# texas-sales-tax

## Section 1 -- Quick reference

**Quick reference table**  _(https://comptroller.texas.gov/taxes/sales/remote-sellers-marketplace-faq.php)_

| Field | Value |
| --- | --- |
| Jurisdiction | Texas, United States |
| Jurisdiction code | US-TX |
| Tax type | Sales and Use Tax (state + local) |
| State rate | 6.25% |
| Local rate cap | 2.00% (city + county + transit + special district) |
| Maximum combined rate | 8.25% |
| Sourcing | Origin-based for intrastate; destination-based for remote sellers |
| Economic nexus | $500,000 total Texas revenue for remote sellers; includes taxable and nontaxable sales into Texas |
| Primary legislation | Texas Tax Code, Chapter 151 |
| Tax authority | Texas Comptroller of Public Accounts |
| Filing portal | https://comptroller.texas.gov/taxes/sales/ |
| SST member | Yes (associate member) |
| Return form | 01-114 (standard); 01-117 (short form) |
| Filing frequencies | Monthly, quarterly, annual (assigned by Comptroller) |
| Vendor discount | 0.5% of tax due (max $1,750/month) for timely filing |
| No state income tax | Correct -- but franchise tax applies to businesses (separate) |
| Federal framework skill | us-sales-tax |
| Skill version | 2.0 |

### Required inputs

**Required inputs table**

| # | Question | Why it matters |
| --- | --- | --- |
| 1 | Texas Sales and Use Tax Permit number? | Required for filing |
| 2 | Assigned filing frequency? | Determines due dates |
| 3 | Nexus type (physical, economic, both)? | $500,000 threshold |
| 4 | Sell through marketplace facilitators? | Facilitators collect on facilitated sales |
| 5 | Primary business location in Texas? | Origin-based for intrastate sales |
| 6 | Sell services? Which types? | Texas taxes only enumerated services |
| 7 | Sell SaaS or data processing services? | 20% exemption on data processing services |
| 8 | Franchise tax obligations? | Separate from sales tax -- escalate if needed |

### Refusal catalogue

- **R-TX-1 -- Franchise tax** — Texas franchise tax (margin tax) is entirely separate. Outside scope.
- **R-TX-2 -- Motor vehicle sales tax** — Administered by TxDMV, not Comptroller. Different return process.
- **R-TX-3 -- Oil and gas equipment** — Highly specialized drilling/production equipment taxability. Escalate to reviewer.

### 3.1 Tangible personal property

**Tangible personal property table**

| Pattern | Taxable? | Notes |
| --- | --- | --- |
| General TPP (electronics, furniture, appliances, equipment) | TAXABLE | Tex. Tax Code Section 151.051 |
| Clothing and footwear | TAXABLE | NO clothing exemption except during Sales Tax Holiday |
| Clothing under $100 during August Sales Tax Holiday | EXEMPT | Tex. Tax Code Section 151.326 |

### 3.2 Food and beverages

**Food and beverages table**

| Pattern | Taxable? | Citation |
| --- | --- | --- |
| Grocery food (for home consumption) | EXEMPT | Sec. 151.314 |
| Prepared food (heated, served with utensils) | TAXABLE | Sec. 151.314(c) |
| Soft drinks / candy | TAXABLE | Sec. 151.314(b) |
| Bakery items (unheated, no utensils) | EXEMPT |  |
| Dietary supplements | EXEMPT |  |
| Bottled water | EXEMPT |  |
| Ice | EXEMPT |  |
| Alcoholic beverages | TAXABLE |  |

### 3.3 SaaS and digital goods

**SaaS and digital goods table**

| Pattern | Taxable? | Notes |
| --- | --- | --- |
| Canned software (any delivery) | TAXABLE | Sec. 151.009 |
| Custom software (any delivery) | TAXABLE | Unlike most states, TX taxes custom software |
| SaaS (cloud-hosted) | TAXABLE | As data processing service -- 20% exemption applies |
| Data processing services | TAXABLE (80%) | Only 80% of charge taxable; 20% exempt under Sec. 151.351 |
| Streaming services | TAXABLE | As amusement services |
| Digital books, music, movies (download) | TAXABLE | Treated as TPP |

- **Data processing 20% exemption critical note** — Texas provides a 20% exemption for data processing services. Only 80% of the charge is subject to tax.

