YAHOO! TEXAS TAXES!

That is a great question. Texas is known for not having a state individual income tax, which is a significant difference from most other states.

Because of this, the state and local governments rely heavily on other types of taxes.

Here is a list of the primary taxes individuals and businesses pay in Texas:

🏡 Taxes on Property and Wealth

These are generally local taxes and are often considered the biggest tax burden for Texas residents and businesses.

Property Tax (Real Property):
- This is the largest source of revenue for local governments (school districts, counties, cities, and special districts).
- It is assessed on the appraised value of your real estate (land and structures).
- Note: Texas does not have a state-level property tax. The rates are set and collected by your local taxing jurisdictions.
Property Tax (Business Personal Property):
- Businesses must pay property tax on tangible personal property used to generate income (e.g., equipment, inventory, furniture).

🛒 Taxes on Goods and Services (Consumption)

These are paid when you buy most items and certain services.

State Sales and Use Tax:
- The base state rate is $6.25\%$.
- You pay this when purchasing most tangible goods and certain taxable services.
- Exemptions: Notably, most unprepared grocery items (like bread, milk, eggs), certain medical services, and prescription drugs are exempt from sales tax.
Local Sales and Use Tax:
- Cities, counties, special purpose districts, and transit authorities can impose their own sales tax, which is added to the state rate.
- The maximum total local rate is $2.00\%$.
- The maximum combined state and local sales tax rate is $8.25\%$.
Use Tax:
- This is the equivalent of the sales tax on taxable goods bought from outside of Texas (e.g., online purchases from sellers without a physical Texas presence) and brought into or used in the state, where Texas sales tax was not originally collected.

⛽ Excise and Specific Taxes

These are taxes on the purchase of specific goods or services.

Item/Activity	Tax Type	Details
Gasoline & Diesel	Excise Tax	20 cents per gallon (state rate, no additional state sales tax).
Alcohol	Excise Taxes	Taxes levied on the volume of spirits, wine, and beer (paid by the manufacturer/vendor, but often reflected in the retail price).
Mixed Beverages	Sales & Gross Receipts	A mixed beverage sales tax (paid by consumer) and a mixed beverage gross receipts tax (paid by business) on alcohol purchased at bars/restaurants.
Tobacco/Cigarettes	Excise Tax	A fixed amount per pack of cigarettes or on other tobacco products.
Hotel/Lodging	Occupancy Tax	Guests pay a state tax of $6\%$ on the price of a room costing over $15 per day, plus any local municipal taxes.
Motor Vehicles	Motor Vehicle Sales Tax	A tax on the sale or transfer of a motor vehicle.

💼 Business Taxes

These are taxes levied on business entities operating in Texas.

Franchise Tax (Margin Tax):
- This is Texas’s primary business tax, sometimes called a “margin tax,” paid by most corporations, LLCs, and partnerships. It is a tax on a company’s margin (total revenue minus certain deductions, like cost of goods sold or compensation), not its net income.
- Sole proprietorships and general partnerships owned by natural persons are generally exempt, and a business with total revenue below a set threshold owes no tax.

Key Takeaways for Individuals

NO state individual income tax.
NO state or local tax on retirement income or Social Security benefits.
The two main taxes you will see are Property Tax (local government) and Sales Tax (state and local government).

Would you like me to look up the current maximum sales tax rate for a specific city or county in Texas?

That’s a helpful next step!

For sales tax in Texas, the maximum combined rate is ¹$8.25\%$.² This is composed of the ³$6.25\%$ state rate plus up to a ⁴$2.00\%$ local rate (which includes city, county, and various special purpose districts).⁵

Because most major cities in Texas have adopted the maximum local rate of $2.00\%$ (often comprised of $1.0\%$ for the city and $1.0\%$ for a transit or special purpose district), the sales tax rate for most of the largest cities is the maximum.

Here are the current combined sales tax rates for the ten largest cities in Texas (by population), all of which are at the maximum:

🏙️ Sales Tax Rates for Top Texas Cities (8.25%)

City	County	Combined Sales Tax Rate	Local Rate Breakdown
1. Houston	Harris	$8.25\%$	$6.25\%$ State + $2.00\%$ Local (City + Transit)
2. San Antonio	Bexar	$8.25\%$	$6.25\%$ State + $2.00\%$ Local (City + Transit)
3. Dallas	Dallas	$8.25\%$	$6.25\%$ State + $2.00\%$ Local (City + Transit)
4. Austin	Travis	$8.25\%$	$6.25\%$ State + $2.00\%$ Local (City + Transit)
5. Fort Worth	Tarrant	$8.25\%$	$6.25\%$ State + $2.00\%$ Local (City + Transit)
6. El Paso	El Paso	$8.25\%$	$6.25\%$ State + $2.00\%$ Local (City + SPD)
7. Arlington	Tarrant	$8.25\%$	$6.25\%$ State + $2.00\%$ Local (City + Transit)
8. Corpus Christi	Nueces	$8.25\%$	$6.25\%$ State + $2.00\%$ Local (City + Transit)
9. Plano	Collin	$8.25\%$	$6.25\%$ State + $2.00\%$ Local (City + Transit)
10. Lubbock	Lubbock	$8.25\%$	$6.25\%$ State + $2.00\%$ Local (City + SPD)

Important Context on Rates

The $6.25\%$ state rate is consistent everywhere in Texas.
The ⁶$2.00\%$ local rate can be made up of taxes from the city, county, and/or special purpose districts (like Transit Authorities or Emergency Service Districts). If the combined total of these local taxes hits ⁷$2.00\%$, the overall rate is capped at the ⁸$8.25\%$ maximum.⁹
The lowest possible sales tax rate in Texas is $6.25\%$ in areas with no local sales tax (often unincorporated county areas).