State and Local Tax Attorneys in Dallas, TX – Remote Sellers
Since the 2018 U.S. Supreme Court decision in South Dakota v. Wayfair, Texas has applied an economic nexus test for franchise and sales taxes under certain circumstances. Remote sellers—out-of-state sellers whose only activity in Texas is the remote solicitation of sales—may be liable for both the Texas Franchise Tax and the Texas Limited Sales, Excise and Use Tax, even without a physical presence in the state.
Franchise Tax
Remote sellers are subject to the Texas franchise tax if their annual gross receipts from business conducted in Texas exceed $500,000. Even without a physical presence, a foreign taxable entity can establish “economic nexus” with the state and owe franchise tax if Texas-source revenue meets or exceeds this threshold during a federal income tax accounting period ending in 2019 or later (34 Tex. Admin. Code § 3.286 — Seller’s and Purchaser’s Responsibilities).
Limited Sales, Excise and Use Tax
Texas imposes sales and use taxes on transactions involving tangible personal property and taxable services. Under Texas law, a remote seller is required to collect and remit sales tax if its total Texas revenue exceeds $500,000 in the preceding 12 months. This threshold creates a safe harbor for remote sellers whose revenue falls below this amount, exempting them from permitting and collection obligations (34 TAC § 3.286).
The Texas sales tax applies to transactions when the purchaser takes possession of the taxable item in Texas, regardless of their physical presence. The Texas use tax complements the sales tax and applies to taxable items purchased out-of-state but stored, used, or consumed in Texas.
Local jurisdictions may also impose use taxes where the taxable item is first stored, used, or consumed.
Currently, Texas imposes a maximum state sales tax of 6.25%, with local governments adding up to 2%, for a combined maximum of 8.25%. However, new remote sellers may elect to collect and remit a single local tax rate of 1.75% by choosing that option on their Sales and Use Tax application. This rate is published annually in the Texas Register by January 1 and remains in effect for the calendar year.
Why Timely Collection and Remission Matters
The Texas Comptroller of Public Accounts has the exclusive jurisdiction to enforce the Texas Tax Code. The Texas Tax Code is both a civil statute and criminal statute, which means the Comptroller can impose civil fines and even refer violators for criminal prosecution. Taxpayers have an obligation to keep contemporaneous records, and collect and remit taxes as required by the Code. If records are not available, the Comptroller may estimate taxes owed. For these reasons, remote sellers should comply with the Texas Tax Code.
Why Choose Coleman Jackson, P.C.?
Our experienced Dallas-based SALT attorneys and counselors assist remote sellers with:
- Obtaining Sales and Use Tax permits and Franchise Tax registration
- Advising on compliance, remediation, and negotiations with government officials
- Maintaining accurate records to meet reporting requirements
- Representation in administrative audits and hearings
- Representation in judicial forums
- Guidance on other regulatory and business law matters
Need an Experienced SALT Lawyer for Your Remote Seller Business?
Contact the trusted State and Local Tax Attorneys at Coleman Jackson, P.C. today at (214) 599-0431 for guidance on compliance, audits, and litigation for remote sellers in Texas.
