Texas collects a state sales tax rate of 6.25 percent, with local jurisdictions adding up to 2 percent more. In most North Dallas cities including Plano, Carrollton, Frisco, and McKinney, the combined rate is 8.25 percent. Texas has one of the broadest sales tax bases in the country, covering not just tangible goods but many categories of services that business owners do not always expect to be taxable.
What Is Taxable in Texas
Texas taxes the sale of tangible personal property by default. This includes retail goods, parts, supplies, and many business-to-business product sales. On the services side, Texas taxes a significant list including repair and remodeling services, data processing, information services, security services, telecommunications, and many personal services. Understanding whether your specific service is taxable requires checking the Texas Tax Code or consulting with a CPA familiar with Texas tax law.
Getting Registered
Before you begin collecting sales tax in Texas, you must register with the Texas Comptroller of Public Accounts and obtain a sales tax permit. The permit is free and can be obtained online. Once registered, you are assigned a filing frequency, either monthly, quarterly, or annually, based on your expected sales volume. Most new businesses start on a quarterly filing schedule.
When You Collect Sales Tax
As a retailer or service provider making taxable sales, you collect sales tax from your customer at the time of the sale and hold it in trust until your filing deadline. The tax collected is not your money; it belongs to the state. Spending sales tax collections before remitting them is one of the more serious sales tax compliance failures, as it creates a liability that accumulates rapidly.
The Audit Exposure Problem
The Texas Comptroller actively audits businesses for sales tax compliance. Industries with high cash transaction volumes, including restaurants, contractors, repair shops, and personal service businesses, are disproportionately targeted. An audit that uncovers years of uncollected or underremitted sales tax can result in back taxes, penalty, and interest that seriously threaten a business's financial stability. Compliance from the start is far less expensive than remediation after an audit.
Many North Dallas small business owners who come to us after a Comptroller audit are dealing with three to four years of back sales tax liability. The cost of getting it right from day one is always a fraction of cleaning it up later.
Sumler Advisory helps small business owners in Carrollton, Plano, Frisco, and across North Dallas get their Texas sales tax right from the start. Your first consultation is always free.
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