Texas: Sales Tax Handbook
What constitutes sales tax nexus in Texas?
One of the more complicated aspects of Texas sales tax law is sales tax nexus, the determination of whether a particular sale took place within the taxation jurisdiction of Texas, and is thus subject to state (and possibly local) sales taxes.
If a vendor's transactions are determined to have nexus in Texas, the vendor must register for a Texas sales tax license and collect appropriate sales taxes from the buyer for all transactions with nexus in the state. On this page, we have compiled some of the most commonly needed facts about what constitutes sales tax nexus in Texas.
Sales Tax Nexus in Texas
According to the law of Texas, all retailers who have tax nexus can be defined in several ways. A seller is considered to have tax nexus if they have any of the following within the state's boundaries:
An office, warehouse, storage room, place of distribution, or any other place of business(directly or through any subsidiary), any employee, independent contractor or other representative, any personal or real property, and leased or rented property.
For additional details on sales tax nexus law in Texas, see the nexus information page from the Comptroller of Public Accounts at http://texreg.sos.state.tx.us/public/readtac%24ext.TacPage?sl=R&app=9&p_dir=&p_rloc=&p_tloc=&p_ploc=&pg=1&p_tac=&ti=34&pt=1&ch=3&rl=286
Taxation of Internet-Based Sales in Texas
NOTE: 2018 Supreme Court Ruling Regarding Online Sales Taxes
In the 2018 Supreme Court case South Dakota vs. Wayfair Inc, Et Al., the court overturned a previous ruling that required a merchant to have physical nexus in order for a state to collect sales tax. This means that any state is now free to enforce collection of sales taxes on out-of-state online merchants. The information provided here may be subject to change, and many states are expected to begin collecting online sales taxes following this ruling.
Depending on the situation, Texas may or may not charge sales tax on Internet-based transactions. Texas's statute does indicate that it is possible for tax nexus to exist. However, in the case Quill Corp. v. North Dakota, the U.S. Supreme Court declared that due to the Commerce Clause, a seller must have a physical presence in the state for the state to legally require the seller to collect sales tax. This being said. an individual whose only activity within Texas's state boundaries is utilized completely as n internet hosting user, is not considered to be "engaged in business" in the state of Texas
The nexus status and taxability of Internet-based sales, by vendors and/or consumers within Texas, have been the subject of hot debate in recent years. You can learn more on our introduction to Internet-based sales taxes.
Does my business have tax nexus in Texas?
The folks at the sales tax compliance company Avalara are an approved Texas sales tax partner, and you can use their free Texas nexus wizard tool to determine whether or not your business has nexus, and is therefore required to pay Texas sales taxes. If you're interested in automating your sales tax collection and filing process, click here to get more information.
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