How Much Is the Sales Tax in Houston, Texas?

Sales tax is a consumption tax applied to the sale of goods and services, serving as a primary revenue source for state and local governments. These funds help finance public services like infrastructure, education, and public safety. Sales tax rates vary significantly by location within a state, reflecting local financial needs and policies.

Current Sales Tax Rate

The combined sales tax rate in Houston, Texas, is 8.25%. This rate represents the total percentage consumers pay on taxable purchases made within the city. This combined rate is consistent across the city, ensuring a uniform tax application for most retail transactions.

Components of the Sales Tax Rate

The 8.25% sales tax rate in Houston is a composite of several distinct levies. The State of Texas imposes a base sales tax rate of 6.25% on all retail sales and certain services. The City of Houston adds its own sales tax of 1%. The Metropolitan Transit Authority of Harris County (METRO) contributes an additional 1% to the combined rate, funding public transportation initiatives.

Common Goods and Services Subject to Sales Tax

In Texas, sales tax primarily applies to the retail sale, lease, and rental of tangible personal property. This includes items like electronics, clothing, vehicles, and digital goods such as computer programs, software, music, and movies. Software-as-a-service (SaaS) is also taxable if accessed within the state.

Certain services are specifically deemed taxable under Texas law. These include amusement services, cable television, and motor vehicle parking and storage. Repair, maintenance, and remodeling services for tangible personal property are also subject to sales tax.

Telecommunications, credit reporting, debt collection, and information services are also taxable. Labor charges for fabricating or processing tangible personal property, such as tailoring or woodworking, are included in taxable transactions. Prepared food and beverages, including restaurant meals and most ready-to-eat items, are subject to the full sales tax rate.

Common Exemptions from Sales Tax

Many common exemptions exist from sales tax in Texas. Most food and food ingredients purchased for home consumption, often referred to as unprepared groceries, are exempt. This includes items like fresh fruits, vegetables, meat, dairy products, bread, and cereals. This exemption does not extend to prepared or hot foods, candy, soft drinks, or dietary supplements.

Prescription drugs and many medical devices are also exempt. This includes items such as insulin, diabetes testing supplies, prosthetics, orthopedic devices, hearing aids, and prescription eyeglasses. Wound care dressings and hypodermic syringes are also exempt.

Over-the-counter medications are exempt if they carry a Drug Facts panel or are dispensed with a prescription. Educational materials, including textbooks and instructional items, are commonly exempt. Items purchased by non-profit organizations or for the purpose of resale are typically exempt, provided proper documentation like a resale certificate is furnished.