Q: Can you please advise me on obtaining a Texas sales and use tax permit?
Thanks to a Texas business owner for that question! A sales and use tax permit—called a “seller’s permit” in some states—authorizes the permit holder to collect sales tax on transactions conducted in the state. Anyone selling tangible property in Texas needs to obtain a sales and use tax permit from the the state comptroller. Our short guide will tell you everything you need to know about the process.
What is a Texas Sales and Use Tax Permit?
A sales and use tax permit is the registration required to sell goods in Texas. If your business sells or leases tangible property in Texas, the permit is necessary to legally collect sales tax on the goods you sell. Sales tax also applies for selling taxable services in Texas.
What is tangible personal property?
Under the Texas Tax Code, tangible personal property is defined as any property that can be weighed, measured, or be perceptible to the senses—essentially, any physical property.
What is a taxable service?
“Taxable services” include a wide range of services, ranging from amusement services, repair and maintenance, insurance, debt collection, internet access and more. A full list of qualifying services can be found in the Texas state statutes.
Do I need a Texas Sales and Use Tax Permit?
You’ll need to apply for a Texas’s Sales and Use Tax Permit if you sell products or services, or lease tangible property in Texas. (This is also called “nexus,” and it applies to both domestic and foreign companies doing business in Texas.) As a vendor in the state of Texas, you are responsible for collecting sales tax, and submitting sales and use tax returns to the state. In this sense, getting your sales and use tax permit is a way of registering your business with the Texas Comptroller.
For more information about Texas sales tax requirements, check out the Texas State Comptroller. Or, for questions specific to your business, you might want to reach out to a business attorney or CPA.
What does it mean to have nexus in Texas?
In the business world, having “nexus” means that some aspect of your business is tied to a particular place—in this case, Texas. Texas considers “nexus” to constitute:
- Having a retail store, warehouse, inventory or any place of business in Texas
- Employing someone who solicits sales or advertising in Texas
- Keeping inventory or equipment in Texas
- Leasing equipment in Texas
- Making deliveries in Texas using a company vehicle
- Making $500,000 or more in sales in Texas
If any of the above applies to your company, it means you’re doing business in Texas and most likely need to apply for a sales/use tax license.
How do I apply for a Texas Sales and Use Tax Permit?
To apply for a Texas Sales and Use Tax Permit, you’ll need to submit a Sales/Use Tax License Application to the Texas Department of Revenue. You may submit your application online through the Texas Online Sales Tax Registration Application System.
Alternatively, you can print and mail an AP-201 application to:
Comptroller of Public Accounts
111 E. 17th St.
Austin, TX 78774-0100
Do I need a permit for each place of business I own?
If your business has more than one location, you’ll need a separate permit for each active place of business. A location is considered active if it receives three or more orders for taxable sales in a calendar year. The Texas Comptroller will issue separate permits with distinct outlet identification numbers for each location, but maintain the same taxpayer identification number for the business itself.
What is the fee for a Texas Sales and Use Tax Permit?
There is no fee to register for the permit, but some businesses may be required to post a security bond to obtain a permit. For more information, contact a Texas Comptroller field office.
What is the penalty for making sales without a permit?
If you are found to have knowingly made sales without a permit, you can be convicted of a Class C misdemeanor under Texas law and fined up to $500. Repeat offenses incur increasingly severe misdemeanors and correspondingly higher fines. Three or more repeated offenses can net a $4,000 fee and up to a year of jail time.
Learn more about How to Start a Business in Texas.