The Sales Tax Rate in Houston, Texas

Sales tax is a consumption-based tax imposed on the sale of goods and services. The revenue generated is a funding source for state and local governments, paying for public services like schools, roads, and first responders. In the United States, these taxes are not set at the federal level; instead, state, county, and city governments establish their own rates and regulations.

Houston Sales Tax Rate Breakdown

The total combined sales tax rate that consumers pay on purchases in Houston, Texas, is 8.25%. This figure is not a single tax but is composed of three separate rates levied by different government entities.

The largest portion of the rate comes from the state of Texas, which imposes a statewide sales and use tax of 6.25%. Layered on top of the state tax are local taxes. The City of Houston adds its own sales tax of 1.0%, which funds municipal services within the city limits.

The final component is a 1.0% special purpose district tax for the Metropolitan Transit Authority of Harris County (MTA). This tax is specifically designated to fund the region’s public transportation system, including buses and light rail services.

Identifying Taxable Items and Services

The 8.25% sales tax rate in Houston applies to the sale, lease, or rental of all tangible personal property, unless a specific exemption exists. Tangible personal property is defined as physical items that can be seen, weighed, measured, or touched. This broad category includes everyday purchases such as furniture, electronics, automobiles, and clothing.

Beyond physical goods, Texas law also subjects a number of specific services to sales tax. These include services like data processing, information services, real estate listing services, and personal services such as laundry and dry cleaning. Repair and remodeling services for nonresidential real property are also taxable, as are maintenance services for tangible personal property, like appliance repair or dog grooming.

Despite the broad application, there are exemptions for items considered necessities. The most common exemptions are for most unprepared food products, often referred to as groceries. This includes items like flour, sugar, milk, eggs, and fresh produce. Prescription drugs and over-the-counter medicines that are labeled with a federally required “Drug Facts” panel are also exempt from sales tax, as are wound care supplies like bandages and medical tape.

Business Collection and Remittance Process

Any individual or entity engaged in business in Houston that sells taxable goods or services must first obtain a Texas Sales and Use Tax Permit. This permit is issued by the Texas Comptroller of Public Accounts and there is no fee to apply. The application can be completed online through the Comptroller’s eSystems portal.

Once permitted, a business is obligated to collect the correct sales tax, 8.25% for Houston, at the time of every taxable transaction. These collected funds are considered to be held in trust for the state and must be kept separate from the business’s operating revenue. The business must state the tax on the customer’s invoice or receipt.

Businesses must remit the collected taxes to the state by filing a sales tax return with the Texas Comptroller of Public Accounts and paying the amount due. The Comptroller assigns a filing frequency—typically monthly, quarterly, or annually—based on the amount of tax collected. Filing and payment are handled electronically through the Comptroller’s WebFile system, and timely filers are permitted to retain a small discount of one-half of one percent of the tax due.