By Coleman Jackson, Attorney, Certified Public Accountant
September 16, 2019
Texas imposes a 6.25 percent state sales tax and use tax on all retail sales, leases and rentals of most goods and some services that are either sold in Texas or used in Texas. Cities, Counties and Transit Authorities can charge up to 2% sales tax on taxable goods and services. This local sales tax varies from city to city, county to county and transit authority to transit authority throughout the state of Texas. The maximum sales and use tax in Texas is 8.25 percent.
Remote sellers are required to begin sales and use tax collection on October 1, 2019 on their Texas sales. The remote seller must collect the correct tax by using the Sales Tax Rate Locator. For example if a remote seller sales a chest of imported cigars to a person residing in Dallas, Texas; they must collect 8.25 percent tax on the gross sale at the time of the sale. If this same sale is made in another city of Texas the total collected tax could be lower. It would not be higher because 8.25% is the maximum sales and use tax in Texas. However, other types of tax obligations could be implicated in this hypothetical, such as, tobacco taxes and fees. Remote sellers doing business in Texas must register with the Texas Comptroller of Public Accounts before October 1, 2019 to fulfill their Texas tax responsibilities. First, remote sellers must apply for a Sales Tax Permit pursuant to the Texas Tax Code.
Once the remote seller is properly registered with the Texas Comptroller of Public Account and receive their sales tax permit, they will be advised by the Texas Comptroller as to whether they must report their taxable sales and use taxes on a monthly basis, quarterly basis or annual basis. Monthly sales and use tax reports are due on the 20th day of each month following the reporting month. Quarterly filers must file their sales and use tax reports on April 20th, July 20th October 20th and January 20th. Annual filers must report taxable Texas sales and use taxes on January 20th for the previous year.
Out of State sellers or remote sellers are required to begin collecting sales and use tax from their Texas customers on October 1, 2019. If the remote seller fails to register and report Texas Sales and Use Tax they will be subjected to the penalties, administrative actions, and judicial options available under the Texas Tax Code in enforcing the tax laws. The TTC provides for civil and criminal sanctions against businesses doing business in Texas and not in compliance with their tax responsibilities.
Businesses, who run afoul of the Texas Tax Code and desire to comply with Texas tax laws, whether they are in Texas or someplace else in the world, could possibly qualify to voluntarily disclose under the Texas Voluntary Disclosure Agreement Process (VDA). A company representative must initiate the process on behalf of an anonymous client who meets the threshold requirements by contacting the Business Activity Research Team (BART) in writing. If the business has already been contacted by the Texas Comptroller regarding non-compliance with Texas Tax laws, the business cannot voluntarily disclose. It should be noted that the VDA process is available for all types of taxes administered by the Texas Comptroller of Public Accounts. Some of the types of taxes that the Texas Comptroller is responsible for administering under the Texas Tax Code are as follows:
- Sales and Use Tax
- Hotel Tax
- Franchise Tax
- Tobacco Taxes and Fees
- Battery Sales Fees
- Cement Production
- Boat and Boat Motor Taxes
- Insurance Taxes
- Manufactured Housing
- Controlled Substances
This law blog is written by the Taxation | Litigation | Immigration Law Firm of Coleman Jackson, P.C. for educational purposes; it does not create an attorney-client relationship between this law firm and its reader. You should consult with legal counsel in your geographical area with respect to any legal issues impacting you, your family or business.
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