The Austin sales tax rate is 8.25 percent, the maximum any Texas city can charge. It applies to most retail goods and a specific list of services, but not to groceries, prescription drugs, or most medical devices. The rate has held steady for years and is the same everywhere inside Austin city limits.
How the 8.25% Rate Is Split
Three taxing authorities share every dollar of sales tax collected in Austin:
- Texas state sales tax: 6.25%
- City of Austin: 1.0%
- Capital Metropolitan Transportation Authority: 1.0%
Texas caps combined local rates at 2 percent on top of the state’s 6.25 percent, so 8.25 percent is the ceiling anywhere in the state.1Texas Comptroller of Public Accounts. Sales and Use Tax The state portion funds statewide programs; the city portion pays for municipal services like roads, parks, and public safety; and Capital Metro’s share funds bus routes, MetroRail, and other transit. Unincorporated areas near Austin that sit outside the Capital Metro service area or inside a different special purpose district can have a slightly lower combined rate, so the total can shift by a fraction if you cross certain boundary lines.
What’s Taxable and What Isn’t
Most tangible personal property sold in Austin is taxable at the full 8.25 percent: electronics, furniture, household goods, clothing (outside the August holiday), and leases or rentals of tangible property.
Texas also taxes a defined list of services, which surprises some buyers. Taxable services include data processing, cable television, telecommunications, pest control, landscaping, janitorial work, motor vehicle parking, laundry and dry cleaning, security services, and debt collection. A 20 percent exemption applies to data processing and information services, so only 80 percent of those charges are actually taxed.1Texas Comptroller of Public Accounts. Sales and Use Tax Most professional services — legal, accounting, medical — are not taxed.
Groceries vs. Prepared Food
Staple groceries are exempt. Bread, milk, eggs, produce, meat, cereal, cheese, chips, nuts, and granola bars all ring up tax-free.2State of Texas. Texas Tax Code 151.314 – Food and Food Products Soft drinks, candy, and ice are the main taxable exceptions.
Prepared food is fully taxable at 8.25 percent. That covers anything sold heated, anything served with eating utensils, and anything ready to eat immediately — pizza by the slice, rotisserie chicken from the hot case, made-to-order sandwiches, store-assembled salads. If a store employee heats a frozen burrito for you, tax applies. If you microwave it yourself using the store’s microwave, it doesn’t. Food that’s merely cut, repackaged, or pasteurized stays exempt so long as the store doesn’t provide utensils. Utensils here means plates, forks, cups, and straws; napkins and foam containers don’t count.3Texas Comptroller of Public Accounts. Grocery and Convenience Stores
Other Common Exemptions
- Prescription drugs are exempt. Over-the-counter medicines are exempt if they carry the FDA-required “Drug Facts” panel. Insulin is exempt with or without a prescription.4Cornell Law Institute. 34 Texas Admin Code 3.284 – Drugs, Medicines, Medical Equipment, and Devices
- Braces, hearing aids, prosthetics, orthopedic appliances, dental devices, and their replacement parts are exempt. No prescription needed except for corrective lenses.4Cornell Law Institute. 34 Texas Admin Code 3.284 – Drugs, Medicines, Medical Equipment, and Devices
- Hospital beds designed for patient care, including mattresses and built-in devices, are exempt.5Texas Public Law. Texas Tax Code 151.313 – Health Care Supplies
The August Sales Tax Holiday
Texas holds a sales tax holiday each August. The 2026 dates are August 7 through August 9. During that weekend, most clothing and footwear priced under $100 per item can be bought tax-free, along with school supplies under $100 and student backpacks (including rolling and messenger styles) under $100.6Texas Comptroller of Public Accounts. Sales Tax Holiday
The $100 cap is per item, not per receipt. A $90 pair of shoes qualifies; a $110 pair doesn’t, and you can’t split the price. The exemption applies automatically at checkout — no coupons or forms.
Online and Out-of-State Purchases
Ordering online from a seller outside Texas doesn’t avoid the tax. The same 8.25 percent applies as Texas use tax. In practice, most large retailers and marketplace platforms collect it automatically at checkout, so Austin buyers rarely have to self-report.
The collection duty works two ways. Remote sellers with more than $500,000 in total Texas revenue over the preceding twelve months must register and collect Texas tax; sellers below that threshold aren’t required to.7Texas Comptroller of Public Accounts. Remote Sellers Marketplace platforms like Amazon, eBay, and Etsy have a separate rule under Texas Tax Code Section 151.0242: the platform must collect and remit tax on every taxable sale made through it, even when the actual seller is a small vendor who wouldn’t hit the $500,000 threshold on their own.8State of Texas. Texas Tax Code 151.0242 Sellers still have to collect tax on sales they make outside those platforms, such as through their own website or at a craft fair.