### 3.4 Services

**Services table**

| Pattern | Taxable? | Citation |
| --- | --- | --- |
| Amusement services | TAXABLE | Sec. 151.0028 |
| Cable television | TAXABLE | Sec. 151.0033 |
| Credit reporting / debt collection | TAXABLE | Sec. 151.0039 |
| Data processing | TAXABLE (80%) | Sec. 151.0035; 20% exempt |
| Information services | TAXABLE | Sec. 151.0038 |
| Laundry/cleaning/garment services | TAXABLE | Sec. 151.0045 |
| Motor vehicle parking/storage | TAXABLE | Sec. 151.0048 |
| Nonresidential real property repair/remodeling | TAXABLE | Sec. 151.0048 |
| Pest control | TAXABLE |  |
| Security services | TAXABLE |  |
| Telecommunication | TAXABLE | Sec. 151.0103 |
| Waste/trash removal | TAXABLE |  |
| Professional services (legal, accounting, consulting, medical, engineering) | NOT TAXABLE | Not enumerated |
| Residential construction labor | NOT TAXABLE |  |
| Residential real property services (cleaning, landscaping) | NOT TAXABLE |  |
| Advertising | NOT TAXABLE |  |
| Transportation/freight | NOT TAXABLE |  |
| Education | NOT TAXABLE |  |

### 3.5 Manufacturing and exemptions

**Manufacturing and exemptions table**

| Pattern | Taxable? | Citation |
| --- | --- | --- |
| Manufacturing equipment (directly in manufacturing) | EXEMPT | Sec. 151.318 |
| Raw materials / ingredients for manufactured product | EXEMPT | Sec. 151.318 |
| Farm/ranch machinery | EXEMPT | Sec. 151.316 |
| Agricultural supplies (feed, seed, fertilizer) | EXEMPT | Sec. 151.316 |
| Resale (Form 01-339) | EXEMPT | Sec. 151.302 |
| Interstate commerce (shipped out of state) | EXEMPT | Sec. 151.307 |
| Federal government | EXEMPT | Sec. 151.309 |
| Prescription drugs | EXEMPT | Sec. 151.313 |
| OTC drugs and medicine | EXEMPT | Sec. 151.313 -- Texas exempts OTC (unlike many states) |
| Containers/packaging for resale goods | EXEMPT | Sec. 151.302(c) |
| Newspapers/periodicals | EXEMPT | Sec. 151.320 |

### 4.1 Rate structure

**Rate structure table**

| Component | Maximum rate |
| --- | --- |
| State | 6.25% |
| City | 2.00% |
| County | 0.50% |
| Transit authority | 1.00% |
| Special district | Varies |
| **Combined cap** | **8.25%** |

### 4.2 Sourcing

**Sourcing table**

| Scenario | Rate applied |
| --- | --- |
| Intrastate (seller and buyer both in TX) | Rate at seller's location (origin-based) |
| Remote (out-of-state) sellers | Rate at buyer's ship-to address (destination-based) |

### 5.1 General rule

- **General taxability rule** — All sales of TPP taxable unless specifically exempted. Only specifically enumerated services are taxable.  _(Tex. Tax Code Section 151.051)_

### 5.2 Data processing 20% exemption

- **Data processing / SaaS 20% exemption rule** — SaaS and data processing services: only 80% of the charge is taxable. The 20% exemption applies automatically.  _(Tex. Tax Code Section 151.351)_

### 5.3 Residential vs. nonresidential

- **Residential vs nonresidential classification rule** — Nonresidential real property services are taxable. Residential real property services (cleaning, landscaping, repairs) are NOT taxable. Classification depends on property type, not customer type.

### 6.1 Forms

**Forms table**

| Form | Use |
| --- | --- |
| 01-114 | Standard sales and use tax return |
| 01-117 | Short form |
| 01-115 | Schedule A -- local tax detail |
| 01-148 | Use tax return (purchasers) |
| 01-339 | Exemption/resale certificate |

### 6.2 Due dates

**Due dates table**

| Frequency | Due date |
| --- | --- |
| Monthly | 20th of following month |
| Quarterly | April 20, July 20, October 20, January 20 |
| Annual | January 20 |

### 6.3 Mandatory e-filing

- **Mandatory e-filing threshold** — $50,000+ USD (paid in state tax in preceding fiscal year requires electronic filing via WebFile)

