergency preparation supplies, and Energy Star products — each with specific spending limits.

Services are broadly exempt unless specifically enumerated as taxable — taxable services include data processing, real property repair, and security services among about 20 categories.

SaaS is generally taxable in Texas as a data processing service.

Filing frequency and deadlines

The Comptroller assigns frequency based on tax liability:

• Monthly — over $1,500/quarter or $500/month
• Quarterly — between $500 and $1,500/quarter
• Annually — under $1,000/year

Monthly returns are due the 20th of the following month. Quarterly returns are due the 20th of the month following the quarter (April 20, July 20, October 20, January 20). Annual returns are due January 20.

Timely filers may keep a 0.5% discount (capped at $500/month for monthly filers) as compensation for collecting tax.

Penalties for non-compliance

Late payments incur a 5% penalty if paid within 30 days of the due date, increasing to 10% after 30 days. Interest accrues at the rate set by the Comptroller.

Failure to file or register can trigger back-assessments with penalties and interest calculated from the date nexus was established. Willful evasion is a criminal offense in Texas. The Comptroller actively audits remote sellers and marketplace activity.

FAQ

Is software-as-a-service (SaaS) taxable in Texas?

Yes. Texas treats SaaS as a taxable data processing service at the standard rate. If you sell SaaS to Texas customers, you must collect and remit sales tax on those transactions.

What qualifies for the Texas resale exemption?

Items purchased for the purpose of resale in the regular course of business are exempt. The buyer must provide a properly completed Texas Sales and Use Tax Exemption Certificate (Form 01-339) to the seller at the time of purchase.

Do I need to file a return even if I had no sales in Texas this period?

Yes. If you hold an active Texas sales tax permit, you must file a zero return for each reporting period, even if no tax was collected. Failure to file zero returns can result in permit revocation.

Use InvoiceQuickly's tax rate lookup tool to verify the correct combined rate for any Texas address.

Step-by-step: register and start collecting in Texas

1. Confirm nexus — physical presence in Texas creates immediate nexus. Economic nexus: $500,000 in total Texas revenue (one of the higher thresholds nationally) in the previous 12 calendar months.
2. Register via Texas Comptroller's eSystems — apply for a Texas Sales and Use Tax Permit through the Texas Comptroller's online portal. Processing typically takes 2–3 weeks; no fee.
3. Configure state 6.25% + local up to 2% — Texas state rate is 6.25%, plus local rates capped at 2% (combined max 8.25%). Houston, Dallas, Austin, San Antonio all at the 8.25% combined ceiling. Configure ZIP-based rates with a 2% maximum local cap.
4. Capture Form 01-339 resale certificates — Form 01-339 (Texas Sales and Use Tax Resale Certificate) for resellers; Form 01-339 (Exemption Certificate) for nonprofits and government. Hold for at least 4 years.
5. File via WebFile — monthly for $1,500+/month liability, quarterly for $500–$1,500, annual for less. Returns due the 20th of the month following the period. Texas offers a 0.5% prepayment discount and a 0.5% timely-filing discount.

Real Texas compliance situations

• A Houston-based retailer charges 8.25% combined (6.25% state + 1% city + 1% Metro Transit + 0% county). Other Texas metros may use different local-rate stacking but cannot exceed 8.25% combined. Their tax setup verifies this cap holds in every transaction.
• An Austin SaaS company confirmed Texas taxes SaaS — pre-written software accessed remotely is taxable. They charge 8.25% on Texas SaaS subscriptions and capture exemption certificates from qualifying nonprofits and government entities.
• A Dallas-Fort Worth e-commerce store ships statewide. They use destination-based sourcing for in-state orders, with ZIP-based rates ensuring suburbs (which may have different local rates) are charged correctly. Plano (8.25%), Irving (8.25%), Frisco (8.25%) — most major suburbs hit the cap.

More Texas FAQs

Is SaaS taxable in Texas? Yes — Texas treats SaaS as taxable as a "data processing service" or pre-written software. This applies whether delivered as a subscription, single-license, or remote access. Texas is one of the larger states that taxes SaaS.

Why is the local tax capped at 2%? The Texas legislature caps total local sales tax at 2% across all local jurisdictions (city, county, transit, special district). Once a city hits 2% local, additional districts cannot stack on top. This keeps the maximum combined rate at 8.25%.

Does Texas have a sales tax holiday? Yes — Texas holds three annual sales tax holidays: (1) ENERGY STAR Memorial Day weekend in May, (2) Water-Efficient Products in late May, and (3) Back-to-School Tax-Free Weekend in August (clothing/footwear/backpacks under $100, school supplies under $100).

Does Texas have a grocery sales tax? No — most groceries (unprepared food) are exempt in Texas. Prepared food, candy, soft drinks, and dietary supplements are taxable at the full combined rate. The grocery exemption is one of the most generous nationally.