Whether you're already based in Texas and are planning to start a business or are considering moving your business to the Lone Star State, getting your Texas sales tax permit will likely be a requirement that you will need to meet. Having your tax permit will enable you to collect taxes from the sale of goods or services. This tax will also need to be reported and forwarded to the state.
Find out whether or not you will need a permit and what you need to know in acquiring your permit and conducting business in Texas.
What Is a Texas Sales Tax Permit?
Most businesses in Texas will need to have a sales tax permit — also known as a sales tax license — before they can begin doing business. This requirement applies to sole proprietorships, Limited Liability Companies (LLC) and corporations.
Conducting business without having a sales permit can result in fees and penalties. Luckily, you are in the right spot to learn how to avoid getting into this situation as we outline an easy-to-follow and uncomplicated way to apply for your sales tax permit.
Applying for a Texas Sales Tax Permit
Depending on your preferences, there are two ways to register for your Texas sales permit: registering online and applying by mail.
The first step is to go to the comptroller.texas.gov website and click on the “Sales Tax Permit Application” link. This will open up a new page that will give you the option to register as a “New Permit Applicant.” As a first-time user, you’ll need to create a profile and set up your user ID and password.
Once your profile is created, it’s time to start working on your application. Key information required for the application will include:
Social Security number
Texas taxpayer number
Contact information: email, address, phone number, alternate contact information, etc.
The application will include a questionnaire covering your business activity, including:
Do you have a distribution center or warehouse outside your main physical business location?
Do you have a franchise or licensee?
Do you operate an online marketplace?
Will you sell alcohol products?
Once you review and confirm your answers, you will put in the “first date of taxable sales,” which is when you plan on starting your business and selling products and services. You will also need to add all of your business information, including business name, address, phone number, etc.
The end of the application will give you a chance to review your information and make sure that you did not make any errors. If everything looks good, hit the “submit” button. Now all you need to do is just wait two to three weeks to receive your Texas sales tax permit.
Applying by Mail
If you choose not to file online, you can download the application and submit it by mail. Make sure to print form AP-201 (Texas Application for Sales and Use Tax Permit) and send the completed paperwork to:
Comptroller of Public Accounts
111E. 17th Street
Austin, TX 78774-0100
Requirements of a Texas State Permit Holder
Once you receive your Texas Sales Permit and your doors are open for business, you now have the right to charge customers a sales tax on taxable items and services. Examples of taxable items include physical products such as clothing, furniture, computer equipment, software (including downloads) and services like auto repair and house cleaning. Key goods and services that are exempt from sales tax include groceries, medications, utilities and fuel. A full list covering taxable services can be found on the Texas Comptroller’s website.
If your business is collecting a sales tax, the money will need to be sent to the Texas Comptroller of Public Accounts. The state sales tax is 6.25 percent, but the taxable amount may vary depending on where your business is located and the city or district tax rate. To get an accurate idea of what your sales tax rate is, use the Sales Tax Rate Locator.
Filing frequency for a business will be determined by the Comptroller of Public Accounts. In most cases, this will depend on the level of activity and volume of sales generated by your business. Your obligation for submitting sales tax returns may be monthly, quarterly or annually. For businesses generating about $10,000 a month, filing sales tax returns will be a monthly obligation with a deadline on the third week of each month.
Texas Sales Tax and Use Permit Frequently Asked Questions
How much does a sales tax permit cost in Texas?
While some states charge a fee for a sales tax permit, the good news for businesses starting in Texas is that this state permit is free.
Will I need to apply annually for a permit?
You will not need to reapply for a permit as long as you are still operating your business and collecting sales tax.
Would one permit cover multiple businesses?
If you are conducting business in more than one location or have multiple businesses, you will need to apply for additional permits linked to each business address.
What happens if I sell my business?
If you sell your business, the buyer of your business will need to apply for a new permit.
Is a sales tax permit the same as a resale certificate in Texas?
No. These are two different documents. When a business has a sales permit, it is part of the state’s tax-collection process, in essence collecting the tax on the state’s behalf and remitting it to the Texas Comptroller.
A Resale Certificate is a document that allows a business owner to buy products from a wholesaler for the purposes of reselling to your customers. Purchasing inventory for resale does not require a business owner to pay a tax, as long as they have a resale certificate. The sales tax obligations will be paid by the customers purchasing the item from your store or business. Resale Certificates for Texas businesses can be obtained by completing Form 01-339 (Texas Sales and Use Tax Resale Certificate).
Do I need a Texas sales tax permit if I am a remote online seller?
If you are a remote seller and are based in Texas, you will need to collect sales tax and have a Texas sales tax permit. The only way around this is if you are an "occasional" seller, which means that you are not in business full time. If you are selling items to customers outside of Texas, you are not required to collect Texas sales tax. It is, however, recommended that you keep your online sales records for at least four years.
Getting Business Help the Uncomplicated way
In addition to getting your Texas sales tax permit, starting and running a business involves staying on top of a myriad of deadlines, regulations and rules. Keeping accurate records and following good bookkeeping practices is critical when it comes to managing a business and not running afoul — especially when it comes to taxes. Failure to do so can come at a price with fees and penalties that can not only cost you money but also jeopardize the standing of your business. For many business owners, getting professional support is worth the expense and can provide peace of mind.
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Peter Mavrikis is an author and editor with over 25 years of experience in publishing. He has worked as the Editorial Director for Barron’s Educational Series, as well as Kaplan Test Prep, where he ran the test prep, foreign language, and study guide divisions. Peter has also written several books on history, exploration, science, and technology.