The City of Austin’s sales tax rate is 8.25 percent. This includes a 6.25 percent state sales tax and a 2 percent local sales tax.
The rules for grocery stores are a little more straightforward than those for other businesses. Most basic foods (milk, eggs, bread) are not taxable. Beer, gum, candy and soft drinks are taxable. It does get a little complicated with ice cream, however. Essentially, large tubs of ice cream are not taxable, but individually packaged items like ice cream sandwiches are taxable. Popsicles that do not contain at least 50 percent fruit juice are taxable. Over-the-counter drugs are not taxable. Most vitamins and herbs are also not taxable as long as they have a Supplement Facts label. FAQ on grocery store items.
Did you know that admission to antique shows is taxable? It’s taxable as part of the Amusement Services category, which also includes rodeos, skating rinks, go-cart tracks and paintball fields. Other taxable services include cable and satellite TV, credit reporting, data processing, debt collection, Internet access, insurance, security and nonresidential property repair. See also FAQ on taxable services.
Cars and trucks are subject to a lower sales tax rate of 6.25 percent. The taxes on auto sales between individuals are not necessarily based on the actual sales price, however. It must be calculated based on the car’s Standard Presumptive Value (SPV). Even if you get a bargain and pay lower than market value, the sales tax is still based on the value calculated by the Texas Department of Motor Vehicles. See also SPV calculator. See below for more information on how Hurricane Harvey's aftermath has affected sales tax collection for motor vehicles.
Sales Tax Rates for Other Cities in the Austin Area
Sunset Valley: 8.125 percent
Georgetown: 8.25 percent
Pflugerville: 8.25 percent
Round Rock: 8.25 percent
West Lake Hills: 8.25 percent
Sales Tax Holiday
Usually held in early August, the sales tax holiday helps families reduce the cost of getting kids ready for the beginning of the school year. Most clothing, footwear, school supplies and backpacks are tax-free during the holiday. Each individual item must sell for less than $100 to qualify for the tax break.
This is an evolving issue, but online retailers that have a physical presence in Texas must collect sales taxes from customers in the state. Amazon went to court to try to fight the Texas rules, claiming that its presence in Texas was not significant, consisting of only a few distribution warehouses. Texas-based brick-and-mortar stores argued for the other side, saying that online retailers were receiving an unfair advantage since they previously didn’t have to collect sales taxes.
If you still have questions, check out the Texas sales tax FAQ.
Aftermath of Hurricane Harvey
When Hurricane Harvey roared ashore in August 2017, many businesses shut down temporarily and others were completely destroyed. The state granted sales tax extensions to many businesses to give them time to recover and rebuild. Nonetheless, the ripple effect of the devastating hurricane will linger in Texas for years to come. Some of the tax revenue that used to flow into state coffers will simply cease to exist as businesses close permanently. Many other suspensions and waivers due to the storm are industry-specific. Industries hit hard by the storm included hotels and trucking companies.
2017 Tax Reform
The tax bill passed at the end of 2017 at the national level may affect some sales taxes in Texas. Most notably, your ability to deduct sales taxes from your federal taxes may have changed. Consult with a tax professional to get the most up-to-date advice on this evolving issue.
Property Taxes vs. Sales Taxes
In response to consumer complaints about ever-rising property taxes, some legislators are proposing bills that would increase sales taxes in exchange for more stability in their property tax bill. Rep. Charlie Geren’s bill will allow some cities to essentially eliminate property taxes and replace that revenue by increasing sales taxes. A key sticking point in that proposal is that cities would only be eligible for this option if they could show that the revenue from the increased sales taxes would be equal to or greater than the revenue from property taxes. A more modest proposal by Rep. Drew Springer would raise more revenue from sales taxes by eliminating exemptions on items such as over-the-counter medications, some food items, gasoline, auto repair and haircuts.