Sales tax laws in Texas are complex, due to the requirement that businesses must report sales tax at the local level. That means identifying which city, county, and jurisdiction each sale corresponds to. So your business will have to track every customer's address so the correct tax amount is collected and reported on your returns.
Below, we'll explain how to complete a sales tax return in Texas, including when you need to file, what information needs to be provided, and how to amend a return.
Key takeaways
Filing frequency depends on your average monthly sales tax liability. Businesses typically file their returns quarterly.
The first step in preparing a return is to collect the sales information for the tax period. Then, you'll input your total sales, taxable sales, and taxable purchases for the filing period.
If you collected or paid the wrong sales tax, you can amend the original return to take a credit or request a refund from the comptroller.
How to find your return due date
Your filing frequency will depend on your average monthly sales tax liability. Most businesses are required to file Texas sales tax returns quarterly. After a business registers for sales tax, it'll be assigned a filing schedule.
In Texas, you'll always have to submit your returns on or before the 20th of the month following your reporting period. If the 20th falls on a weekend or holiday, then the due date is pushed to the next working day. For businesses that file monthly, this means they file on the 20th of the month following their reporting month. For example, September sales tax is due by 20 October.
These are the sales tax quarters in Texas.
|
Quarter |
Reporting period |
|
First quarter |
January–March |
|
Second quarter |
April–June |
|
Third quarter |
July–September |
|
Fourth quarter |
October–December |
Once you begin filing returns, your filing frequency could change if your average monthly sales tax liability changes. Failure to report by these deadlines will result in the following penalties, according to the Texas comptroller.
|
Time after due date |
Penalty |
|
Report filed after the due date |
Flat US$50 penalty per report |
|
Tax paid 1–30 days late |
5% penalty |
|
Tax paid 31–60 days late |
10% penalty |
|
Tax paid more than 61 days late |
10% penalty, plus interest calculated at the rate published in Pub. 98-304 |
How to prepare your Texas sales tax return
The first step in preparing a Texas sales tax return is to collect the sales information for the tax period. This period might be a month, year, or quarter. You'll input your total sales, taxable sales, and taxable purchases for the filing period. You must round each of these numbers to the nearest whole dollar:
Total sales: This refers to the total amount of revenue your business collected in sales (not including tax) – whether or not the sales were taxable – during the filing period.
Taxable sales: This refers to the total amount of revenue your business collected in taxable sales (not including tax) during the filing period.
Taxable purchases: This refers to the total amount of money your business spent on taxable purchases, leases, or rentals during the filing period. This includes purchases from both Texas-based and out-of-state sellers. If you aren't sure which purchases apply, you can learn more from the Texas comptroller.
If your business hasn't exceeded US$500,000 in annual gross revenue, then you might not need to file a Texas sales tax return. This is known as the economic nexus threshold. There's also a physical nexus threshold, which is exceeded when a business has employees, an office, or a warehouse in Texas and sells taxable goods, services, or both. If your business establishes nexus, you'll have to collect sales taxes on all taxable transactions, file returns, and pay the appropriate amount to the state.
How to calculate local sales tax rates in Texas
After you report your business's total transaction volume, Texas will require you to report taxable sales at the local level. Consider calculating these numbers before you attempt to file. If your business will be based in Texas, this will likely be straightforward. Texas is an origin-based sales tax state. So if you live in and sell goods or services in Texas, you'll collect all Texas sales taxes at the rate assigned to your business's location.
However, if you're not based in Texas, this part of the Texas sales tax filing will be more complex. If you're a remote seller, you'll need to calculate your taxable sales for each buyer's address, accounting for their city, county, jurisdiction, transportation authority, and special district rates. There's a sales tax rate locator available on the Texas comptroller's website.
To make things easier for remote sellers, Texas has instituted a single local use tax rate that remote sellers can opt to use. Sellers can use this single tax rate instead of collecting and remitting the total local tax in effect at the buyer's address. Businesses located in Texas and marketplace providers that collect taxes on behalf of marketplace sellers cannot use this rate.
How to complete and file a Texas sales tax return
The final step to completing a sales tax return in Texas is to file and remit the tax. Even if you don't owe any sales tax during a tax period, you could still be required to file a sales tax return (referred to as a "zero return") for that period.
The Texas comptroller's website describes the multiple ways businesses can file and remit sales tax, including online and by physical mail.
How to file a final Texas sales tax return
If you need to close a business location or end your tax responsibility, you must file a final return to settle your account. The comptroller's eSystems portal and Virtual Field Office provide dedicated tools to close one or more locations and officially terminate your state tax responsibility.
How to file an amended Texas sales tax return
If you collect or pay sales tax in error, you can amend the original return to take a credit or request a refund from the comptroller. Here's a closer look:
To file an amended return, you must strictly follow the instructions on the specific form used to file your original return.
The state prohibits you from electronically filing an amended return that reduces the tax due, if you're going to file it after the due date for the period being amended.
You'll generally have a four-year statute of limitations, starting from the exact date the tax was originally due and payable, to file an amended return and claim a refund.
For the refund claim to be valid, you must submit it in writing, state fully and in detail the exact ground on which the claim is founded, and identify the specific period of the overpayment.
Once the submitted claim includes all of these required elements, it'll successfully "toll" the statute of limitations. This will effectively freeze the four-year statute while the comptroller's office evaluates the request.
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The content in this article is for general information and education purposes only and should not be construed as legal or tax advice. Stripe does not warrant or guarantee the accuracy, completeness, adequacy, or currency of the information in the article. You should seek the advice of a competent lawyer or accountant licensed to practise in your jurisdiction for advice on your particular situation.