One milestone can change everything for your business: crossing Texas’s $500,000 economic nexus threshold. That single number determines whether you’re collecting sales tax in the nation’s second-largest economy, a state where 1,800+ local jurisdictions create compliance headaches that can derail growth.
For e-commerce sellers watching revenue climb, that threshold arrives faster than expected. And when it does, you’re facing registration deadlines, rate calculations across hundreds of jurisdictions, and filing schedules that pull focus from what actually matters: your customers.
Hands Off Sales Tax (HOST) handles Texas compliance from threshold tracking to final filing, so you never miss a deadline or miscalculate a rate.
What Is Economic Nexus in Texas?
Economic nexus is your business’s connection to Texas based purely on sales activity. No warehouse, no employees, no physical footprint required, just revenue from Texas customers.
After the 2018 Wayfair decision, states gained authority to require out-of-state sellers to collect sales tax once they hit specific thresholds. Texas implemented its law October 1, 2019, fundamentally changing who owes sales tax.
Previously, only businesses with boots on the ground (offices, inventory, employees) faced Texas sales tax obligations. Post-Wayfair, your sales volume alone creates the obligation.
Texas Economic Nexus Threshold: The $500,000 Rule
Texas keeps it simple: $500,000 in total Texas revenue during the preceding twelve months triggers economic nexus.
This threshold counts gross revenue from all sales of tangible personal property delivered into Texas, both taxable and exempt. Hit $500,000 in any rolling 12-month period, and nexus exists.
Revenue-only standard: Texas ditched transaction counts. Ten sales or ten thousand, only the dollar amount matters.
Exempt sales count: The $500,000 includes sales-for-resale and exempt product categories. Many sellers miss their obligation by tracking only taxable sales.
Rolling 12-month measurement: Texas watches your trailing twelve months constantly. You can’t hide behind calendar years or fiscal periods.
All channels included: Your website, Amazon, eBay, Etsy, every platform where you’re the seller of record counts toward the threshold (unless marketplace facilitators handle collection).
Example: $420,000 in Texas sales during 2024, then $150,000 by March 2025. You’ve exceeded $500,000 in the trailing twelve months. Economic nexus triggered.
When Texas Economic Nexus Takes Effect
Cross the threshold, and nexus doesn’t slam into effect instantly. Texas provides breathing room before collection obligations begin.
Nexus establishes the month you exceed $500,000. Collection obligations start the first day of the fourth month after crossing.
Timeline example:
- Month 1: You exceed $500,000 (nexus established in June 2025)
- Months 2-3: Grace period (July-September, no collection required)
- Month 4: Collection begins October 1, 2025
Texas recommends registering during the grace period so your permit activates when obligations begin.
HOST’s nexus analysis tracks your sales across all states, pinpointing exactly when thresholds cross and collection starts, eliminating guesswork and preventing late registrations.
What Happens After Crossing the Threshold
Register for a Texas Sales Tax Permit
Obtain your permit from the Texas Comptroller through their webfile system. Free registration takes 2-4 weeks and requires your FEIN, business structure, estimated monthly sales, and Texas activity details.
Collect the Right Sales Tax
Starting your collection date, charge appropriate sales tax on all taxable Texas sales. State rate: 6.25%. Combined rates with local taxes: 6.25% to 8.25%.
The catch? Accurate rates require knowing precise delivery addresses. With 1,800+ local taxing jurisdictions, rate calculation gets messy fast.
Simplified option for remote sellers: Texas offers an alternative. Instead of tracking exact rates across every jurisdiction, you can elect to collect a flat 1.75% local use tax rate statewide. This creates a combined 7.95% rate everywhere in Texas (6.25% state + 1.75% local).
This simplification is available only to out-of-state sellers and must be elected during registration or by filing Form 01-799. Texas-based businesses can’t use this option because they must calculate exact destination rates. The 1.75% rate updates annually each January 1.
File Regular Returns
Texas assigns filing frequencies (monthly, quarterly, or annually) based on expected liability. Most new out-of-state sellers start quarterly. Returns due by the 20th of the month following the period. Zero returns required even if you collected nothing.
Remit Everything Collected
Texas offers no vendor discounts. Every penny collected goes to the Comptroller by the filing deadline.
Maintain Four Years of Records
Complete sales tax records like invoices, exemption certificates, exempt sales documentation, it all must be kept for four years.
Common Texas Nexus Scenarios
Marketplace Facilitator Rules
Selling exclusively through Amazon, eBay, Etsy, or Walmart Marketplace? The platform typically handles Texas sales tax collection for those sales.
