Texas is one of only five states that do not charge any business tax, personal income tax, or fee to sole proprietors. This means that businesses in Texas can invest more of their profits in their operations. The other states that don't charge these taxes are Alaska, Florida, South Dakota and Wyoming. If you sell physical products such as electronics, books, cars, furniture, appliances, raw materials, etc., you will need to remit the taxes you collect to the Texas Comptroller.
In Texas, some items such as medicines and some groceries are exempt from sales tax. The State Administrative Code, Title 34, Part 1, Chapter 3, Subchapter O contains an extensive list of Texas sales tax rules and exemptions applicable to numerous organizations, services and products. The Texas sales tax rate is 6.25 percent statewide. Local tax jurisdictions such as cities and counties can also impose sales taxes at a rate of up to 2 percent for a total maximum combined rate of 8.25 percent. You can use our sales tax calculator to get an idea of what you'll have to pay but always check with your accountant and the Texas Comptroller to find out if your company is required to collect sales taxes and make sure you continue to comply. A privilege tax is a tax on companies for the privilege of doing business in a state.
To pay your unemployment insurance tax, you can create an account with the Texas Workforce Commission and pay online or by mail. You'll be able to deduct some of your company's expenses from your income by calculating how much you have to pay self-employment tax.The state taxes companies that fail to file Form E-Z Computation at a rate of 0.75 percent of their taxable margins (0.375 percent for retailers and wholesalers). Failure to pay or fail to file a franchise tax report, whether you owe franchise taxes or not, could result in the loss of the company's right to conduct business transactions in the State of Texas. If a sales tax report is not properly filed, the Comptroller can submit an estimated billing amount that they will consider valid for tax collection purposes unless you contest it. Texas offers several tax incentives for both businesses and individuals which makes it attractive for expanding and relocating businesses and their employees.
In addition, franchise tax allows for several different tax choices which can adjust the rate and amount taxed. To properly file and pay your Texas small business taxes it's important to maintain complete and accurate business records. Local tax jurisdictions (cities, counties, special purpose districts and traffic authorities) can also impose up to 2 percent sales and use taxes for a maximum combined rate of 8.25 percent. All employers must withhold federal income taxes from each employee's paycheck to be remitted to the federal government. It is essential that business owners maintain control of their payroll taxes or work with a third party vendor to ensure timely filing of all reports and timely payment of all payroll taxes. Legally complying with Texas state taxes is essential for operating your small business and giving you the best chance of success.
Remote sellers are those who only seek sales within the state even if their business location is out of state. Consult with your accountant or tax advisor for more information on how to reduce your LLC's self-employment tax through a corporate tax election S-Corp. While this list is not complete it will give you a good start to creating a complete set of business tax records.