Texas Sales Tax on Services, Installation, etc Texas: Sales Tax Handbook


What purchases are taxable in Texas?

The taxability of various transactions (like services and shipping) can vary from state to state, as do policies on subjects such as whether excise taxes or installation fees included in the purchase price are also subject sales tax. This reference is here to help answer your questions about what is and is not subject to the Texas sales tax.

Section 1: Taxability of Goods and Services

What transactions are generally subject to sales tax in Texas?

In the state of Texas, sales tax is legally required to be collected from all tangible, physical products being sold to a consumer. An example of items that are exempt from Texas sales tax are items specifically purchased for resale.

This means that an individual in the state of Texas purchases school supplies and books for their children would be required to pay sales tax, but an individual who purchases school supplies to resell them would not be required to charge sales tax.

Are services subject to sales tax in Texas?

The state of Texas does not usually collect sales taxes on the vast majority of services performed. However, there are some services which are taxed. Examples would be cable television services, amusement services, waste collection services, floral services, construction services(so long as the the materials are charged separately), mobile telecommunication services, landline communication services, natural gas and electricity services, and nonresidential real property repair and remodeling services.

This means that a web designer would not be required to collect sales tax, while a florist might be required to collect sales tax.

You can find a table describing the taxability of common types of services later on this page.


Are shipping & handling subject to sales tax in Texas?

In the state of Texas, the laws regarding tax on shipping and handling costs are relatively simple. Essentially, if the item being shipped is taxable, and if you charge for the shipping as part of the order, then the shipping charge is considered to be taxable. If the item is not taxable, then the shipping is not seen as being taxable either.


Are drop shipments subject to sales tax in Texas?

"Drop shipping" refers to the common business practice in which a vendor, often in a different state, makes a sale of a product which is shipped to the end-user by a third party supplier hired by the initial vendor. In Texas, drop shipments are generally subject to state sales taxes.


Section 2: Taxability of Various Items in Texas

This table shows the taxability of various goods and services in Texas. If you are interested in the sales tax on vehicle sales, see the car sales tax page instead. Scroll to view the full table, and click any category for more details.

Category Exemption Status
Amazon Purchases
Products on Amazon.com TAXABLE *
General Clothing TAXABLE
Food and Meals
Catering TAXABLE *
Grocery Food EXEMPT
Leases and Rentals
Motor Vehicles EXEMPT *
Tangible Media Property TAXABLE
Manufacturing and Machinery
Machinery EXEMPT
Raw Materials EXEMPT *
Utilities & Fuel EXEMPT *
Medical Goods and Services
Medical Devices EXEMPT *
Medical Services EXEMPT
Medicines EXEMPT
Newspapers and Magazines
Newspapers EXEMPT
Periodicals TAXABLE *
Occasional Sales
General Occasional Sales EXEMPT
Motor Vehicles EXEMPT *
Optional Maintenance Contracts
General Optional Maintenance Contracts TAXABLE
Parts Purchased for Use in Performing Service Under Optional Maintenance Contracts EXEMPT
Pollution Control Equipment
General Pollution Control Equipment TAXABLE *
Janitorial Services TAXABLE
Transportation Services EXEMPT
Software and Digital Products
Canned Software - Delivered on Tangible Media TAXABLE
Canned Software - Downloaded TAXABLE
Custom Software - Delivered on Tangible Media TAXABLE
Custom Software - Downloaded TAXABLE
Customization of Canned Software TAXABLE *
Digital Products TAXABLE
General Trade-Ins EXEMPT
Vending Machine Sales
Merchandise TAXABLE *

* See notes in category taxability page for details

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Source: http://www.salestaxhandbook.com/texas/sales-tax-taxability