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

Texas has no state income tax, so the state relies on sales tax as a major source of revenue. When you buy something in Texas, you pay 6.25 percent to the state on top of the price. This is the base rate that applies everywhere in the state.

On top of the state rate, most cities and counties add their own local sales tax. Your total sales tax bill depends on where you are when you make the purchase. A purchase in Houston will have a different total rate than the same purchase in Dallas or a rural county, because each area has added its own percentage on top of the state 6.25 percent.

Key Takeaways

  • Texas's state sales tax rate is 6.25 percent, and most cities and counties add local tax on top of that, bringing total rates between 8.25 and 8.875 percent in most populated areas.
  • Sales tax applies to most tangible goods and some services, but groceries, prescription medications, and certain medical equipment are exempt.
  • The seller collects the tax at the point of sale and sends it to the state and local tax authorities, not to you directly.
  • Online purchases from out-of-state sellers may or may not have Texas sales tax added, depending on whether the seller has a physical presence in Texas.

Local tax rates vary by city and county

Cities in Texas can add up to 2 percent in local sales tax, and counties can add up to 2 percent. Some areas add both, some add only one, and a few add neither. This means your actual sales tax rate depends on your exact location.

In major cities like Houston, Dallas, Austin, and San Antonio, combined rates typically fall between 8.25 and 8.875 percent. Rural areas with no local additions stay at the state rate of 6.25 percent. To find the exact rate where you live or shop, you can check the Texas Comptroller of Public Accounts website, which lists rates by city and county, or ask the cashier at checkout.

What is and is not subject to sales tax

Most tangible goods — clothing, electronics, furniture, cars, gasoline — are subject to sales tax in Texas. Some services are also taxed, including hotel stays, rental cars, and certain repairs and installations.

Several categories are exempt from sales tax. Groceries and food for home consumption are not taxed. Prescription medications are exempt. Medical equipment prescribed by a doctor, such as wheelchairs or diabetic supplies, is also exempt. Certain services like haircuts and dry cleaning are not taxed in Texas, though this varies by service type. If you are unsure whether a specific item or service is taxed, the receipt will show whether tax was charged.

How sales tax is collected and reported

The business selling you the item collects the sales tax at the point of sale. You pay the tax as part of your total bill. The seller then sends the collected tax to the state and local tax authorities on a regular schedule, usually monthly or quarterly depending on the business size and the local jurisdiction.

You do not file sales tax yourself as a consumer. The responsibility to collect and remit the tax falls entirely on the seller. If you see tax on your receipt, that amount is what the seller will report to the state and local government.

Sales tax on online and out-of-state purchases

Whether you pay Texas sales tax on an online purchase depends on whether the seller has a physical presence in Texas. If an out-of-state online retailer has a warehouse, office, or other location in Texas, they must collect and remit Texas sales tax on purchases shipped to Texas residents. If they have no physical presence in Texas, they typically do not collect Texas sales tax at checkout.

However, Texas law requires you to pay use tax on purchases where sales tax was not collected. Use tax is owed on the same items that would be taxed if purchased in Texas. In practice, most individual consumers do not report use tax on personal purchases, though technically it is owed. Businesses are more likely to track and report use tax on business purchases.

Special sales tax situations in Texas

Texas offers a sales tax holiday in early August each year for school supplies and clothing. During this period, certain items like notebooks, pens, clothing, and shoes under $100 are not subject to sales tax. The exact dates and item limits change annually, so check the Texas Comptroller website before the holiday period.

Resale certificates allow businesses to purchase goods without paying sales tax if they plan to resell those items. A business must have a resale certificate from the state to use this exemption. Individuals cannot use resale certificates for personal purchases.

Frequently Asked Questions

Why does Texas have sales tax but no income tax?

Texas chose to fund state government through consumption taxes rather than income taxes. This means the state relies on sales tax, business taxes, and other revenue sources instead of taxing wages and salaries. The policy decision was made decades ago and remains in place.

Do I pay sales tax on used items?

Yes, used goods are subject to the same sales tax rate as new goods when purchased from a retailer. Private sales between individuals typically do not involve sales tax, though the buyer may owe use tax. Check with the seller if you are unsure.

What if a store charges me the wrong sales tax amount?

Point out the error to the cashier or store manager immediately. Most stores will correct the charge on the spot. If you discover the error after leaving, contact the store with your receipt and they can issue a refund for the overcharge.

Are there any services that are taxed in Texas?

Yes. Hotel stays, rental cars, and certain repairs and installations are subject to sales tax. However, many personal services like haircuts and dry cleaning are not taxed. The tax status depends on the specific service, so check your receipt or ask the business.