If you’re a business owner in Texas, you may be wondering if your company is required to pay sales tax. Sales tax is a tax that is charged on the sale of certain goods and services, and it is the responsibility of businesses to collect and remit the tax to the state. The rules surrounding sales tax can be complex, but in general, there are some key factors that determine which companies need to pay sales tax in Texas.
Type of Business
In Texas, most businesses that sell tangible goods or taxable services are required to pay sales tax. This includes businesses that sell products such as clothing, furniture, and electronics, as well as businesses that provide taxable services such as landscaping, cleaning, and repair services. It’s important to note that there are some exceptions to this rule, and certain types of goods and services are exempt from sales tax in Texas, such as food and medicine. A full list of taxable services in Texas can be found on the Texas Comptroller website here: Taxable Services (texas.gov). Make sure to check the list and see if you’re in compliance with regulatory agencies.
Sales Thresholds
Another factor that determines whether a business needs to pay sales tax in Texas is the amount of sales they make in a given period. In Texas, businesses that make less than $1,000 in taxable sales in a calendar year are not required to pay sales tax. However, if a business exceeds this threshold, they are required to register with the Texas Comptroller’s office and obtain a sales tax permit. Once they have a permit, they must collect sales tax on all taxable sales and remit the tax to the state on a regular basis.
Online Sales
The rise of e-commerce has created some confusion around sales tax in Texas. If your business sells goods or services online to customers in Texas, you may be wondering if you are required to collect and remit sales tax. In general, if your business has a physical presence in Texas, such as a store or warehouse, you are required to collect and remit sales tax on all taxable sales, including online sales.
However, if your business does not have a physical presence in Texas, you may not be required to collect sales tax on online sales. It’s important to note that the rules surrounding online sales tax are complex and constantly changing. Therefore, it’s recommended to consult with a tax professional or the Texas Comptroller’s office to determine your specific obligations.
Sales Tax Nexus
Sales tax nexus in Texas refers to the connection between a business and the state that requires the business to collect and remit sales tax on taxable transactions. In simpler terms, if a business has sales tax nexus in Texas, it means that they have a significant presence in the state and are therefore subject to the state’s sales tax laws.
According to Texas law, a business has sales tax nexus in the state if it meets any of the following criteria:
- Physical Presence: A business has a physical presence in Texas if it has a physical location such as an office, warehouse, or store within the state.
- Economic Presence: A business has economic presence in Texas if it makes sales of taxable goods or services in the state that exceed certain thresholds. As of October 1, 2019, a business is considered to have economic presence in Texas if it has:
- $500,000 or more in total Texas revenue from taxable sales made in the preceding 12 calendar months, or
- At least 500 separate transactions for tangible personal property or services delivered into Texas in the preceding 12 calendar months.
- $500,000 or more in total Texas revenue from taxable sales made in the preceding 12 calendar months, or
- Affiliate Nexus: A business has affiliate nexus in Texas if it has a relationship with an affiliate that has a physical presence in the state and engages in certain activities that contribute to the business’s sales in Texas.
Conclusion
In conclusion, most businesses that sell tangible goods or taxable services are required to pay sales tax in Texas. However, certain types of goods and services are exempt from sales tax, and the amount of sales a business makes can impact their sales tax obligations. To ensure compliance with state regulations, it’s best to consult with a tax professional or the Texas Comptroller’s office. By understanding your obligations and adhering to state regulations, you can avoid penalties and fines.
If you are trying to start a company selling goods or services in Texas and are confused about sales tax, or just for more information – get booked for a call with your Booked Financial Rep
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This tax information is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, Booked Financial LLC recommends that you consult with a qualified tax advisor, CPA, financial planner, or investment manager.