Buying a Car Is Different
Vehicle purchases don’t follow the 8.25 percent rule. The Texas motor vehicle sales tax is 6.25 percent with no local add-on, and it’s collected by the county tax assessor-collector when you title and register the vehicle, not by the dealer at the point of sale.9Texas Comptroller of Public Accounts. Tax Rates – Motor Vehicle Tax Guide So a car bought in Austin is taxed at 6.25 percent, not 8.25 percent.
Getting a Sales Tax Permit
Any business selling taxable goods or services in Texas needs a Sales and Use Tax Permit from the Comptroller before its first taxable sale. The permit is free, and you apply online through the Comptroller’s website.10Texas Comptroller of Public Accounts. Texas Online Tax Registration Application You’ll need:
- The sole owner’s Social Security number, or each partner’s SSN or FEIN, or each corporate officer’s SSN.
- Your NAICS code describing the business activity.
- Names and identifying details for all owners, officers, partners, or directors, and the physical address of each business location.
The permit has to be displayed at your place of business, and each location needs its own. A restaurant with two Austin locations needs two permits.10Texas Comptroller of Public Accounts. Texas Online Tax Registration Application
Buying Inventory Tax-Free: Resale Certificates
If you’re buying inventory to resell, you can buy it tax-free by giving your supplier a completed Form 01-339, the Texas Sales and Use Tax Resale Certificate. The certificate requires your Texas taxpayer number; a copy of the permit alone isn’t a substitute.11Texas Comptroller of Public Accounts. Texas Sales and Use Tax Frequently Asked Questions – Resale
Resale certificates cover items you’ll resell in the same form, items that become part of a product you sell, and property bought to lease or rent to customers. They don’t cover anything your business will use internally. Office furniture, cleaning supplies, and the broom you grabbed from stock to sweep the storeroom are all taxable to you. If you pull an item you bought under a resale certificate for your own use, you owe tax on the purchase price or the fair market rental value, reported on the “taxable purchases” line of your next return.11Texas Comptroller of Public Accounts. Texas Sales and Use Tax Frequently Asked Questions – Resale
Filing, Deadlines, and the Timely Filing Discount
The Comptroller assigns your filing frequency — monthly, quarterly, or annually — based on how much tax you collect. Monthly returns and payments are due on the 20th of the month after the reporting period. April’s sales are due by May 20. If the 20th is a weekend or holiday, the deadline moves to the next business day.12Texas Comptroller of Public Accounts. Due Dates for Taxes, Fees and Information Reports
Most businesses file through Webfile, part of the Comptroller’s eSystems portal. You enter total sales, calculate tax due, and pay electronically.13Texas Comptroller of Public Accounts. File and Pay
File and pay on time and Texas takes 0.5 percent off the tax as a timely filing discount. Monthly and quarterly filers can take an additional 1.25 percent prepayment discount.14Texas Comptroller of Public Accounts. Texas Sales and Use Tax Frequently Asked Questions – Report and Pay They’re small each period, but worth claiming every time.
Penalties for Late Filing
Miss a deadline and the charges stack:
- 1 to 30 days late: 5 percent penalty on the tax due.
- More than 30 days late: 10 percent.
- After the Comptroller issues a Notice of Tax Due: another 10 percent, bringing the total to 20 percent.
There’s also a flat $50 penalty for each late report, even if no tax was due that period. Interest starts accruing on the 61st day after the original due date at a variable rate the Comptroller sets each calendar year.15Texas Comptroller of Public Accounts. Penalties for Past Due Taxes Letting one return slide can cost a lot more than the tax itself.
Records to Keep
Texas requires businesses to keep sales tax records for at least four years from the date each record is created. Exemption and resale certificates have to be kept for at least four years after the last sale they cover.16Cornell Law Institute. 34 Texas Admin Code 3.281 – Records Required Records also have to be kept through any pending audit, administrative hearing, or judicial proceeding, even past the four-year mark.
Auditors expect invoices, receipts, exemption and resale certificates, and documentation of tax collected and remitted. Most small-business audit problems trace back to missing certificates rather than fraud. If you can’t produce a valid resale certificate for a tax-free sale, the Comptroller can assess the full tax plus penalties as if the certificate never existed.
Buying an Existing Business
Anyone buying an existing Austin business should know that unpaid sales tax obligations can transfer to the new owner. This successor liability applies even if the purchase agreement says otherwise, because state tax law overrides private contracts on the point. Before closing, request a tax clearance letter from the Comptroller confirming the seller has no outstanding sales tax liability. Skipping that step is one of the more expensive mistakes a buyer can make.