How to Calculate Sales Tax in Texas

How to Calculate Sales Tax in Texas
Image Credit: Towfiqu Photography/Moment/GettyImages

In 2019, the general sales tax rate for the state of Texas is 6.25 percent. Cities and municipalities are permitted to set their own tax rates, which can get up to 2 percent on top of the state tax. Business owners are responsible for collecting state and local taxes on goods they sell through their business. It's easy to calculate the sales tax on items you're purchasing with a simple formula.

What Is Sales Tax Anyway?

Basically, it's a tax on retail purchases. It's used to pay for local budget items like roads, schools and fire departments. The Internal Revenue Service has nothing to do with sales tax since the tax is managed at the state and local level. Almost all states have a sales tax, and each state sets its own rate. In Texas, that rate is currently 6.25 percent.

Cities and municipalities have their own rates and these rates are charged on top of the state rate. At the time of publication local rates range from 0 to 2 percent. This means that the smallest possible sales tax rate for Texas is 6.25 percent, and the highest rate is 8.25 percent.

How Is Sales Tax Calculated?

Sales tax is a percentage of the sticker price of an item. This percentage gets added to the total price of the item at the checkout. Most tangible products – that's items you can pick up from the store shelves – are taxable. If you're buying goods in-person from a brick-and-mortar store, then every customer will pay the same sales tax rate.

Different rules apply when you buy stuff online. Generally when you order goods from the internet, you pay the sales tax rate applicable to the address where you have the items shipped. This is usually your home address.

However, if both you and the seller are based in Texas, then the seller must charge you the sales tax rate for their business location instead of your home location. The shipping charge is also taxable. For example, if you bought an item for $50 with a $4.99 shipping charge, then $54.99 is the taxable total. So you may find yourself paying a slightly different sales tax rate than usual when shopping online.

Texas Sales Tax Rate Information

You need to know two things to calculate the sales tax in Texas:

  • Either the tag price of the item or the total price (the amount you paid at the checkout).
  • The sales tax rate for the location where you bought the item.

The first of these is easy – look at the item's price tag, your receipt or credit card statement to see how much you paid. To find the sales tax rate for the store locality, visit the Texas Comptroller website and navigate to the sales tax rate lookup tool. Type in the address of the store to get the tax rate for this location.

Calculate Sales Tax in Texas

The easiest option is to find an online sales tax in Texas calculator and plug in the numbers. But the pencil-and-paper approach is straightforward too. To find out how much you'll have to pay at the checkout when you know the tag price, use this formula:

Tag price x sales tax rate (expressed as a decimal)

For instance, suppose the sales tax rate is 6.25 percent (the basic Texas tax rate). Divide this number by 100 to convert it to a decimal — 0.0625. If you buy an item for $60, the sales tax is:

$60 x 0.0625 = $3.75

You will pay $63.75 (the sum of the $60 price tag and the $3.75 sales tax) to the cashier.

Determine the Sales Tax Paid

To find out how much sales tax you paid when you know the total receipt, use the following formula:

Total price / (1 + sales tax rate)

So if you paid $63.75 at the checkout, the calculation would be 63.75/ 1.0625, or $60. The sticker price was $60, and you paid $63.75, so the sales tax must be $3.75.

references