How Does the Austin Sales Tax Compare to the Rest of Texas?
Texas imposes a minimum sales tax of 6.250%, which applies to towns like Dumont. The Austin sales tax rate is around 32% higher than in these cities.
States like New Mexico, North Carolina, and New York also share a sales tax rate higher than 6.250%.
Meanwhile, the highest Texas sales tax rate is 8.250%, which applies to cities like Beaumont and Alvarado. Austin shares the same sales tax rate as these cities.
For a better understanding, let’s compare the Austin sales tax with a few other cities in various Texas counties:
Sales Tax Rate
Did COVID-19 Impact Sales Tax Filing Due Dates in Austin?
The Texas Comptroller of Public Accounts helped businesses struggling to pay the sales tax for February 2020. It offered short-term payment agreements, like waivers of penalties and interest, which was valid till April 1, 2020.
Postponement and deadline extensions were only granted on a case-by-case basis.
What Creates Sales Tax Nexus in Austin?
As Austin is located in Texas, it’s subject to the Texas state sales tax nexus rules. There are no separate sales tax nexus laws for Austin.
Economic Nexus: A taxable sale occurs when you sell goods worth $500,000 or more in the state within the previous or current calendar year.
Physical Location: This can be a warehouse, office, or distribution center.
Employee Location: If a company has employees or any other type of representation in a particular state or city, they should pay taxes.
Affiliate Nexus: A taxable sale happens when an out-of-state business receives substantial referrals from in-state businesses.
Trade shows: Businesses that participate in a single day of trade show activities create sales tax nexus for an entire year following the date of trade show participation.
Tangible Personal Property: Sales of tangible personal property like equipment, supplies, or IT systems. Tangible personal properties used for a final sale and those that help make a chemical or physical change in final products are exempt from sales taxes.
What Products Are Exempt from Austin Sales Tax?
A tax exemption is granted by the Texas state and applies to Austin as well. Austin doesn’t have any separate tax exemption rules for taxpayers.
For example, in May 2023, the Texas House voted on a House bill to repeal the sales tax on menstrual products and diapers, which applies to all Texas states, counties, and cities.
According to the Texas tax law, some other items in the sales tax exemption lists are:
Baby products like baby food (canned, packaged, etc.) and medicated products.
Bakery items (nontaxable when sold at a grocery and convenience store without eating utensils or heated). For example, bagels, biscuits, and cookies. This includes baking supplies such as almond paste, marzipan, and dried fruits.
Condiments and spices like catsup and herbs.
Dairy products include butter, margarine, and lactose-reduced milk and dairy products.
Food produce like canned, dried, and fresh fruits and vegetables and other food categories like frozen meals, packaged vegetables, rice mixes, and eggs
Snacks (unless sold in an individual-sized portion), for example, breakfast bars and chips.
Beverages like coffee (beans, ground, and instant), fruit and vegetable juices (more than 50% fruit or vegetable juice, canned, bottled, or frozen), and water.
Grains and pasta like beans and cereals.
Meat, poultry, and fish, like canned meats and dried meats.
Nutritional supplements like herbal and mineral products. The product should either fulfill the criteria for dietary supplements or be labeled with a “Supplement Facts” panel according to the regulations of the FDA.
Over-the-counter drugs and medicines (when required by the FDA to be labeled with a Drug Facts panel), like acne treatment products and allergy treatment products. It also includes wound care items like adhesive bandages (including strip adhesive bandages, large adhesive bandages, and butterfly closures) and corn cushions.
Who Needs a Sales Tax Permit in Austin?
A sales tax permit is issued by states in the United States. Texas issues sales tax permits for Austin residents.
Lease or rent tangible personal property in Texas.
Sell or lease tangible personal property or taxable services to customers in Texas from an out-of-state business and have revenue from Texas of $500,000 or more in the past 12 months.
How to Collect Sales Tax in Austin?
Like income tax and property tax, the sales tax revenue is also collected by Texas.
Texas is an origin-based sourcing state for intrastate sales and a destination-based sales tax sourcing state for interstate sales.
Here’s how you can collect sales tax on:
Intrastate Texas sales: A sale is considered intrastate if it ships from an origin in Texas to a buyer's address in Texas.
For example, if your business is located in Round Rock, Texas, and you sell to a buyer in Marathon, Texas, you’ll have to charge the sales tax rate in your Round Rock location.
Interstate Texas sales: A sale is considered interstate if the taxable item ships from outside Texas and the seller isn’t otherwise “engaged in the business” in the state. In such cases, you’d generally charge the sales tax rate at your buyer’s location.
For instance, if your business is located in Leander, Idaho, and you sell to a buyer in Alpine, Texas, you will charge the buyer the Alpine sales tax rate.
Note: Sellers can collect use tax on a taxable item clients haven’t paid a sales tax for. Usually, the sales tax and use tax have similar rates.
What are the Austin Sales Tax Due Dates?
Since Austin sales taxes are collected by the Texas Comptroller of Public Accounts, the due dates are also decided by the state. Monthly Texas sales tax filings are due on the 20th of the month following the reporting month.
Late payments are subject to penalties and interests. For example, you may have to pay $50 for late filings and will be ineligible for prepayment discounts.
File by mail by using sales tax form 01-117 or 01-114 (short form)
File by phone if you have a zero sales tax return or no sales tax to report.
Alternatively, you can let Zamp automate & manage the entire compliance process for you!
Zamp offers white-glove onboarding, rooftop accurate calculations, proactive nexus monitoring, and click-to-approve sales tax registrations & filings. This way, you can focus on your business and customers without the stress of dealing with sales tax!