Economic Nexus Threshold

Texas adopted economic nexus rules effective October 1, 2019, following South Dakota v. Wayfair. Remote sellers must register once they exceed $500,000 in Texas taxable sales during the preceding 12 months. Unlike states with dual thresholds, Texas does not require a minimum transaction count—revenue alone determines the obligation.

The $500K threshold applies to taxable sales only, not total revenue. Exempt wholesale transactions, nontaxable services, and out-of-scope sales do not count toward the threshold. Sellers should track Texas-specific taxable revenue separately from gross sales to determine when registration is required.

Physical Presence Rules

Texas has long enforced nexus for businesses with physical presence in the state. Any tangible connection—inventory, employees, contractors, or even temporary activity like trade shows—creates immediate nexus, regardless of sales volume. Physical presence nexus predates economic nexus and remains the primary trigger for most businesses with local operations.

Common physical presence triggers include:

• Inventory stored in Texas warehouses, including Amazon FBA, third-party logistics providers, or drop-shipping partners
• Employees or contractors working from Texas, whether full-time, part-time, or remote
• Office space or facilities, including rented offices, coworking memberships, or manufacturing sites
• Trade show attendance where you display goods, take orders, or solicit sales
• Installation, repair, or maintenance services performed in Texas by your staff

If you use Amazon FBA and inventory is stored in Texas, you have physical presence. Amazon collects tax on marketplace sales, but direct sales through your own website or other channels require separate registration.

Statewide Rate with Minimal Local Tax

Texas charges a 6.25% state sales tax, with most jurisdictions adding up to 2% local tax for a maximum combined rate of 8.25%. However, the state does not impose local sales tax on remote sellers who lack physical presence. Out-of-state sellers registering under economic nexus rules collect only the 6.25% state rate, simplifying compliance significantly.

Sellers with physical presence in Texas may owe local tax depending on the location of their inventory or business operations. The Texas Comptroller provides a Sales Tax Rate Locator to determine combined rates for specific addresses.

Marketplace Facilitator Obligations

Texas requires marketplace facilitators to collect and remit sales tax on behalf of sellers once the facilitator's total Texas sales exceed $500K. Platforms like Amazon, eBay, Etsy, and Shopify's managed fulfillment handle collection for transactions processed through their systems.

Sellers operating through multiple channels—marketplace plus direct sales—must track each separately. Marketplace facilitators cover platform transactions, but direct website sales or sales through non-facilitator channels remain the seller's responsibility. If your combined activity exceeds $500K in taxable sales, registration is required even if most revenue flows through a facilitator.

SaaS and Digital Goods Taxability

Texas does not tax most software as a service (SaaS) or remotely accessed cloud software. The state defines taxable tangible personal property as physical items or items that can be perceived by the senses. Software accessed remotely without a transfer of code typically escapes sales tax, while downloaded software or electronically delivered digital goods may be taxable depending on how they're classified.

This creates a compliance advantage for SaaS businesses: if your product is cloud-based and accessed via login rather than downloaded, Texas sales likely do not trigger a collection obligation. However, sellers of downloadable software, digital media, or streaming content should review Texas Tax Code Chapter 151 for specific guidance, as certain digital products may fall under tangible personal property rules.

Registration and Filing

Register with the Texas Comptroller through the Webfile system as soon as you meet the economic nexus threshold or establish physical presence. Texas does not require a separate business entity registration before obtaining a sales tax permit—you can register directly as an out-of-state remote seller.

Most sellers file monthly or quarterly returns, depending on sales volume. Texas offers a Single Local Use Tax option for remote sellers who collect only the state rate, further simplifying compliance. Returns are due by the 20th of the month following the reporting period.

Texas does not offer a voluntary disclosure program with broad penalty relief, so proactive registration before making taxable sales is critical. Retroactive registration after months of unreported activity creates liability, penalties, and interest.

Evidence to Retain

Texas audits can reach back four years, or longer if fraud is suspected. Retain the following documentation to support your nexus determination and sales tax filings:

• Sales records by state showing total Texas revenue and taxable sales
• Marketplace facilitator statements documenting platform-collected tax
• Inventory location logs showing where products were stored and fulfilled
• Exemption certificates for wholesale, resale, or exempt transactions
• Customer invoices and receipts for taxable and nontaxable sales
• Payroll and contractor records identifying Texas-based workers

Keep records for at least four years from the transaction date. Missing documentation during an audit shifts the burden of proof to the seller and can result in estimated tax assessments based on incomplete data.