Sales Tax in Texas Product Sale
Texas imposes a maximum of 8.25% sales tax on the sale of tangible personal property. Merchants who sell tangible personal property must impose the tax on each transaction and remit the taxes to the Texas Comptroller of Public Accounts, the state’s taxing agency. However, special rules apply to food and beverages, drugs and medical supplies, newspapers and magazines, services, products for resale or manufacturing, agricultural products.
In general, Texas taxes the sale of tangible personal property at a rate of 8.25 percent. In addition, local city and county governments have the option to impose additional local sales taxes to generate revenue for appropriate purposes. The Texas Administrative Code Rule 3.293 and Section 151.314 of the Texas Tax Code govern Texas food sales and tax laws. The Comptroller of Public Accounts follows these laws and regulations.
The Comptroller of Public Accounts requires licensed businesses file monthly, quarterly or annually sales tax returns based on the expected sales volume in Texas and remit the sales taxes they have collected on behalf of the state. The Comptroller of Public Accounts issues sales tax permits to qualified businesses. However, certain food sales are exempt from the state’s sales tax.
The Texas Tax Code generally states that “food products for human consumption” are exempt from the state’s sales tax, which means food for immediate consumption is taxable, but food the purchaser must prepare or eat at home is not. The Texas Tax Code specifically designates cereals, poultry, milk, fish, vegetables, spices, condiments, fruits, sugars, salts, coffees and teas as exempt food. This list of exemption food is not exhausted; additional information can be found. In addition to those foods, it exempts products derived from those items listed.
For example, tomato sauce is exempt as a vegetable product. Baked goods like pastries and donuts are exempt. In addition, meals prepared for school lunches, churches, hospitals and retirement homes are exempt.
The Texas Tax Code specifically places certain items outside of the exemption. These products include soft drinks, candy, ice-cube and artificial sweeteners. The list is also not exhausted; other items can be found as non-exempt food product. In addition, the sale of all food products prepared at restaurants, vending machines, cafeterias or other similar businesses does not enjoy the sales tax exemption. The exemption does not apply to food sales in prisons operated by or under contract with the state.
“General use” clothing (defined differently between states) is usually taxable, but a handful of states either exempt specific clothing items (e.g., Minnesota, Pennsylvania), or impose thresholds (e.g., New York, Massachusetts). There are states where clothing gets special treatment (e.g., Rhode Island, Vermont). In Pennsylvania, general clothing is exempt, but formal wear is not.
In New York State, for example, general clothing is exempt from local sales tax if under $110, but only in certain jurisdictions (New York City and a handful of counties including Chenanga, Columbia, and Chatauqua); if an item retails for more than $110, the entire amount is taxable. The remaining localities do impose local sales and use tax in place of the state sales tax. Even though some states do not impose a sales tax requirement on sellers at the state levels, plenty of localities are allowed to do so. For example, Madison County in New York State offers no exemption for clothing, choosing instead to impose a local tax of 4% on clothing sales. For Texas, the clothing is taxed at a maximum rate of 8.25%.
Disclaimer: This essay is for general information and educational purpose. For further information, make sure to consult your accountant.
Joseph Scrofano. (2017). Texas Food Sales and Tax Laws. Retrieved from http://legalbeagle.com/6872751-texas-food-sales-tax-laws.html
Jeffrey Joyner. (2017). What is Not Taxable with the Texas Sales Tax. Retrieved from http://www.ehow.com/info_7789682_not-taxable-texas-sales-tax.html
Liz Malm. (2013, November 19). Map: State Sales Taxes and Clothing Exemptions. Retrieved from https://taxfoundation.org/map-state-sales-taxes-and-clothing-exemptions
Texas Administrative Code. (2017). Retrieved from https://texreg.sos.state.tx.us/public/readtac$ext.ViewTAC?tac_view=5&ti=34&pt=1&ch=3&sch=O&rl=Y
Avalara. (2017). Sales Tax for the Clothing and Apparel Industry. Retrieved from https://www.avalara.com/learn/whitepapers/sales-tax-clothing-industry/
Sales Tax -Product Sales
by: Guanyi Yu
Guanyi Yu-Master's Degree in Accounting Student at Naveen Jindal School of Management
Staff Accountant IAA CPA FIRM PLLC