Texas is the second-most populous state in the union as of 2011 and has neither a personal income tax nor a corporate income tax. Instead, to supply essential services to its growing population, it collects more than 60 separate taxes, fees and assessments. These include property taxes, cigarette/tobacco advertising fees, and local sales taxes for more than 1,400 cities and other local governments. The Texas Comptroller’s Office collects these taxes and determines how taxes are assessed.
Sales Tax Overview
Texas law demands the collection of sales tax when tangible goods are sold or taxable services are performed, primarily at the retail level. These taxes, which differ by location, are computed on the sum of all the goods being offered. The actual tax imposed must appear as a separate item on the invoice or receipt, unless a written statement declares that the price includes sales tax. The seller is ultimately responsible for collecting all amounts and remitting the correct charges to the Comptroller’s office. Otherwise, she is liable not only for the tax but for penalties and interest.
Shipping charges are taxable if the goods being delivered are taxable. For example, a dining room set that is sold to a consumer for $1,000 has a sales tax. If the delivery charge for that set is $100, then the charge must also have a sales tax. In contrast, a pallet of paper sold at a wholesale price of $1,000 to an office supply store incurs no sales taxes. The delivery charge of $50 for that pallet incurs no sales tax as well. The seller, and not the delivery agent, is responsible for collecting taxes on the delivery charge. One exception: if a buyer requests delivery of purchases to a third party, then postage for that delivery is not taxable.
Sales Tax Holiday
Texas declares a sales tax holiday on the third weekend of August to coincide with the start of the school year. Certain goods and services bought on that weekend from 12:01 a.m. Friday to midnight Sunday do not incur sales tax. These goods include school supplies such as pencils, rulers, scissors, calculators and notebooks; backpacks for elementary and secondary students; and most clothing such as jeans, shirts, swimsuits, jackets and dresses. Some of the items it does not cover include nonstudent backpacks, helmets, jewelry, watches or boots.
Tax Holiday Deliveries
During the sales tax holiday, deliveries of goods without sales tax do not incur sales tax. For example, deliveries on pencils, notebooks and dresses are not charged a sales tax. Deliveries on helmets, watches and boots are charged a sales tax. If a delivery contains both taxable and exempt items, and the delivery charge is per item, taxes are charged only on the deliveries of the taxable items. If the delivery charge is a flat fee and the delivery contains at least one exempt item, the entire fee is exempt from sales tax.
- Window on Texas State Government: Overview of Texas Taxes
- Window on Texas State Government: Frequently Asked Questions
- Office of the Texas Secretary of State: Texas Administrative Code Transportation and Delivery Charges
- Window on Texas State Government: Sales Tax Holiday
- Window on Texas State Government: Sales Tax Holiday FAQ