Everything is bigger in Texas, including giant steaks, state pride, and the new $1.2 billion Cowboys Stadium with the largest video screen in the world. Texas is often associated with larger-than-life myths, and its inhabitants are known for being friendly, resilient, and self-reliant.
Texas has 254 counties (more than any state in the U.S.) and imposes over 60 taxes. Cities, counties, and school districts operate independently of one another, although they may enter into an agreement where the county collects property tax for a city and school district, so only one tax bill/form is necessary, instead of three.
Texas continues to add new residents, who are attracted by its friendly business climate (and also perhaps the 72oz. steaks). The state economy has weathered tough times better than most, and programs such as the Texas Smart Buy initiative and the Texas Tuition Promise Fund help prepare for the future.
The following sections provide information about Texas’s tax structure, including policy updates and useful links for its taxpayers. Despite the national economic downturn, Texas continues to be a leading producer of oil, beef, cotton, and hardy people ― and you don’t want to mess with that.
TABLE OF CONTENTS
General Information About Texas Tax Laws
- • Sales and Use Tax
- • Corporation Franchise Tax
- • Property Tax
- • Other Taxes
Notable Changes In Policy/Legislation
Tax Tips & Helpful Facts
GENERAL INFORMATION ABOUT TEXAS TAX LAWS
Texas does not impose a Personal Income Tax (PIT) ― it is actually restricted by the state’s constitution. Instead, Texas’s tax revenue comes primarily from its Sales and Use Tax (SUT), Corporation Franchise Tax, and Property Taxes.
Sales and Use Tax (SUT)
There are five levels of the Texas SUT: state, city, county, transit, and special purpose district. The state of Texas has a 6.25% base sales tax onto which the other local SUTs are added. These other rates fall into the following ranges:
- City: 0.25% to 2%
- County: 0.5% to 1.5%
- Transit: 0.25% to 1%
- Special Purpose District: 0.125% to 2%
To search for specific sales tax rates by city or county, visit the online rate finder:
Texas’s state SUT applies to the retail sales, rentals, and leases of goods and taxable services. It is applicable to sole proprietorships, partnerships, and corporations that must regularly file tax reports and make tax deposits (monthly, quarterly, or yearly, depending on qualifications). Payments are typically due on the 20th day of the month following the end of the reporting period.
The Occasional Use Tax is paid by those who are not charged the correct amount of Texas sales tax when buying goods/services for use in the state. Often this applies to telephone and online purchases, as well as things bought from another state or another country. The bottom line is that you must pay the rate of the city/county where you live and/or intend to use the product.
With a Texas SUT permit, the Use Tax is filed in Item 3 (Taxable Purchases) on the Texas SUT Return Form:
Without a Texas SUT permit, the Use Tax is reported with the Texas Occasional Use Tax Form:
To apply for a Texas SUT permit, register online:
In July 2009, Texas Comptroller Susan Combs released figures that predicted a loss of $550 million in state sales tax revenue by the end of the current fiscal year. The decline is a result of recent economic weakness and the absence of a Personal Income Tax, which places a lot of responsibility on the SUT. However, the Comptroller’s office assures that the state has enough money to cover Texas’s budget, and despite the drops in sales tax revenue, Texas is faring better than most other states in these times. In fact, Forbes magazine published a list of cities most likely to bounce back quickly from the recession, naming Austin, San Antonio, Dallas, and McAllen in the top ten.
Corporation Franchise Tax
The Texas Franchise Tax is a privilege tax that applies to all active taxable entities that are organized and/or doing business in Texas. Subject to this tax are: corporations, limited liability corporations (LLCs), partnerships, business trusts, professional associations, business associations, and joint ventures. Exempt from this tax are sole proprietorships, passive entities, general partnerships (solely and directly owned by “natural people”), and certain other entities. Even if an entity is unrecognized by federal tax standards, it may be subject to the Franchise Tax in Texas. For more details and to see the official Texas Tax Code on Franchise Tax, visit the following website:
Texas Franchise Tax rates are as follows:
- 1.0% for most entities
- 0.5% for qualifying wholesalers and retailers
- 0.575% for entities making $10 million or less in total annual revenue, filing the E-Z Computation Form 05-169
Also, entities making $1 million or less in total annual revenue owe no tax, and entities that would owe less than $1,000 in tax do not have to pay that tax. However, even if no tax is owed, every taxable entity must file a report.
To file a Franchise Tax report online using Simple PDF Format, visit the following website:
To file a Franchise Tax report online using Smart PDF Format, visit the following website:
To file a Franchise Tax report online with WebFile, visit the following website:
This year, Texas ranked seventh out of all the states for its business-friendly tax climate, according to a report by the Tax Foundation. Another study by U.S. News & World Report listed Houston, TX among the top ten “America’s Best Places to Find a Job 2009.” These studies have found that cities like Houston did not actually experience high employment growth, but they displayed stability during the recession which prevented high employment drops.
I havea question.If I have purchased furniture is the company allowed to tax payments and interest rates? Or should taxes be applied to the merchandise? I would appreciate any clearance on this matter.
I really believe I am being taken advantage of as a senior citizen
Sincerely
Ramona Gains