For entrepreneurs evaluating Texas as a business location in 2026, the tax landscape is a key factor. With a state sales tax of 6.25% and potential local additions of up to 2%, the combined rate can reach 8.25%.
Economic Nexus in Texas
Remote sellers must collect Texas sales tax if they exceed $500,000 in annual sales within the state. This threshold has been in effect since 2019-10-01. Marketplace facilitators like Amazon and Etsy are also required to collect and remit tax on behalf of third-party sellers. The Texas Comptroller of Public Accounts enforces these provisions and provides registration guidance at https://comptroller.texas.gov.
LLC Formation in Texas (2026)
Forming an LLC in Texas costs $300 for the initial filing. There is no annual franchise tax, keeping ongoing costs low. Texas has no state income tax, making it attractive for LLC owners seeking tax efficiency.
The process involves filing Articles of Organization with the Secretary of State, obtaining a federal EIN, and registering for applicable state tax accounts. You will also need a sales tax permit from the Texas Comptroller of Public Accounts.
Key Tax Rules
• Texas has a 6.25% state sales tax rate with local jurisdictions adding up to 2%.
• No state income tax, making it attractive for business formation.
• Franchise tax applies to businesses with revenue over $2.47 million.
• Economic nexus threshold: $500,000 in sales within the state.
Sales Tax Exemptions
The following categories are generally exempt from sales tax in Texas: groceries, prescription medications, over-the-counter drugs. Businesses should maintain proper documentation for exempt transactions.