Texas Sales Tax Guide & Nexus Calculator (2026)
Texas is one of three states with a $500,000 economic nexus threshold and is notable for a unique SaaS taxability rule: Texas taxes SaaS as a “data processing service” but only on 20% of the service price, yielding an effective rate of 1.25% rather than the full 6.25%. Understanding this rule is essential for any SaaS business with Texas customers.
Quick Reference
Section titled “Quick Reference”| Criterion | Detail |
|---|---|
| State Rate | 6.25% |
| Economic Nexus Threshold | $500,000 gross sales (rolling 12 months) |
| Transaction Threshold | None |
| Digital Goods / SaaS | Taxable (SaaS at 20% of service price — effective 1.25%) |
| Typical Filing Frequency | Monthly |
| SST Member | No |
| Registration Portal | comptroller.texas.gov |
Economic Nexus
Section titled “Economic Nexus”For informational purposes only · Not legal or tax advice · Consult a licensed tax professional · Rules as of 2026
Texas’s economic nexus threshold is $500,000 in gross sales into Texas in the preceding 12 calendar months — one of only three states at this level (alongside California and New York). Once exceeded, registration and collection are required.
Marketplace-facilitated sales count toward the threshold. There is no transaction count alternative threshold.
The $500,000 threshold means smaller sellers often do not create Texas nexus even when they have obligations in many other states. This is a meaningful difference in compliance prioritization.
Tax Rate and Product Taxability
Section titled “Tax Rate and Product Taxability”Texas’s state rate is 6.25%. Local jurisdictions add up to 2% additional:
- State: 6.25%
- City: up to 2% (cities set their own rates up to the 2% cap)
- Combined maximum: 8.25%
- Combined in Houston: 8.25%
- Combined in Dallas: 8.25%
- Combined in Austin: 8.25%
- Combined in San Antonio: 8.25%
Most major Texas cities run at the combined 8.25% maximum.
Texas uses destination-based sourcing for remote sellers.
Product Categories
Section titled “Product Categories”Taxable: Tangible personal property, SaaS (with the 20% rule — see below), most retail goods.
Exempt: Prescription drugs, most groceries (food for home consumption is exempt), qualifying agricultural inputs, manufacturing equipment and supplies.
Grocery exemption: Texas broadly exempts most food items for home consumption from sales tax. Prepared food, candy, and certain snacks remain taxable.
Digital Goods and SaaS — The 20% Rule
Section titled “Digital Goods and SaaS — The 20% Rule”Texas has one of the most distinctive digital goods rules in the US:
Texas taxes SaaS — but as a “data processing service,” and only on 20% of the service price. The other 80% is exempt.
The calculation:
- Standard SaaS invoice: $1,000/month
- Taxable portion: $1,000 × 20% = $200
- Tax owed: $200 × 8.25% = $16.50
- Effective rate on full charge: 1.65% (using combined 8.25%) or 1.25% (using state 6.25% only)
This rule exists because the Texas Comptroller classifies SaaS as a “data processing service,” and Texas law exempts 80% of data processing service charges from sales tax.
What this means practically:
- You must collect and remit tax on Texas SaaS sales — you cannot simply not collect
- You collect only on the taxable 20%, not the full invoice amount
- Configure your tax engine or billing platform to apply the 20% taxable base correctly (not 100%)
- Platforms like Stripe Tax require you to assign product tax code
txcd_20030000for SaaS; Stripe should handle the 20% rule for Texas automatically — verify your configuration
Other digital goods in Texas:
- Downloaded software — taxable at 100% of the price (not the 20% rule)
- Digital content (music, movies, ebooks) — taxable at 100%
- Internet access services — generally exempt (federal Internet Tax Freedom Act applies)
Registration
Section titled “Registration”Texas is not an SST member. Register directly with the Texas Comptroller.
- Go to the Texas Comptroller: comptroller.texas.gov
- Access the eSystems portal
- Register for a Texas Sales and Use Tax Permit
- Provide EIN and business details
- You will receive a Texas Taxpayer Number and Sales Tax Permit
Registration is free.
Foreign Sellers
Section titled “Foreign Sellers”Texas accepts foreign business registrations. A US EIN is required. Texas does not require a registered agent specifically for sales tax registration.
Filing Frequency and Deadlines
Section titled “Filing Frequency and Deadlines”| Annual Tax Liability | Filing Frequency |
|---|---|
| Less than $1,500 | Annual |
| $1,500–$1,500/month | Quarterly |
| More than $1,500/month | Monthly |
Monthly due dates: Returns are due by the 20th of the following month.
Returns are filed through the Texas Comptroller eSystems portal. Texas requires electronic filing for most registered sellers.
Compliance Notes
Section titled “Compliance Notes”The 20% SaaS rule is unique: No other major US state has this exact rule. Sellers who apply a full 6.25% to SaaS charges are overcollecting; sellers who apply 0% are non-compliant. The taxable base is 20% of the service price.
Stripe Tax and the 20% rule: Stripe Tax handles the Texas SaaS 20% rule automatically when you assign the correct SaaS product tax code. If you use a different billing platform, verify that it handles this correctly — most generic tax engines require specific configuration for Texas SaaS.
$500,000 threshold: Texas joins California and New York with a five-times-higher threshold. Many sellers who have nexus in 30+ other states may not have Texas nexus yet.
Not SST: Texas is not an SST member. Multi-state SST registration does not cover Texas.
Amazon FBA: Amazon operates multiple major fulfillment centers in Texas. FBA inventory creates physical nexus from dollar one — the $500,000 threshold does not apply.
High-value market: Texas is the second-largest US state by GDP. Once you cross $500,000, the tax exposure (even at 1.25% effective for SaaS) on a large revenue base is meaningful.