Texas Sales Tax on Invoices: A Practical Guide
Last verified: · Sales-tax rates and rules change; verify with the Texas Comptroller of Public Accounts before relying on a specific rate.
Texas is one of the most active US states for invoicing complexity — the state taxes a specific list of services (including SaaS via the data-processing rule), has a 6.25% state rate that combines with up to 2% local for a 8.25% cap, and runs an economic-nexus framework that brings out-of-state sellers in at the $500,000 threshold. This guide covers what small businesses and out-of-state sellers need to know about Texas sales tax on invoices, with current rates and authoritative sources.
The headline rate
Texas's state sales tax is 6.25%. Local jurisdictions (cities, counties, transit authorities, special districts) layer up to 2.00% in additional sales tax for a combined cap of 8.25%. Most metropolitan areas — Houston, Dallas, Austin, San Antonio, Fort Worth — sit at the 8.25% cap because city + transit + special-district taxes total the maximum. Smaller cities and unincorporated areas may sit at lower combined rates. Use the Texas Comptroller's Sales Tax Rate Locator for any specific address.
Do you need to register?
If your business is in Texas:yes. Apply for a Texas Sales and Use Tax Permit through the Comptroller's online application — it's free and typically issued within 1-3 business days.
If your business is outside Texas: the post-Wayfair economic nexus rules apply. Out-of-state sellers must register once they have $500,000 or more in Texas salesin the preceding 12 calendar months. Texas uses a 12-month rolling-window approach (not calendar year), so monthly review of Texas sales is recommended. There's no transaction-count prong — Texas eliminated it. Until you cross $500K, no Texas sales-tax obligation exists for the out-of-state seller.
What's taxable in Texas — including the unusual ones
Texas taxes tangible personal property (physical goods) and a specific list of taxable services in Tax Code §151.0101. The full list runs to about 17 categories, but the ones most likely to affect small-business invoicing:
- Data processing services — taxable on 80% of the charge (a 20% statutory exemption). This category covers SaaS, cloud computing, web hosting, data storage, and remotely-accessed software. The 80% taxable / 20% exempt split is a Texas-specific quirk; see Comptroller Publication 94-127.
- Information services — taxable on 80% of the charge (same partial exemption). Includes paid news subscriptions, market research, financial data feeds, and similar information delivery.
- Telecommunications services — taxable.
- Amusement services — admission to entertainment (movies, sports, concerts) is taxable.
- Repair, remodeling, and restoration of real property — taxable in most cases for residential repair; nuanced for commercial repair vs new construction.
- Security services, debt collection, credit reporting — taxable.
Most professional services NOT on the §151.0101 list — accounting, legal, consulting, design, copywriting, photography, freelance creative work — are nottaxed in Texas. The list is exhaustive: if a service isn't named in the statute or the implementing regulations, it's not taxable.
The SaaS rule, in plain English
Texas treats SaaS as data processing services under §151.0035. Data processing services are taxable on 80% of the charge — meaning 20% of the SaaS subscription price is statutorily exempt. So a $1,000/month SaaS subscription in Texas would have $800 of taxable charge × 8.25% combined rate = $66 in Texas sales tax (rather than the full $82.50 if 100% were taxable).
This treatment is unusual nationally — California doesn't tax SaaS at all, while several other states tax 100% of the SaaS charge. The 80/20 split applies only to data processing under Texas law; other software treatments may apply differently. Texas-Texas SaaS sales (in-state seller, in-state buyer) and Texas-out-of-state SaaS sales are both subject to this treatment when nexus exists.
What the invoice should show
For a Texas taxable sale, the invoice should clearly show:
- The taxable items with line-item prices
- For data processing or information services: the 80% taxable basis broken out (or a clear note that the 20% exemption is reflected in the tax calculation)
- Tax label ("Texas Sales Tax" or "TX Sales Tax") with the combined rate
- Calculated tax amount
- Grand total
Mixed invoices (taxable + non-taxable items) should subtotal each separately so the tax calculation is unambiguous. Issueable's invoice generator supports per-line tax handling for this case.
Frequently asked questions
What is Texas's state sales tax rate?
