Sales Tax

Sales Tax in Texas: Complete Guide 2026

Updated 2026-03-10

Data Notice: Figures, rates, and statistics cited in this article are based on the most recent available data at time of writing and may reflect projections or prior-year figures. Always verify current numbers with official sources before making financial, medical, or educational decisions.

Sales Tax in Texas: Complete Guide 2026

Tax information is for educational purposes only and does not constitute tax advice. Consult a licensed tax professional for your specific situation.

Texas relies heavily on sales tax revenue as one of its primary funding mechanisms, given the absence of a state income tax. The state’s 6.25% base rate is the joint-highest statewide rate in the country, and combined rates reach up to 8.25% in most major cities. Understanding what Texas taxes — and what it exempts — is critical for both residents and businesses.

Texas Sales Tax Rates (2026)

ComponentRate
State base rate6.25%
Maximum local add-on2.00%
Average combined (state + local)~8.20%
Maximum combined rate8.25%

Combined Rates by Major City

CityCombined Rate
Houston8.25%
San Antonio8.25%
Dallas8.25%
Austin8.25%
Fort Worth8.25%
El Paso8.25%
Plano8.25%
Rural areas (no city tax)6.25% — 8.25%

Most major Texas cities have adopted the maximum 2% local sales tax, bringing the combined rate to the 8.25% cap. The local component is split among the city, county, transit authority, and special purpose districts, subject to the combined 2% cap.

How Texas Sales Tax Works

Local Tax Structure

The 2% maximum local tax is typically composed of:

EntityTypical Rate
City1.00% — 1.50%
Transit authority (e.g., METRO, DART)0.50% — 1.00%
County0.00% — 0.50%
Special purpose district0.00% — 0.50%
Total local (capped)2.00%

Because the local rate is capped at 2%, areas inside a transit authority district with a 1% transit tax may have less room for city or special district rates.

Online and Remote Sales

Texas requires remote sellers with Texas sales of $500,000 or more in the preceding 12 months to collect and remit Texas sales tax. Marketplace facilitators (Amazon, eBay, Etsy, etc.) are also required to collect on behalf of third-party sellers.

What Is Taxable and What Is Exempt

Exempt from Sales Tax

  • Groceries: Most food for home preparation (bread, meat, produce, dairy, canned goods)
  • Prescription medications
  • Over-the-counter medications (Texas exempts OTC drugs, unlike many states)
  • Water and water service
  • Internet access
  • Certain agricultural supplies (with a valid ag exemption certificate)
  • Manufacturing equipment (with a valid exemption certificate)

Taxable

  • Prepared food and restaurant meals (taxed at the full combined rate)
  • Carbonated beverages, candy, and snack foods (some nuances apply)
  • Clothing and footwear (taxable, except during designated tax-free weekends)
  • Electronics, furniture, vehicles, and general merchandise
  • Digital goods: Texas generally taxes digital products including software, streaming services, and downloaded content as “data processing services” at a reduced rate or under specific rules.

Sales Tax Holidays

Texas holds an annual Sales Tax Holiday (typically the second weekend in August) where clothing and footwear priced under $100, school supplies under $100, and backpacks under $300 are exempt from sales tax. A separate Energy Star Sales Tax Holiday (typically in late May) exempts qualifying energy-efficient appliances.

Comparison to National Average

MetricTexasNational Average
State base rate6.25%~5.09%
Average combined rate~8.20%~6.60%
Maximum combined rate8.25%Varies
Grocery exemptionYes~32 states
Clothing exemptionNo (except holiday)~8 states
OTC medicine exemptionYes~28 states

Texas’ combined rate is approximately 24% above the national average. The grocery and OTC medicine exemptions provide significant relief on everyday essentials, partially offsetting the high rate on discretionary purchases.

Tips for Minimizing Texas Sales Tax Impact

  1. Take full advantage of sales tax holidays. Stock up on school supplies, clothing, and shoes during the August tax-free weekend. At 8.25%, a $500 back-to-school shopping trip saves over $40.
  2. Buy groceries, not prepared food. The grocery exemption is broad — even bakery items are exempt if purchased for home consumption. However, meals eaten at a restaurant or deli are fully taxable.
  3. Deduct sales tax on your federal return. Since Texas has no state income tax, you can elect to deduct state and local sales taxes instead of income taxes on your federal Schedule A. The IRS provides optional tables based on income and location, or you can track actual spending.
  4. Use ag or manufacturing exemptions if eligible. Farmers, ranchers, and manufacturers can obtain exemption certificates that exempt qualifying purchases from sales tax.
  5. Understand vehicle sales tax. Vehicle sales are taxed at 6.25% of the purchase price (with no local add-on). Private-party sales are taxed at the higher of the sale price or 80% of the standard presumptive value (SPV).
  6. Shop in unincorporated areas for large purchases. If you live near an area without a city sales tax, purchasing big-ticket items there can save 1%—2% on the transaction.

Key Takeaways

  • Texas’ 6.25% state rate plus up to 2% in local taxes produces combined rates up to 8.25% in most major cities
  • Groceries, prescription medications, and OTC drugs are exempt, providing substantial relief on daily essentials
  • Annual sales tax holidays offer savings on clothing, school supplies, and energy-efficient appliances
  • The federal sales tax deduction is especially valuable for Texans, since they cannot deduct state income tax
  • Remote sellers and marketplace facilitators are required to collect Texas sales tax
  • Vehicle sales tax is 6.25% with no local add-on, but private sales use the standard presumptive value system

Next Steps