Taxes / State tax rules / Texas
Selling on eBay, Poshmark or Etsy from Texas: sales tax and 1099-K rules
On a marketplace sale to a Texas buyer, a marketplace provider engaged in business in Texas collects state and local sales and use tax and certifies that to its sellers; the Comptroller says a remote seller selling only through such providers needs no Texas permit, but a Texas-based seller still needs a permit and files returns even if all its sales are on marketplaces. The Texas Comptroller pages we checked say nothing about a separate Texas 1099-K rule.
General information, not tax advice. Check with a tax professional about your own situation.
Checked against the official pages listed below on .
Texas in short
- General sales tax:
- Yes, 6.25% state rate
- Marketplace facilitator law:
- Yes: Tex. Tax Code § 151.0242 (HB 1525, 2019), since Oct 1, 2019
- When a marketplace must collect:
- for a marketplace provider that is a remote seller, all sales through its marketplace exceeding $500,000 (the remote seller safe harbor, measured over the previous 12 calendar months), unless it is otherwise engaged in business in Texas
- Form 1099-K:
- No state rule stated on the pages checked
Who collects the tax on a marketplace sale
A marketplace provider engaged in business in Texas collects, reports and remits state and local sales and use tax on all sales made through its marketplace and certifies in writing to sellers that it will. Until a seller receives a certification, the Comptroller says the seller should collect.
If you sell only through marketplaces
A remote seller that only sells through providers that have certified they collect is not required to hold a Texas permit, but must keep records of marketplace sales for four years. A Texas seller has a physical presence and must hold an active permit and file returns, even if its only sales are through a marketplace, the Comptroller says.
Registration, resale certificates and what changes when you also sell direct have their own page: Texas: seller's permit and resale certificate rules.
The law: Tex. Tax Code § 151.0242 (HB 1525, 2019), effective .
"If you are a Texas seller and sell through a marketplace, you are still responsible for having a Texas tax permit and filing your sales and use tax returns timely."
"Remote sellers that only sell through a marketplace provider that has certified they will collect sales and use tax on your behalf are not required to hold a Texas tax permit."
"As of April 1, 2020, you must include all sales in the safe harbor calculation, including marketplace sales, even if the marketplace provider is collecting and remitting the sales tax."
Sources: Marketplace Providers and Marketplace Sellers; Remote Sellers and Marketplace Frequently Asked Questions; Taxing Out-of-State Sellers (Fiscal Notes, September 2019).
Texas's sales tax
Texas imposes a 6.25% state sales and use tax, and cities, counties, special purpose districts and transit authorities can add up to 2%, for a combined maximum of 8.25%.
"Texas imposes a 6.25 percent state sales and use tax on all retail sales, leases and rentals of most goods, as well as taxable services"
Sources: Sales and Use Tax.
Form 1099-K: Texas and the federal test
The Comptroller's sales tax, marketplace and remote seller pages read for this page say nothing about a Texas Form 1099-K requirement.
The federal test, for comparison: the IRS says a payment app or online marketplace must send a Form 1099-K when payments for goods or services total over $20,000 in more than 200 transactions, and adds: "However, they may send you a Form 1099-K with lower amounts and/or transactions." (Understanding your Form 1099-K, reviewed ). The Instructions for Form 1099-K count both parts for the calendar year, through each platform separately, and say the box 1a gross amount is figured without adjustments for credits, discounts, fees, refunds or shipping, so a 1099-K figure is not the same as profit. More on the federal rule in Form 1099-K for resellers.
Sources: Marketplace Providers and Marketplace Sellers; Sales and Use Tax.
Worked examples
Tax on a $40 marketplace sale to Austin
At the 6.25% state rate, a $40.00 taxable item carries $2.50 of state tax; local tax of up to 2% brings the most it can be to 8.25%, or $3.30. The provider collects it.
The Comptroller's return example
A seller has $30,000 of sales through a certifying marketplace and $20,000 of taxable sales through its own website in a reporting period. It reports $50,000 in item one (Total Texas Sales) and $20,000 in item two (Taxable Sales). At the 6.25% state rate, the state tax on the $20,000 is $1,250.00, before local tax.
