Texas sales tax is a tax on purchases, not income
Texas has no state income tax. Instead, the state collects revenue through sales tax, which is charged when you buy goods or certain services. The current state sales tax rate is 6.25 percent, but the total tax you pay at checkout is usually higher because cities and counties add their own local sales taxes on top of the state rate.
When you buy something in Texas, the seller collects the combined state and local tax from you at the register or online. The seller then sends that money to the state comptroller's office, which distributes it to state and local governments. This means you see one tax line on your receipt, but it represents multiple tax layers.
Sales tax applies to most physical goods — clothing, groceries, electronics, furniture — and to some services like repairs and rentals. A few categories are taxed differently or not at all, which can be confusing when you are shopping or running a business.
Key Takeaways
- Texas state sales tax is 6.25 percent, but your total tax rate depends on your city and county, which can add 1 to 2 percent or more.
- Sales tax is collected by the seller at the time of purchase and sent to the state comptroller, not paid directly by you to the government.
- Groceries, prescription medications, and some medical equipment are exempt from sales tax in Texas.
- If you run a business in Texas, you must register for a sales tax permit and file returns with the comptroller's office, even if you have no sales in a given month.
How the total sales tax rate is calculated
The 6.25 percent state rate is only the starting point. Your city and county each have the option to add their own sales tax, called local sales tax. These local rates vary widely across Texas and can range from 0.5 percent to 2 percent or higher, depending on where you are.
For example, if you live in Austin, you pay 6.25 percent state tax plus 2 percent local tax, for a total of 8.25 percent. In Houston, the total is 8.25 percent as well, but the breakdown is different. In some rural areas, the total might be only 6.25 percent because no local tax is added. You can find your exact rate by entering your address on the Texas Comptroller of Public Accounts website.
The seller is responsible for knowing the correct rate for your location and charging you accordingly. If you buy online from a Texas seller, they should charge the tax rate for your delivery address. If you buy from an out-of-state seller, Texas sales tax may or may not explore depending on whether that seller has a physical presence in Texas — this rule changed in recent years and continues to shift.
What is and is not subject to sales tax in Texas
Most items you buy are taxable, but Texas has specific exemptions. Groceries — food you cook at home — are not taxed. This includes bread, milk, vegetables, meat, and canned goods. However, prepared food, restaurant meals, and food you eat at the store are taxed.
Prescription medications are exempt from sales tax when you present a valid prescription. Over-the-counter medications like aspirin or cold medicine are taxed. Medical equipment prescribed by a doctor — such as wheelchairs, hearing aids, or oxygen equipment — may be exempt, but you need documentation from a physician.
Clothing and shoes are taxable in Texas, with no exemption for children's clothing or any other category. Utilities like electricity and water are taxed. Services like haircuts, repairs, and labor are generally taxed. Gasoline is taxed, but the tax is built into the pump price and does not appear as a separate line item on your receipt.
Sales tax for online and out-of-state purchases
If you order from an online retailer, you should see sales tax added at checkout if the seller has a legal obligation to collect it. Large online retailers like Amazon, Walmart, and Target collect Texas sales tax on orders shipped to Texas addresses. Smaller sellers may not, depending on their sales volume and whether they have a warehouse or office in Texas.
If you buy from an out-of-state seller who does not collect Texas sales tax, you are technically responsible for paying use tax to Texas — a tax on items you bring into the state or have delivered to you. In practice, most individuals do not pay use tax, and the state does not pursue individual buyers. However, if you run a business and buy inventory or equipment from out-of-state sellers without paying tax, the comptroller's office can audit you and require payment plus penalties.
When you order from another state and no sales tax is charged, you do not need to file a separate form or send money to Texas. The obligation exists in law, but enforcement focuses on businesses, not individual shoppers.
What you need to know if you run a business in Texas
If you sell taxable goods or services in Texas, you must register for a sales tax permit with the Texas Comptroller of Public Accounts before you make your first sale. You can register online at the comptroller's website at no cost. The permit allows you to collect sales tax from customers and remit it to the state.
You must file a sales tax return with the comptroller on a schedule determined by your sales volume — usually monthly, quarterly, or annually. You file even if you had no sales in that period. Returns are filed through the comptroller's online system, and payment is made electronically. If you fail to file or pay on time, the comptroller charges penalties and interest.
You do not pay sales tax on items you buy for resale. If you are a retailer, you provide your sales tax permit number to your suppliers, and they do not charge you tax on inventory. You only collect and remit tax when you sell to the end customer. Keeping records of your permit number and your suppliers' names is important in case of an audit.
Sales tax on specific situations
If you buy a used car in Texas, sales tax is calculated on the sale price, not the book value. The seller collects the tax, and you pay it at the time of purchase or when you register the vehicle with the Department of Motor Vehicles. If you trade in a vehicle, the tax is calculated on the net amount you pay, not the full price of the new car.
If you rent a car, hotel room, or other property in Texas, sales tax applies to the rental charge. The rental company collects it and includes it in your bill. If you rent equipment or tools, tax applies unless the rental is for agricultural use or another specific exemption.
If you buy a service like a haircut, repair, or installation, sales tax applies to the labor charge. If a contractor gives you a quote that says "labor not taxed," that is incorrect — you should ask for clarification before you agree to the work.
Frequently Asked Questions
How do I find out what the sales tax rate is in my city?
Go to the Texas Comptroller of Public Accounts website and use the sales tax rate lookup tool. Enter your street address, city, and ZIP code, and the tool will show you the exact combined state and local rate for your location. You can also call your city or county tax assessor's office.
Do I have to pay sales tax if I buy something online from outside Texas?
It depends on the seller. If the seller has a warehouse, office, or other physical location in Texas, they must collect Texas sales tax. If they do not, they usually will not charge you tax at checkout. Technically you owe use tax to Texas, but the state does not enforce this against individual shoppers.
Are groceries really not taxed in Texas?
Groceries for home cooking are not taxed. This includes produce, meat, dairy, bread, and canned goods. Hot food from a deli counter, restaurant meals, and food you eat at the store are all taxed. If you are unsure whether an item counts as a grocery, ask the cashier before you check out.
What happens if I run a business and do not register for a sales tax permit?
Operating without a permit is illegal in Texas. The comptroller can fine you, require you to pay back taxes plus penalties and interest, and in some cases pursue criminal charges. Register before you make your first sale, even if you think your sales will be small.
Do I pay sales tax on labor if I hire someone to fix something?
Yes. If you hire a plumber, electrician, contractor, or other service provider, sales tax applies to the labor charge. The service provider should include the tax on your invoice. Some service providers mistakenly tell customers that labor is not taxed — this is not correct under Texas law.