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May 16, 2016

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Sales and use taxes, part 1: an FAQ for businesses

Sales and use taxes are a big deal in Texas. It could scarcely be otherwise, given that Texas leads the nation in the percentage of state revenue coming from sales taxes.

The percentage is nearly 83 percent, according to the U.S. Census Bureau. Small wonder, then, that the issue of sales tax deductibility is important to Texas taxpayers.

In this two-part post, we will discuss some of the issues that can arise for businesses in complying with sales and use tax requirements in Texas.

What is required of businesses regarding collecting and paying over sales taxes?

Businesses that conduct businesses in Texas have to collect state taxes at the rate of 6.25 percent on the sales of most types of goods. The tax also applies to leases and rentals of goods, as well as some services.

Local governments may also impose sales taxes, on top of what the state has already imposed.

What is use tax?

Use tax refers to a tax on the storage or consumption of goods. It applies in cases when sales tax wasn’t paid at the time the goods were bought. The rate is the same as the sales tax.

How often do the taxes have to be collected?

It depends on the volume of sales. Depending on the volume, collection of sales and use taxes could be monthly, quarterly or even yearly.

In part two of this post, we will discuss problems businesses owners can run into with collecting or paying over sales and use taxes.

Tax Controversy