State Nexus Guide
Texas Sales Tax Nexus 2026: $500K Threshold Explained
Texas economic nexus threshold is $500,000 under Tex. Tax Code §151.107. Revenue-only, no transaction count. Texas Comptroller registration steps, single local rate explained.
Texas Sales Tax Nexus — The 2026 Threshold
Texas imposes economic nexus on any remote seller that has more than $500,000 in total revenue from taxable and exempt sales of tangible personal property and services delivered into Texas in the preceding 12 calendar months. The statute is Tex. Tax Code §151.107, as amended. Texas adopted economic nexus effective October 1, 2019, more than a year after the Wayfair decision. Texas's $500,000 threshold is revenue-only — there is no parallel 200-transaction test. A seller with 10 transactions totaling $501,000 has Texas nexus. A seller with 300 transactions totaling $499,999 does not — at least under the economic nexus test. Texas updated its threshold rules in 2023 to explicitly apply a revenue-only standard, aligning with California and New York on the $500,000 floor. One practical detail that catches sellers: Texas uses a 12-month rolling window, not a calendar year. If your Texas revenue for the 12-month period ending on October 31 exceeds $500,000, you have Texas nexus on November 1 — even if your calendar year-to-date total is only $400,000. This rolling measurement means nexus can attach mid-year, which a calendar-year-only monitoring approach will miss. Texas also has a unique feature: sellers who cross the threshold 'must apply for a permit before making any taxable sales in Texas,' as the Texas Comptroller's own guidance states. Most states allow 30 to 60 days after establishing nexus before requiring registration. Texas's language implies an obligation to register before the first taxable sale if the rolling-12-month threshold has been crossed — which creates urgency for fast-growing sellers approaching the Texas line. Texas's state sales tax rate is 6.25%. Local jurisdictions (cities, counties, transit authorities, and special districts) may add up to 2%, for a maximum combined rate of 8.25%. Texas is unique among major states for its 'single local rate' system — sellers remit local tax at a single composite rate for each delivery zip code, rather than separately calculating city, county, and district rates. This simplifies rate compliance compared to California's 400+ district structure.
What Triggers Nexus in Texas Beyond Sales Volume
Texas's physical nexus rules are defined in Tex. Tax Code §151.107 and Texas Comptroller guidance. Several triggers are specific to Texas's interpretation of what constitutes a taxable presence. FBA inventory: Texas Amazon fulfillment centers in Coppell, Fort Worth, San Antonio, Houston, Corpus Christi, and other locations create physical nexus for FBA sellers with inventory there. Physical nexus in Texas has no minimum threshold — a single unit of inventory in a Texas warehouse creates nexus. Texas's marketplace facilitator statute (Tex. Tax Code §151.0242) requires marketplace facilitators to collect on behalf of sellers, but this does not eliminate the seller's physical nexus registration obligation. Representatives and agents: Texas imposes nexus on out-of-state sellers who maintain a representative, agent, or solicitor in Texas who regularly solicits Texas sales on the seller's behalf. This includes independent sales reps working on commission, delivery personnel making regular Texas stops, and employees attending Texas trade shows. Texas explicitly includes 'engaging in business' through any third party conducting activities on the seller's behalf in the state. Drop-shipping from Texas suppliers: if a Texas-based vendor ships goods to Texas customers as a seller's drop-ship fulfillment partner, the Texas Comptroller may assert that the vendor relationship creates a Texas representative or agent, creating nexus for the out-of-state seller. This is less clearly established than FBA physical nexus but has been a point of auditor focus. Service businesses: Texas taxes certain services — including software-as-a-service. SaaS providers delivering into Texas are subject to Texas sales tax under the taxable services definition in Tex. Tax Code §151.0101. Texas's $500,000 economic nexus threshold covers both goods and taxable services, making it one of the more comprehensive threshold tests for SaaS companies.
