Sales tax laws in Texas are complex, due to the requirement that businesses must report sales tax at a local level—including identifying which city, county, and jurisdiction each sale corresponds to. Because of this, your business must track every customer’s address so the correct amount of tax is collected and reported accurately on your returns.

Completing a Texas sales tax return is a three-step process. Businesses must first identify their filing frequency and due dates, then prepare the return, and finally, file and remit sales tax. Following this process will help you to prepare for and complete your return smoothly and accurately.

What’s in this article?

• How to find your return due date
  
• How to prepare your Texas sales tax return
  
• How to complete and file a Texas sales tax return
  

How to find your return due date

The timing for filing a return depends 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, they will be assigned a filing schedule.

In Texas, you will 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 business day. For businesses filing monthly, this means you file on the 20th of the month following your reporting month. For example, September sales tax collections are due by October 20.

These are the sales tax quarters in Texas:

• First quarter: January–March
  
• Second quarter: April–June
  
• Third quarter: July–September
  
• Fourth quarter: October–December
  

Once you begin filing returns, your filing frequency may 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:

• $50 penalty on each report filed after the due date
  
• 5% penalty on a tax paid 1–30 days after the due date
  
• 10% penalty on a tax paid 31–60 days after the due date
  
• 10% plus interest, calculated at the rate published on Pub. 98-304, on tax paid more than 61 days after the due date
  

How to prepare your Texas sales tax return

The first step in preparing a return is to collect the sales information for the tax period. This period may be a month, a year, or a quarter. Your Texas sales tax return will ask you to 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—within the filing period.

• Taxable sales: This refers to the total amount of revenue you collected in sales (not including tax) that were taxable within the filing period.

• Taxable purchases: This refers to the total amount of money your business spent on taxable purchases, leases, or rentals within 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.

Note, if your business has not reached economic nexus thresholds in Texas, then a sales tax return might not be required. In addition to meeting economic nexus thresholds, if a business has employees, an office, or a warehouse located in Texas and is selling taxable goods and/or services, the business must collect sales taxes on all taxable transactions, file returns, and pay the appropriate amount to the state.

Local sales taxes due

After you’ve reported your business’s total transactions, Texas requires that you report taxable sales at the local level. Calculate these numbers before you attempt to file. If you’re a Texas-based seller, this should be fairly straightforward. Texas is an origin-based sales tax state, so if you live in and sell goods or services in Texas, you should 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. You will need to calculate your taxable sales for each of your buyers’ addresses, accounting for their city, county, jurisdiction, transportation authority, and special district rates. There’s a sales tax rate locator available on the Texas Comptroller website.

To make things easier for remote sellers, Texas has instituted a single local use tax rate rule 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 any marketplace providers collecting 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 tax. Even if you do not owe any sales tax, you could still be required to file a sales tax return (also referred to as a zero return) for each tax period, or you could face a penalty.

The Texas Comptroller website describes the multiple ways businesses can file and remit sales tax, including online and by physical mail.