Do You Need to Get a Sales Tax Permit in Texas?

by | Dec 17, 2019

Quick Answer: You need to get a sales tax permit in Texas if you have a physical presence or meet economic or affiliate nexus requirements. Read on for more detailed information. 

What is Sales Tax Nexus Anyway?

Your business owes sales tax in any state where it has “sales tax nexus”. In short, if you have sales tax nexus you need to collect and remit sales tax. If you don’t have sales tax nexus, you generally don’t need to get a permit. 

Sales tax nexus is a legal term that means you have crossed a threshold and now have a sales tax collection responsibility in the state. Nexus can be created by having a physical presence, economic presence, or by other factors.  Nexus rules vary by state and retailers have specific nexus rules based on where they have people, property or inventory.  

 

What Should You Do Once You Determine You Have Sales Tax Nexus?

Once you determine that you have sales tax nexus in Texas, your next step is to register for a sales tax permit in the state.  Check out our blog post on getting a sales tax permit in Texas or more information about that process.

If you are not interested in doing the work of getting the permit yourself, TaxValet can handle the permit registration for you with our Sales Tax Permit Registration Service

 

Common Ways to Have Sales Tax Nexus in Texas

1. Economic nexus in Texas

If you made more than $500,000 of sales in Texas in the previous calendar year, then you are required to register for, collect, and pay sales tax to the state. If you meet this threshold, it does not matter if you have a physical presence in Texas.  Nexus has been created based on your volume of sales.

For more information see Title 34, 3.286(b)(2)(B).

If you need help determining which states you have crossed economic nexus thresholds, check out our Sales Tax Starter Kit service.

2. Physical presence nexus in Texas

The following creates physical presence nexus in Texas. If you have any of the following in Texas, you will need to get a sales tax permit:

  1. Office – Maintains, occupies, or uses a kiosk, office, distribution center, sales or sample room or place, warehouse or storage place, or any other physical location where business is conducted;
  2. Employees – Has any representative, agent, salesperson, canvasser, or solicitor who operates under the authority of the seller to conduct business in Texas, including selling, delivering, or taking orders for taxable items;
  3. Special Events – Promotes a flea market, arts and crafts show, trade day, festival, or other event in Texas that involves sales of taxable items;
  4. Independent Contractors – Uses independent salespersons, who may include, but are not limited to, distributors, representatives, or consultants, in Texas to make direct sales of taxable items;
  5. Tangible Property in State – Derives receipts from the sale, lease, or rental of tangible personal property that is located in Texas or owns or uses tangible personal property that is located in Texas, including a computer server or software to solicit orders for taxable items, unless the seller uses the server or software as a purchaser of an Internet hosting service;
  6. Organized in Texas – Is formed, organized, or incorporated under the laws of Texas and the seller’s internal affairs are governed by the laws of Texas, notwithstanding the fact that the seller may not be otherwise engaged in business in this state pursuant to this section;
  7. Advertising – engages in regular or systematic solicitation of sales of taxable items by the distribution of catalogs, periodicals, advertising flyers, or other advertising, by means of print, radio, or television media, or by mail, telegraphy, telephone, computer database, cable, optic, microwave, or other communication system for the purpose of effecting sales of taxable items;
  8. Franchisee –  Allows a franchisee or licensee to operate under its trade name in Texas if the franchisee or licensee is required to collect sales or use tax in the state;
  9. Ownership –  Holds a substantial ownership interest in, or is owned in whole or substantial part by, another person in Texas who meets any of the above nexus requirements. 

For more information, please see Texas Admin. Code 34.  

If you need help determining which states you have a physical presence in, check out our Sales Tax Starter Kit service.

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Uncommon Ways to Have Sales Tax Nexus in Texas

1.  Affiliate Nexus in Texas

What exactly is affiliate nexus? Affiliate nexus can exist when a business has sufficient contact with a state through a separate business. If your out-of-state business has a relationship with an in-state business, then you may have affiliate nexus. 

Please keep in mind that an “affiliated business” does not necessarily mean that it is a marketing “affiliate” in the typical sense of the word. Instead, “affiliate nexus” refers to the relationship between two businesses.

If a retailer holds a substantial ownership interest in or is substantially owned by a person with a business location in Texas they may have affiliate nexus if any of the following apply: 

  1. Sells a substantially similar line of products under a substantially similar business name as the person located in Texas;
  2. Uses facilities or employees of the Texas business to advertise, promote sales, or perform other activity to establish a marketplace in Texas;
  3. Maintains a distribution center, warehouse, or similar location in Texas; 
  4. Delivers property sold by the retailer to consumers.

For more information, please see Texas Admin. Code 34. 

 

Do You Need a Sales Tax Permit in Texas If You Only Sell on Marketplaces?

If you are an out-of-state online retailer who ONLY sells on approved marketplaces (such as Amazon, eBay, etc), Texas sales tax will be remitted by the marketplace and you do not need to get a sales tax permit. 

For more information about this please see FAQ:  I’m a remote seller and I only sell my products through a marketplace provider. Do I need to obtain a permit and collect tax?

If you are an e-commerce seller who is unsure of where you need to get a sales tax permit, feel free to check out our Sales Tax Starter Kit service.

Disclaimer: Our attorney wanted you to know that no financial, tax, legal advice or opinion is given through this post. All information provided is general in nature and may not apply to your specific situation and is intended for informational and educational purposes only. Information is provided “as is” and without warranty.

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