Texas's state sales tax rate is 6.25%. Local jurisdictions (cities, counties, transit districts, special purpose districts) can add up to 2.00% in combined local sales tax, capping the total combined rate at 8.25%. Most metropolitan areas — Houston, Dallas, Austin, San Antonio — sit at the 8.25% cap. Smaller cities and unincorporated areas may have lower combined rates. The Texas Comptroller publishes the current combined rate for any address at comptroller.texas.gov.
Does Texas tax services?
Texas taxes a specific list of services rather than exempting all of them. Taxable services in Texas include: data processing (with a 20% statutory exemption — only 80% of the charge is taxable), information services, telecommunications, amusement services, repair and remodeling of real property in some contexts, security services, debt collection, credit reporting, and several others. Most professional services NOT on the list — accounting, legal, consulting, design — are exempt. SaaS in Texas is generally treated as data processing and is taxable on 80% of the charge. The Texas Tax Code §151.0101 lists taxable services explicitly; if a service isn't on the list, it's not taxed.
What's Texas's economic nexus threshold?
Texas requires out-of-state sellers to register and collect sales tax once they have $500,000 or more in Texas sales in the preceding 12 calendar months. There's no transaction-count threshold (Texas uses dollar threshold only). The 12-month rolling-window approach means sellers should review their Texas sales monthly to identify when they cross the threshold. Once registered, the obligation continues as long as Texas sales remain above the threshold.
Is SaaS taxable in Texas?
Yes, in most cases. Texas treats SaaS, cloud computing, and remotely-accessed software as 'data processing services' under Texas Tax Code §151.0035. Data processing is taxable on 80% of the charge (a 20% statutory exemption) at the combined sales tax rate. This treatment differs from California, which doesn't tax SaaS, and from a number of other states with their own rules. The 80% taxable / 20% exempt split is a quirk of Texas tax law and produces some unusual invoice math; see Texas Comptroller Publication 94-127 (Data Processing Services).
Does Texas have marketplace facilitator rules?
Yes. Since October 2019, marketplace facilitators (Amazon, Etsy, eBay, Walmart Marketplace) that exceed Texas's economic nexus threshold must collect and remit Texas sales tax on third-party sellers' behalf. Sellers operating exclusively through registered marketplace facilitators don't need to register independently for those marketplace sales. Sellers with both marketplace and direct-to-consumer channels count combined Texas sales toward the $500K threshold and register for the direct-sales portion if applicable.
How do I claim a Texas resale exemption?
B2B sales to Texas-registered resellers can be exempt with a valid Texas Resale Certificate (form 01-339) on file. The seller retains the certificate and applies zero tax on qualifying sales. The invoice should reference the buyer's Texas Sales and Use Tax Permit number and note 'Sale for resale; Texas Resale Certificate on file.' Texas Comptroller offers Form 01-339 (resale certificate), Form 01-924 (exemption certificate), and Form 01-922 (limited resale certificate for property used out-of-state) — make sure the right form is used for the transaction type.
What's the Texas franchise tax — and is it the same as sales tax?
No, separate. Texas franchise tax is a margin-based business tax owed by entities doing business in Texas (LLCs, corporations, certain partnerships). It's calculated on revenue, not on sales transactions, and is filed annually on May 15. Texas does NOT have a personal income tax (one of nine states without one). Sales tax is a transactional tax owed by buyers and collected by sellers; franchise tax is an entity-level tax owed by the business itself. Both flow to the Texas Comptroller, but they're filed and calculated separately.
Where can I verify Texas sales tax rates and rules?
Texas Comptroller of Public Accounts at comptroller.texas.gov — the official tax authority. Look for: the Sales Tax Rate Locator (search by address), Publication 94-101 (Texas Sales and Use Tax Rates), Publication 94-127 (Data Processing Services), and the Sales Tax Permit application portal. The Comptroller's website also publishes private letter rulings, frequently asked questions, and webinar content.
Sources
- Texas Comptroller of Public Accounts (comptroller.texas.gov) — official tax authority.
- Comptroller Publication 96-259 — Sales and Use Tax for Online Sellers
- Publication 94-127 — Data Processing Services
- Texas Tax Code Chapter 151 — Limited Sales, Excise, and Use Tax
This page is general information for small businesses, not tax advice. Texas sales tax rates and rules change. For specific transactions, consult a Texas-licensed CPA or tax attorney, or request a written private letter ruling from the Texas Comptroller.