Texas – TX Sales Tax Calculator: User Guide

Texas is the second-largest state by both population and area, located in the South Central Region of the United States of America. Austin is its Capital, and Houston is the Largest City. Besides, Dallas–Fort Worth Metroplex is the Largest Metro.

Texas, also known as The Lone Star State, shares its borders with Arkansas to the northeast, New Mexico to the west, the Mexican states of Tamaulipas, Chihuahua, Nuevo León, and Coahuila to the southwest, Louisiana to the east, Oklahoma to the north, and has a coastline with the Gulf of Mexico to the southeast.

Texas offers many great perks to living in this state, including a robust job market, sunny warm weather, surprisingly low cost of living, no state income tax, affordable housing, and important of all, the second-largest economy among the 50 states. It is home to fifty companies that were included in the 2017 Fortune 500 list.

All these perks mentioned above attracts plenty of people, businesses, and entrepreneurs to settle in here to earn a fortune. So, if you are one of them, and planning to start, expand, or relocate your business in The Lone Star State, you should learn to deal with TX Sales Tax.

Our experts have invested hours in bringing you a quick sales tax guide along with a handy Texas Sales Tax Calculator that would assist you in running your business smoothly and in compliance with the Texas State Law.

So Let's Get Started!

Texas Sales Tax Facts:

• 25% of Texas Sales tax is charged on the state level. Besides, several counties and cities also levy local sales tax, ranging from 0% to 2%, raising the combined Texas Sales tax up to 8.25%.
• In some cases, a special sales tax rate may also apply, ranging between 0% and 2%.
• Consumers use, rental tax, sales tax, sellers use, lodgings tax are among the most common types of Sales Tax levied in Texas.
• Abram, Texas, is among cities that levy the lowest possible combined sales tax rate of 6.25%.
• Abilene, Texas, is among the cities which levy the highest possible combined sales tax rate of 8.25%.
• 6% of hotel occupancy tax is charged on a hotel room's cost as additional fees and taxes.
• 25% of manufactured housing tax is charged on the home's sale price as additional fees and taxes.
• Some types of services subjected to Texas Sales Tax include television service (whether cable or satellite), storage services, entertainment like live music or movie tickets, internet access (However, the first $25 of your internet bill is exempt) automobile parking.
• Direct donations to the organizations, including religious, charitable, educational, nonprofits organizations can be exempted from sales tax in Texas using Form 01-339, Texas Sales and Use Tax Exemption Certification (PDF).
• Goods for resale (such as wholesale items), improvement, or raw materials are exempt from sales tax. Moreover, newspapers, containers, groceries, prescription drugs, and non-prescription drugs are also exempted.
• Texas State offers a one-weekend-long "back to school" sales tax holiday in August of each year, where all school supplies and clothing articles under $100 can be bought without paying Texas Sales Tax.
• Taxable transactions where Texas sales tax was not collected are subjected to Texas Use Tax at an equivalent rate of 6.25%.

How to calculate Sales Tax in Texas?

Businesses and Sellers involved in all retail sales, leases, and rentals of most goods, taxable services, and have Nexus in Texas are required to register for Texas Sales tax and obtain a sales tax permit.

They must collect, manage, and remit it to the Texas Department of Revenue while staying in compliance with state laws and avoid penalties and interest.

The sales tax determined on four factors:

1. Nexus: It is a connection of business with a state. The business is only liable to pay taxes to the states with Nexus.
2. Out of State Seller's Eligibility: Out of State Seller is only required to register, collect, and remit the sales tax to the authorities in the state if it falls under the criteria provided by the state.
3. Location and Products or Services: The sales tax rate varies from product to product and location to location, so you must check the sales tax rate applicable to your product according to the product category, county, and city in Texas.
4. Exemptions: Almost all goods are eligible for sales tax regulation—however, Goods for resale (such as wholesale items), improvement, or raw materials are exempt from sales tax. Moreover, newspapers, containers, groceries, prescription drugs, and non-prescription drugs are also exempted under Texas

You should also check with the Texas state government regularly about which goods and services sold in Texas are subject to sales tax.

To calculate Sales Tax in Texas, follow the steps below:

Step 1 – Determine your Nexus:

You, as a Business owner, are only required to collect sales tax if you are eligible for collecting sales tax and have Sales Tax Nexus in the Texas State. And to determine your Nexus in Texas, you must have any of the following:

• Maintaining a physical location in Texas, such as a retail store, salesroom, sample room, office, distribution house, warehouse, or other business locations.
• A permeant or temporary employee working for you in Texas.

Step 2 – Determine the Sales Tax Rate:

Once you have determined that your Nexus is with Texas, next is to deduce the Sales Tax rate (State + County + City) applicable to your product, for which you can refer the tables below:

Step 4 – Calculate Sales Tax:

After determining the sales tax rate according to the location and type of purchases, it is easy to calculate the sales tax amount charged on the product and gross price (amount after tax) of a product.

Example # 1:

For instance, you sell a Neck Massager on your store in Fort Worth, Texas, having a net cost of $105. The amount of Sales Tax that you have to pay on the Neck Massager would be:

Manual Method:

Net Price (amount before Tax) of a Neck Massager: $105

Total Sales Tax rate: 2.00% (Fort Worth) + 0.00% (Tarrant County) + 6.25% (Texas State) = 8.25%

Total Sales Tax amount = $105 x 8.25% = $8.7

Gross Price (Amount after Tax) = 105 + 8.7 = $113.7

So, the Sales Tax amount charged on the Neck Massager would be $8.7, raising the gross cost to $113.7.

Using our Sales Tax Calculator:

All of the steps mentioned above can be skipped to get an instant result using our Sales Tax Calculator. All you need is:

1. Input the $105 as the Net Price of a Neck Massager as Amount Before Tax
2. Input or select 25% of the combined Sales Tax rate on the Tax Rate menu.

Our calculator will automatically calculate the result, and represents it in 3 different forms, as shown in the image below:

Reverse Sales Tax Calculation

In the example above, we have explained to you to calculate the Sales Tax amount payable in a product and the Gross Price of the Product.

But there are also instances when you are required to deduce how much Sales tax you have actually paid on a product in Texas.

This is where the Reverse Sales Tax Calculation Kicks in. And luckily, our Texas Sales Tax Calculator can perform this calculation like a Pro.

Example:

The gross cost (amount after tax) of an Orange Juice is $5, which you sell on your restaurant in Carrollton, Texas. Now, if you want to deduce the amount of sales tax you have actually paid on it and the net cost (amount before tax) of an Orange Juice, you can follow the steps below:

Gross Price (Amount after Tax) of Orange Juice: $5

Total Sales Tax rate: 2.00% (Carrollton) + 0.00% (Denton County) + 6.25% (Texas State) = 8.25%

Manual Method:

Gross Price with sales tax = [Net Price × (tax rate in decimal form + 1)]

5 = [Net Price x ((8.25/100) + 1)]

5 = Net Price x 1.08

$4.6 = Net Price

So the original Price (net price) of the Orange Juice would be $4.6.

Using our Sales Tax Calculator:

You can also use our Sales Tax Calculator for Reverse Sales Tax calculation to skip the aforementioned manual method. All you need is:

1. Input the $5 Gross Price of Orange Juice as Amount after Tax
2. Input or select 8.25% of combined Sales Tax Rate on the Tax Rate

Our calculator will automatically calculate the result and represents it in 3 different forms.

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