How to Register in Texas
Texas sales tax registration is handled through the Texas Comptroller of Public Accounts. The online registration portal is available at comptroller.texas.gov — navigate to 'Sales and Use Tax' and select 'Apply for a Permit.' Texas's system is called eSystems. What you need: your EIN (or SSN for sole proprietors), your legal business name, your primary business address, any Texas business address, expected monthly Texas sales volume, and banking information for electronic funds transfer (required for sellers with annual Texas tax liability over $10,000). Texas registration is free — no application fee. There is no security deposit requirement in Texas, unlike California. The Texas Comptroller typically issues a sales and use tax permit within 2 to 5 business days of a complete online application. The permit is your authority to collect Texas sales tax from customers; operating without one exposes you to the 'failure to hold permit' penalty. Filing frequency in Texas: annual filers report if annual Texas tax liability is under $1,000; quarterly if under $1,500 per period; monthly if above. Most sellers at the $500,000 threshold in Texas will be monthly filers, with returns due on the 20th of the following month. Texas requires electronic filing and payment for monthly filers. One Texas-specific rule: Texas has a 0.5% prepayment discount that sellers can claim for prepaying their estimated tax before the return due date. For sellers with significant monthly Texas liability, this discount is worth capturing. Details are on the Comptroller's website under 'Prepayment of Tax.'
What Texas Audits Look Like
The Texas Comptroller's office runs one of the country's most active sales tax audit programs, with dedicated teams for e-commerce, marketplace, and remote-seller audits. Texas audit selection is data-driven: the Comptroller matches 1099-K filings from payment processors, marketplace sales reports, and business registration data against Texas sales tax permit records. Sellers with apparent Texas revenue above $500,000 and no Texas permit number are flagged for follow-up. Audit triggers specific to Texas: high-volume Amazon FBA sellers with Texas warehouse inventory; sellers on the Shopify platform with large Texas shipping volumes per public shipping data; businesses registered in other states with IRS-reported income that maps to Texas customer addresses; and referrals from the IRS through federal-state data sharing agreements under IRC §6103(d). Texas's statute of limitations for sales tax assessments is four years from the date the return was due. Unlike most states, Texas applies this four-year period even to non-filers, starting from when the return should have been filed. This means Texas's practical look-back is typically four years from the date of nexus establishment for sellers who never registered — a slightly more defined window than states with open-ended non-filer statutes of limitations. Penalty structure: Texas imposes a 5% penalty if tax is paid within 30 days of the due date, and a 10% penalty after that. Additional 1.5% per month interest applies on unpaid balances, compounded annually. For a seller with four years of Texas economic nexus and no registration, the combined exposure can be substantial. Texas does not have a formal voluntary disclosure program equivalent to California's VDP, but the Comptroller's office will negotiate payment plans and sometimes waive penalties for sellers who come forward proactively.
Common Texas-Specific Mistakes
Texas's nexus rules produce several failure modes that are particular to the state. Missing the rolling 12-month window: Texas's measurement period is the preceding 12 calendar months, not a calendar year. A seller who hit $490,000 in Texas revenue in 2024 and then adds another $15,000 in January 2025 has crossed the threshold in February 2025 — even if their 2025 calendar-year total is only $15,000. Sellers who track thresholds on a calendar-year basis miss rolling-period crossings that happen mid-year. Not registering before making taxable sales: Texas's statute language — 'must apply for a permit before making any taxable sales' — is stronger than most states. Sellers who notice they have crossed the threshold and wait until the next quarterly review may already be in violation for the period after the threshold was crossed. Texas's requirement to register before the first taxable sale post-threshold is a real obligation, not merely a guidance recommendation. Confusing the local rate structure: Texas's single local rate system simplifies compliance compared to California, but it still requires correct rate lookup by delivery zip code. Sellers who apply the 6.25% state rate alone and ignore local add-ons are under-collecting by up to 2 percentage points in many Texas cities. Houston, Dallas, Austin, and San Antonio all have combined rates of 8.25%. Assuming services are not taxable: Texas taxes certain services that other states exempt. SaaS is taxable in Texas under Tex. Tax Code §151.0101 as a 'data processing service.' Sellers of cloud software who focus on tangible-goods nexus rules and overlook Texas's service taxability provisions face both a nexus registration problem and an under-collection problem simultaneously. Not claiming the prepayment discount: Texas's 0.5% prepayment discount is small per transaction but meaningful at volume. Sellers who do not set up prepayment with their return schedule leave this credit unclaimed.