### 7.1 Economic nexus

**Economic nexus table**  _([https://comptroller.texas.gov/taxes/sales/remote-sellers-marketplace-faq.php](https://comptroller.texas.gov/taxes/sales/remote-sellers-marketplace-faq.php))_

| Parameter | Value |
| --- | --- |
| Revenue threshold | $500,000 total Texas revenue for remote-seller safe harbor |
| Transaction threshold | None |
| Measurement period | Preceding 12 calendar months |
| Sales included | Taxable and nontaxable sales of tangible personal property and services into Texas, including resale sales and sales to exempt entities |
| Authority | Comptroller remote-seller guidance; Texas Tax Code Section 151.107; Rule 3.286 |

### 7.2 Penalties

**Penalties table**

| Penalty | Rate |
| --- | --- |
| Late filing (1-30 days) | 5% of tax due |
| Late filing (>30 days) | 10% of tax due |
| Fraud | 50% of deficiency |

### 7.3 Vendor discount

**Vendor discount table**

| Parameter | Value |
| --- | --- |
| Rate | 0.5% of tax due |
| Maximum | $1,750/month for timely filers |

### 7.4 Record retention

- **Record retention period** — 4 years from filing or due date.

### 7.5 Statute of limitations

**Statute of limitations table**

| Scenario | Period |
| --- | --- |
| Standard | 4 years |
| No return | Unlimited |
| Fraud | Unlimited |
| 25%+ understatement | 6 years |

### EC1 -- Data processing 20% exemption

Situation: Business purchases $1,000/month SaaS.
Resolution: Taxable amount = $800 (80%). At 8.25%: tax = $66.00, not $82.50.

### EC2 -- Residential vs. nonresidential cleaning

Situation: Cleaning company serves both commercial offices and homes.
Resolution: Commercial (nonresidential) = TAXABLE. Residential = NOT TAXABLE. Classify by property type.

### EC3 -- Sales Tax Holiday

Situation: Customer buys $75 jeans during August holiday weekend.
Resolution: EXEMPT. Clothing under $100/item during holiday. Sec. 151.326.

### EC4 -- Motor vehicle

Situation: Dealer sells a vehicle.
Resolution: Motor vehicle sales tax (6.25%) administered by TxDMV, not Comptroller. Separate process.

### EC5 -- Custom software

Situation: Business purchases custom-developed software.
Resolution: TAXABLE in Texas (unlike most states). Sec. 151.009.

### Test 1 -- Basic sale in Houston

Input: $800 TV. Rate: 8.25%.
Expected: Tax = $66.00.

### Test 2 -- Grocery exempt

Input: $150 of bread, eggs, meat.
Expected: Tax = $0.

### Test 3 -- Data processing 20% exemption

Input: $2,000/month SaaS. Rate: 8.25%.
Expected: Taxable = $1,600. Tax = $132.00.

### Test 4 -- Economic nexus

Input: NY seller, $550K Texas sales, 12 months, no physical presence.
Expected: Exceeds $500K. Must register.

### Test 5 -- OTC medicine exempt

Input: $30 OTC cold medicine.
Expected: Tax = $0. OTC exempt in Texas.

### Test 6 -- Nonresidential cleaning

Input: $500 commercial janitorial. Rate: 8.25%.
Expected: Tax = $41.25.

### Test 7 -- Residential cleaning

Input: $200 home cleaning.
Expected: Tax = $0. Residential exempt.

### Test 8 -- Manufacturing equipment

Input: $50,000 production machine. Form 01-339.
Expected: Tax = $0.

### Test 9 -- Vendor discount

Input: Timely pays $10,000 in tax.
Expected: Discount = $50. Net = $9,950.

### Test 10 -- Clothing during holiday

Input: $75 jeans during August Sales Tax Holiday.
Expected: Tax = $0.

## Section 10 -- Prohibitions

- NEVER apply a general clothing exemption -- clothing is taxable except during the Sales Tax Holiday.
- NEVER assume all services are taxable -- Texas taxes only enumerated services.
- NEVER forget the 20% data processing exemption on SaaS.
- NEVER confuse motor vehicle sales tax (TxDMV) with general sales tax (Comptroller).
- NEVER apply destination-based sourcing for intrastate Texas sales -- Texas is origin-based for intrastate.
- NEVER assume nonprofits are automatically exempt -- must have Comptroller-issued exemption number.
- NEVER exclude exempt or resale sales from the Texas remote-seller $500,000 safe-harbor calculation; Comptroller guidance counts total Texas revenue, including taxable and nontaxable sales into Texas.
- NEVER file without claiming the timely filing discount if eligible.
- NEVER treat residential and nonresidential real property services the same.
- NEVER compute any number -- all arithmetic is handled by the deterministic engine, not Claude.

