Texas charges a base sales tax of 6.25 percent on most goods and services

Texas has one of the lowest statewide sales tax rates in the country. The state itself collects 6.25 percent on taxable purchases. However, most people in Texas pay more than 6.25 percent at the register because cities and counties add their own local sales taxes on top of the state rate.

Your actual sales tax rate depends on where you live and where you make the purchase. A transaction in Austin will have a different total rate than the same purchase in Houston or a rural county. The combined rate — state plus local — typically ranges from 8.25 percent to 8.875 percent across Texas, though some areas go higher.

Key Takeaways

  • Texas state sales tax is 6.25 percent, but your total rate includes city and county taxes added on top.
  • Combined sales tax rates in Texas range from 8.25 percent to 8.875 percent depending on your location, with some areas reaching 9 percent or higher.
  • Groceries, prescription medications, and some medical equipment are exempt from sales tax in Texas.
  • You pay sales tax at the point of sale on most goods, and online retailers must collect it if they have a physical presence in Texas.

How local taxes stack on top of the state rate

Texas allows cities to add up to 2 percent in local sales tax, and counties can add up to 1 percent. Some cities and counties add both. This means a city in a county that both impose local tax will have a combined local rate of up to 3 percent, which gets added to the 6.25 percent state rate for a total of 9.25 percent.

The exact rate in your area depends on which city and county you are in. Austin residents pay 8.25 percent total (6.25 state plus 2 percent city). Houston residents pay 8.25 percent total (6.25 state plus 2 percent city). Rural areas with no city tax but a county tax might pay 7.25 percent. To find your exact rate, search online for your city and county name plus "sales tax rate," or ask a cashier.

What is and is not taxed in Texas

Most tangible goods — clothing, electronics, furniture, gasoline — are subject to sales tax. Services are generally not taxed unless they are specifically listed in state law. For example, haircuts and car repairs are not taxed, but pest control services are.

Several categories are exempt from sales tax in Texas. Groceries and food for home consumption are not taxed. Prescription medications and certain medical devices are exempt. Clothing and shoes are not taxed. Agricultural equipment and livestock feed used in farming are exempt. If you are unsure whether a specific item is taxed, the retailer or the Texas Comptroller's office can tell you.

Sales tax on online and out-of-state purchases

Online retailers must collect and send sales tax to Texas if they have a physical presence in the state — a warehouse, office, or employee location. This includes large retailers like Amazon and Walmart. If an online retailer has no physical presence in Texas, they are not required to collect Texas sales tax, though some do anyway.

If you purchase from an out-of-state retailer that does not collect Texas sales tax, you are technically responsible for paying use tax — a tax on goods brought into Texas from outside the state. In practice, most individuals do not pay use tax, and Texas does not actively pursue individual consumers for it. However, businesses are expected to track and report use tax on their returns.

When you do not pay sales tax at checkout

Resellers and businesses can avoid paying sales tax on inventory by providing a resale certificate to the seller. This certificate shows that the buyer intends to resell the goods, so the tax is collected later when the end consumer buys the item. If you own a business and need a resale certificate, you can obtain one from the Texas Comptroller's office.

Nonprofits and government agencies may be exempt from sales tax on certain purchases. The rules vary depending on the type of organization and the type of purchase. A nonprofit should contact the Texas Comptroller's office to determine what purchases may have access to for exemption and what documentation is needed.

How sales tax is used in Texas

Sales tax revenue goes to the state general fund and to local governments. The state keeps the 6.25 percent it collects. Cities and counties keep the local tax they collect. This revenue funds schools, roads, emergency services, and other public services. Texas does not have a state income tax, so sales tax is a major source of state revenue.

Local sales tax rates can change if a city or county votes to raise or lower them. These changes are usually announced in advance and take effect on a specific date. If you see a rate change coming, retailers and the local tax assessor's office will post notices.

Frequently Asked Questions

Is sales tax included in the price shown on the shelf?

No. Prices on shelves and price tags in Texas do not include sales tax. The tax is added at checkout. This is why your receipt total is higher than the price displayed.

Do I pay sales tax on restaurant meals?

Yes. Restaurant meals, including fast food and takeout, are subject to sales tax. Prepared food for immediate consumption is taxed. Groceries you buy to cook at home are not.

What is the sales tax rate in my city?

Search online for your city name and "sales tax rate," or call your city's tax assessor's office. You can also ask a cashier at any store in your area — they know the local rate.

Do I have to pay sales tax if I buy something online from another state?

Only if the retailer has a physical presence in Texas and collects it. If they do not, you are not charged at checkout, though Texas law says you owe use tax. Most individuals do not pay use tax on personal purchases.

Are there any items that are always tax-free in Texas?

Groceries, prescription medications, and certain medical devices are always exempt. Clothing and shoes are also exempt. Most other goods and prepared foods are taxed at your local combined rate.