But if you also run your own website or sell through non-facilitating channels, you’re responsible for those sales. Track total Texas revenue across all channels to determine if non-marketplace sales meet the $500,000 threshold.
Wholesale and Exempt Sales Still Count
Sales-for-resale and exempt transactions count toward the $500,000 threshold, even though they’re not taxable.
$400,000 wholesale + $150,000 retail = $550,000 total. You’ve crossed the threshold at $550,000, even though only $150,000 was taxable.
Penalties for Non-Compliance
Ignoring the threshold doesn’t make obligations disappear. It creates liability that compounds daily.
Back Taxes: Every dollar of uncollected sales tax from when collection obligations began. Texas can assess up to four years back.
Penalties: 5% if tax is 1-30 days late, jumping to 10% after 30 days. Failure to file or pay can hit 10% of tax due.
Interest: 6.25% annually (subject to adjustment), compounding over time.
Audit Risk: Non-compliant sellers face heightened scrutiny. Texas actively pursues remote sellers exceeding thresholds without registration.
A seller who crossed the threshold two years ago without registering could face tens of thousands in back taxes, penalties, and interest. It becomes a liability that grows exponentially the longer you wait.
How HOST Simplifies Texas Nexus Compliance
Managing Texas alongside obligations in 44 other states creates complexity that strangles growth. HOST handles every aspect so compliance never diverts focus from revenue.
Nexus Analysis: We analyze sales data across all states, identifying exactly where Texas’s threshold was met and when collection obligations begin.
Texas Registration: We handle Comptroller paperwork, navigating state requirements so your permit activates when collection starts.
Automated Rate Calculation: We review and optimize sales tax software, ensuring correct rates across Texas’s 1,800+ jurisdictions, preventing overcharges or undercollections.
All Filings Covered: We prepare and file monthly, quarterly, and annual returns on time, including local and special district returns.
Notice Management: We interpret and respond to Comptroller notices, protecting you from penalties while resolving issues efficiently.
Audit Defense: We organize documentation and defend your position during audits.
Voluntary Disclosure Agreements: If past Texas obligations surface, we file VDAs to limit lookback periods and abate penalties.
Through parent company TaxMatrix, we’ve helped North America’s largest companies manage multi-state requirements. Now we bring that expertise to e-commerce sellers navigating identical complexity.
Ready to Get Texas Compliant?
Crossing Texas’s $500,000 threshold triggers obligations in a state where 1,800+ jurisdictions make compliance treacherous. Whether you just exceeded the threshold, have been operating without compliance, or want certainty you’re collecting correctly, professional help eliminates risk and reclaims time.
Every day without proper compliance increases liability. Every hour spent researching rules, registering, calculating rates, and filing returns is an hour not spent on revenue.
Contact HOST today to discuss your Texas nexus situation or schedule a free consultation. We’ll analyze your sales footprint, determine obligations, and handle everything from registration through ongoing filings.
You handle the sales, we handle the tax.
Want to learn more? Get our “10 Sales Tax Mistakes E-Commerce Sellers Make” e-book.
Frequently Asked Questions
What is Texas’s economic nexus threshold for sales tax?
Texas’s threshold is $500,000 in total Texas revenue during the preceding twelve months. This includes both taxable and exempt sales delivered into Texas. Once exceeded, remote sellers must register and collect Texas sales tax.
Does the $500,000 threshold include exempt sales?
Yes. Texas counts all sales of tangible personal property delivered to Texas customers, including sales-for-resale and other exempt transactions. Only taxable sales require collection, but all sales count toward the threshold.
When do I start collecting Texas sales tax after crossing the threshold?
Collection begins the first day of the fourth month after exceeding the threshold. Cross $500,000 in June, and you must begin collecting October 1. Texas recommends registering during the three-month grace period.
Do marketplace sales count toward Texas’s threshold?
Sales where marketplace facilitators handle tax collection don’t count toward your threshold. Sales through your website or non-facilitating channels do count. If selling through multiple channels, track direct-to-customer Texas sales separately.
What happens if I exceeded Texas’s threshold but never registered?
You owe back taxes from when collection obligations began, plus penalties and interest. Texas can assess up to four years of uncollected tax. The longer you wait, the larger the liability. Consider filing a Voluntary Disclosure Agreement to limit lookback periods and abate penalties.
How do I know if I’ve exceeded the threshold?
Review total Texas sales (all channels, taxable and exempt) over any rolling 12-month period. If sales exceeded $500,000 in any consecutive twelve months, you’ve triggered nexus. HOST’s nexus analysis tracks this automatically across all states, alerting you when thresholds cross.
