Understanding Texas Gross Receipts and Sales Tax

Navigating taxes can be challenging, especially with varying regulations across states. In Texas, two primary taxes businesses need to be aware of are the gross receipts and sales tax.

Gross Receipts Tax

Texas does not impose a traditional corporate income tax. Instead, it has a franchise tax, often referred to as a “margin tax,” which applies to most businesses operating in the state. This tax is based on the business’s gross receipts, with rates varying depending on the type and size of the business.

Sales Tax

Texas levies a sales tax of 6.25% on the sale, lease, or rental of most goods and taxable services. Local jurisdictions can add up to 2% in additional sales taxes, resulting in a maximum combined rate of 8.25%. Businesses must collect this tax from consumers at the point of sale and remit it to the state.

Key Points for Businesses

  1. Registration: Businesses must register for taxes with the Texas Comptroller of Public Accounts.
  2. Filing and Payment: Sales tax is generally reported and paid monthly or quarterly, while the franchise tax is due annually.
  3. Compliance: Staying updated on tax regulations and deadlines is crucial for compliance and avoiding penalties.

Understanding these taxes is essential for any business operating in Texas. Ensure you’re well-informed and prepared to handle your tax obligations effectively. If you have questions, we’re here to help.


About Davis Davis & Harmon LLC – Sales Tax Experts: Headquartered in Dallas, Texas, Davis Davis & Harmon LLC – Sales Tax Experts specializes in sales/use tax refund recovery and audit defense. Our team of consultants is comprised of former Big 4 sales tax consultants and state sales tax auditors. Each of our consultants has 15 to 20 years of experience, providing our clients with access to a highly specialized team of sales/use tax professionals. At Davis Davis & Harmon, LLC, we are committed to maintaining the highest standards in our talent pool. We work hard to meet our clients’ needs by ensuring that you view our firm as an extension of your company and a member of your team.

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