## Disclaimer

This skill is provided for informational and computational purposes only and does not constitute tax, legal, or financial advice. All outputs must be reviewed by a qualified professional (CPA, EA, or tax attorney) before filing.

## Disclaimer

This skill and its outputs are provided for informational and computational purposes only and do not constitute tax, legal, or financial advice. Open Accountants and its contributors accept no liability for any errors, omissions, or outcomes arising from the use of this skill. All outputs must be reviewed and signed off by a qualified professional (such as a CPA, EA, tax attorney, or equivalent licensed practitioner in your jurisdiction) before filing or acting upon.

The most up-to-date, verified version of this skill is maintained at [openaccountants.com](https://openaccountants.com). Log in to access the latest version, request a professional review from a licensed accountant, and track updates as tax law changes.

## 

**Exempt customer documentation and return treatment**  _([https://comptroller.texas.gov/taxes/publications/96-122.php](https://comptroller.texas.gov/taxes/publications/96-122.php))_

| Buyer / sale type | Tax treatment | Documentation to retain | Return treatment |
| --- | --- | --- | --- |
| Federal government | Exempt on qualifying purchases | Properly completed Form 01-339 or purchase voucher in the government entity name | Include tax-free sale in Total Texas Sales; exclude from Taxable Sales |
| Texas state/local government and public schools | Exempt on qualifying purchases | Form 01-339 or government purchase voucher; public school/government identity should be clear | Include in Total Texas Sales; exclude from Taxable Sales |
| Private school, college, university, church, religious/charitable nonprofit | Not automatically exempt; must have Comptroller exempt status | Properly completed Form 01-339 in the exempt organization name; authorized-agent purchases must identify the exempt organization | Include in Total Texas Sales; exclude from Taxable Sales only with support |
| Federally recognized tribal council or tribal-council-owned business | Treat as exempt federal instrumentality; individual tribe members are not exempt merely by status | Form 01-339 or comparable exemption documentation identifying the tribal entity, not an individual member | Include in Total Texas Sales; exclude from Taxable Sales only for entity purchases |
| Farm/ranch/agricultural production | Exempt only for qualifying items used directly in commercial agricultural/timber production | Form 01-924 with Ag/Timber Number for ag/timber exemption; do not use Form 01-339 for that exemption | Include in Total Texas Sales; exclude from Taxable Sales only for qualifying documented items |
| Resale | Exempt when purchased for resale | Properly completed resale certificate (Form 01-339 resale side) and purchaser sales tax permit / resale details | Include in Total Texas Sales; exclude from Taxable Sales |
| Shipped or delivered out of Texas | Not subject to Texas sales tax when destination is outside Texas; check destination-state nexus separately | Shipping records, bill of lading, delivery address, customer order, and invoice showing out-of-state destination | If included in Texas outlet gross receipts, include in Total Texas Sales and exclude from Taxable Sales as a destination deduction |

**Form 01-114 exempt sales reporting**  _([https://comptroller.texas.gov/taxes/audit/manuals/fundamentals/ch5.php](https://comptroller.texas.gov/taxes/audit/manuals/fundamentals/ch5.php))_

| Return concept | Treatment |
| --- | --- |
| Form 01-114 Item 1 / Total Texas Sales | Report gross taxable and nontaxable sales for the outlet/reporting period, excluding separately collected sales tax. Tax-free sales are not omitted from total sales. |
| Form 01-114 Item 2 / Taxable Sales | Report only sales subject to Texas tax after supported deductions and exemptions. Exempt, resale, and supported out-of-state destination sales are excluded here. |
| Deductions / exempt-sales reconciliation | There is no separate universal deduction line in the basic return; Comptroller audit reconciles deductions as Total Sales minus Taxable Sales. Keep certificates and shipping records by transaction. |
| Tax-free sales holidays or statutory exempt items | Include only in Total Texas Sales, not Taxable Sales, unless Comptroller instructions for a special schedule say otherwise. |