Key Facts and Figures
These figures are drawn directly from Texas statutes and tax authority guidance.
Texas's economic nexus threshold is $500,000 in total revenue from taxable and exempt sales of tangible personal property and services delivered into Texas during the preceding 12 calendar months, with no transaction-count threshold, under Tex. Tax Code §151.107 (effective October 1, 2019).
Texas uses a rolling 12-month measurement period for economic nexus — not a calendar year — meaning nexus can attach mid-year when the trailing 12-month Texas revenue total crosses $500,000.
Texas's maximum combined sales tax rate is 8.25% (6.25% state rate plus up to 2% in local taxes); Texas uses a 'single local rate' system per delivery zip code, which simplifies rate calculation compared to states with hundreds of overlapping local jurisdictions.
Texas's statute of limitations for sales tax assessments is four years from the date the return was due, even for non-filers — a defined look-back window that differs from states like California where the limitations period is tolled for non-registered sellers.
Frequently Asked Questions
Does Texas measure the $500,000 threshold by calendar year or a rolling 12 months?
Texas uses a rolling 12-calendar-month window, not the prior or current calendar year. This is a critical difference from most other states. If your Texas gross revenue for the 12-month period ending on any given month exceeds $500,000, you have economic nexus in Texas from that point forward. A seller with $460,000 in Texas revenue for calendar year 2024 who adds another $45,000 in Texas revenue in January 2025 has crossed the threshold in early 2025 — even though their 2025 calendar-year total is only $45,000. Monitoring systems that track only calendar-year totals will miss this. You need to track the trailing 12-month Texas total on a rolling monthly basis.
Does Texas have a transaction-count threshold, or is it revenue only?
Revenue only. As of 2023, Texas's economic nexus test under Tex. Tax Code §151.107 is based solely on $500,000 in gross revenue from Texas sales — there is no 200-transaction or any other transaction-count threshold. This means a seller making 5 large transactions totaling $501,000 has Texas nexus, while a seller making 500 small transactions totaling $100,000 does not. If you are tracking Texas with both a revenue and a transaction counter, you can retire the transaction tracker — it is irrelevant under current Texas law.
I sell SaaS subscriptions. Does Texas tax my product, and do I have economic nexus there?
Texas is one of the clearest states on SaaS taxability: SaaS is taxable in Texas as a 'data processing service' under Tex. Tax Code §151.0101. If you deliver software to Texas customers via the cloud (subscription-based, browser-based, or API access), Texas considers that taxable. Texas's $500,000 economic nexus threshold covers both tangible goods and taxable services — so your SaaS subscription revenue counts toward the threshold. A SaaS company with $501,000 in Texas subscriber revenue has Texas economic nexus and must collect sales tax on those subscriptions. This is a common surprise for software founders who assume SaaS is generally exempt.
How do I register for a Texas sales tax permit?
Register through the Texas Comptroller of Public Accounts at comptroller.texas.gov via the eSystems portal. The application requires your EIN, business name, primary address, and expected monthly Texas sales volume. Texas registration is free — no application fee and no security deposit, unlike California. The Comptroller typically issues your permit within 2 to 5 business days of a complete application. Once registered, you collect Texas sales tax on all taxable Texas sales at the applicable state plus local rate (up to 8.25% combined for most Texas cities). Monthly filing is required if your annual Texas tax liability exceeds $1,500.
Can I fix my Texas exposure before getting an audit letter?
Texas does not have a formal voluntary disclosure program equivalent to California's VDP, but the Texas Comptroller's office will work with sellers who proactively contact them before an audit is opened. In practice, sellers who contact the Comptroller, disclose their period of unregistered activity, and arrange to register and pay back tax often receive waiver or reduction of penalties — though interest is typically not waived. Once an audit notice arrives, this informal negotiating leverage largely disappears. Texas's four-year statute of limitations means the look-back period is more bounded than California's, which is helpful — but four years of compound interest and penalties still adds substantially to the underlying tax owed.
Are you close to the Texas threshold?
NexusFlag tracks your Texas sales activity in real time and alerts you before you cross the nexus threshold — not after the audit notice arrives. 14-day free trial, no card required.
Start Free TrialOr try the free nexus check without creating an account.