Sales Tax - By State

State Sales Tax Nexus Requirements and General Overview

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Texas (TX)

TX Sales Tax - Name and General Application of Tax:

Texas sales tax is imposed on sales of tangible personal property and specified services. Texas use tax is a complementary tax imposed on the storage, use, or other consumption in the state of a taxable item purchased from a retailer.

TX Nexus - General Requirements:

Whether an obligation to collect Texas use tax attaches to a sale by an out-of-state seller is determined by a combination of federal and state restrictions. At the federal level, the determination revolves around whether a nexus between the sale and Texas can be established. If there is sufficient nexus, it then must be determined whether the seller qualifies as a "retailer engaged in business" in Texas.

A retailer is engaged in business in Texas if the retailer:

  • maintains, occupies, or uses in Texas permanently, temporarily, directly, or indirectly or through a subsidiary or agent, an office, distribution center, sales or sample room or place, warehouse, storage place, or any other physical location where business is conducted;
  • has a representative, agent, salesman, canvasser, or solicitor operating in Texas under the authority of the retailer or its subsidiary for the purpose of selling or delivering or the taking of orders for a taxable item;
  • derives receipts from the sale, lease, or rental of tangible personal property situated in Texas;
  • engages in regular or systematic solicitation of sales of taxable items in Texas by the distribution of catalogs, periodicals, advertising flyers, or other advertising, by means of print, radio, or television media, or by mail, telegraphy, telephone, computer data base, cable, optic, microwave, or other communication system for the purpose of effecting sales of taxable items;
  • solicits orders for taxable items by mail or through other media and under federal law is subject to or permitted to be made subject to the jurisdiction of Texas for purposes of collecting Texas sales and use taxes;
  • has a franchisee or licensee operating under its trade name if the franchisee or licensee is required to collect Texas sales or use tax;
  • holds a substantial ownership interest in, or is owned in whole or substantial part by, a person who maintains a location in Texas from which business is conducted and if (1) the retailer sells the same or a substantially similar line of products as the person with the location in Texas and sells those products under a business name that is the same as or substantially similar to the business name of the person with the location in Texas; or (2) the facilities or employees of the person with the location in Texas are used to advertise, promote, or facilitate sales by the retailer to consumers or to perform any other activity on behalf of the retailer that is intended to establish or maintain a marketplace for the retailer in Texas;
  • holds a substantial ownership interest in, or is owned in whole or substantial part by, a person that (1) maintains a distribution center, warehouse, or similar location in Texas; and (2) delivers property sold by the retailer to consumers; or
  • otherwise does business in Texas.

TX Local Tax:

Texas counties, incorporated cities, towns, villages, special purpose taxing districts (e.g., transit, hospital, and library districts), and other political subdivisions are authorized to impose local sales and use taxes for various purposes. Local sales and use taxes are reported on the same forms as the state sales and use tax and subject to most collection procedures applicable to the state tax.

TX SST/Streamlined Sales Tax:

Texas is not a member of the Streamlined Sales and Use Tax (SST) Agreement because, although it has enacted legislation authorizing it to enter into the Agreement, it has not yet enacted all of the changes to its laws necessary to comply with the Agreement's requirements.

TX Sourcing:

Origin-sourcing for intrastate sales. Destination-sourcing for interstate sales.

TX Resale / Exemption Certificates:

Resale certificates - Resale Certificate/Exemption Certificate Form 01-339 or Border States Uniform Sale for Resale Certificate Form 01-909-1 may be issued to a seller in lieu of paying sales or use tax on purchases for resale. Purchasers reselling items in Mexico must provide additional information. The certificate of an out-of-state purchaser must show the purchaser's out-of-state registration number.

Exemption certificates - Exemption Certificate Form 01-339 may be issued to a seller in lieu of paying sales or use tax if the transaction or purchaser qualifies for an exemption. However, in lieu of generic Form 01-339, purchasers claiming an exemption related to the production of food or other agricultural products must use Form 01-924 (Agricultural Exemption Certificate) and purchasers claiming an exemption related to the production of timber products must use Form 01-925 (Timber Operations Exemption Certificate). Also, Form 14-319 (Motor Vehicle Tax Exemption Certificate) is used to claim a motor vehicle sales tax exemption on a vehicle used for agricultural/timber operation purposes. An Ag/Timber registration number issued by the Texas Comptroller must be entered in the agricultural or timber exemption certificate.

TX Statute of Limitations:

The general limitations period for assessing taxes is four years from the date the tax becomes due and payable.

The statute of limitations does not apply and the Comptroller may assess and collect taxes, penalties, and interest at any time if:

  • the taxpayer files a false or fraudulent sales tax return with the intent to evade the tax;
  • the taxpayer fails to file a sales tax return; or
  • the taxpayer files a sales tax return that has a gross error (correct tax exceeds reported tax by at least 25%).

The statute of limitations also does not apply to any period during which a taxpayer has a timely filed claim for refund pending, in which case the Comptroller may assess additional tax within four years from the date the claim for refund was filed.

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