Marketplace sales count toward the $500,000 safe harbor
The Comptroller's example: a remote seller makes $300,000 of Texas sales through its website and $300,000 through marketplaces that collect. The combined $600,000 is over $500,000, so the seller is not covered by the safe harbor and collects on its $300,000 of website sales, while the marketplaces collect on theirs.
Edge cases and details
- A remote seller under the $500,000 safe harbor with inventory temporarily stored at a marketplace provider's Texas facility does not need a permit if the provider certified it will assume the seller's duties; above $500,000, the Comptroller says it must obtain a permit and collect on its sales.
- A marketplace seller that is a taxable entity, such as a corporation, partnership or LLC, owes Texas franchise tax if it has physical presence or economic nexus in Texas, and an out-of-state entity holding a Texas use tax permit is presumed to have nexus.
- Remote sellers may use the single local use tax rate, 1.75% per the Comptroller, but marketplace providers may not use it for sales they collect on.
- No special form is required for a provider's certification; it can sit in the terms of use or another agreement, the Comptroller says.
- Since July 1, 2022, marketplace providers also collect the prepaid 9-1-1 emergency service fee on prepaid wireless service and fees on lead-acid battery sales.
What to do
- If you are based in Texas, the Comptroller expects you to hold a sales tax permit and file returns even if every sale is on a marketplace; keep each provider's certification so marketplace sales can be excluded from taxable sales.
- If you are outside Texas, add marketplace and direct Texas sales together for the previous 12 calendar months against the $500,000 safe harbor, and check with a tax professional.
- Keep marketplace sales records for at least four years, as the Comptroller requires of all sellers.
Common questions
Do I need a Texas sales tax permit if I only sell on marketplaces?
If you are in Texas, yes: the Comptroller says a Texas seller must have an active permit and file returns even when all sales are through a marketplace. If you are a remote seller and every provider has certified it collects, no permit is required.
How do marketplace sales go on a Texas sales tax return?
Include them in item one, Total Texas Sales, and leave them out of item two, Taxable Sales, if the provider has certified it collects for you, the Comptroller says.
When did Texas marketplace providers start collecting?
October 1, 2019, when the Comptroller implemented HB 1525, Texas' marketplace statute, and its remote seller rule changes.
Does Texas have its own 1099-K threshold?
The Comptroller pages we checked say nothing about a Texas 1099-K rule.
Related
- Every state on one table: sales tax, marketplace facilitator laws and 1099-K rules
- Texas: seller's permit and resale certificate rules
- Tennessee: sales tax and 1099-K rules
- Utah: sales tax and 1099-K rules
- Form 1099-K for resellers: the federal test
- Do eBay's fees apply to the sales tax a buyer pays?
- Where each selling app keeps its sales report
General information, not tax advice
This page summarizes Texas's own published pages and statutes as read on , and the IRS's 1099-K pages. It doesn't say what you should file, register for or pay. Rules depend on your situation and change: check with a tax professional, or with the state's revenue department.
Sources
Official pages this page is built from, with the day each was read.
- Texas Comptroller of Public Accounts: Marketplace Providers and Marketplace Sellers; read . Provider duties, certification, Texas sellers need a permit, remote sellers don't, franchise tax.
- Texas Comptroller of Public Accounts: Remote Sellers and Marketplace Frequently Asked Questions; read . $500,000 safe harbor, return examples, inventory storage, single local rate, 2022 fees.
- Texas Comptroller of Public Accounts: Taxing Out-of-State Sellers (Fiscal Notes, September 2019); read . HB 1525 marketplace statute and October 1, 2019 implementation.
- Texas Comptroller of Public Accounts: Sales and Use Tax; read . 6.25% state rate and 8.25% combined maximum.
- IRS: Understanding your Form 1099-K, reviewed . The federal 1099-K test.
- IRS: Instructions for Form 1099-K, reviewed . Both parts of the federal test counted for the calendar year.
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