Selling handmade jewelry, vintage clothing, or digital downloads on Etsy from your apartment in Oregon or Florida feels like a small, personal operation. Then a customer in Houston places a large order, and suddenly you are wondering whether Texas expects you to collect sales tax on that sale. The short answer depends on two things: how much you sell into Texas and whether Etsy is already handling it for you. Here is how the rules work in 2026, who is actually responsible for collecting and remitting the tax, and what you need to do to stay compliant.
What Is Sales Tax Nexus and Why It Matters
Sales tax nexus is the legal connection between your business and a state that triggers an obligation to collect and remit sales tax on transactions within that state. Before 2018, you generally needed a physical presence in a state, like a warehouse, office, or employee, to have nexus there. That changed when the U.S. Supreme Court ruled in South Dakota v. Wayfair that states can also establish nexus based purely on economic activity, meaning the dollar amount of sales you make into that state.
Texas adopted economic nexus rules effective October 1, 2019. If your total gross revenue from sales delivered into Texas exceeds $500,000 during the preceding 12 calendar months, you have economic nexus in Texas and must register for a sales tax permit, collect Texas sales tax on taxable sales, and remit those taxes to the Texas Comptroller of Public Accounts.
That $500,000 threshold is one of the highest in the nation. Many states set their threshold at $100,000, so a seller who has already triggered nexus in 20 other states might still be below the Texas threshold. However, the way Texas counts that $500,000 has several features that catch sellers off guard.
How Texas Counts Your $500,000 Threshold
The Texas threshold is measured on a rolling 12-month basis, not a calendar year. The Comptroller evaluates the trailing 12 months at any point in time. If you cross $500,000 in June, you need to act in June, not wait until year-end to figure it out.
The threshold calculation is also exceptionally broad. Gross revenue for threshold purposes includes taxable sales, non-taxable sales, exempt sales, sales for resale, and even sales made through marketplace facilitators like Etsy, Amazon, and eBay. This is the detail that surprises most growing sellers. Even if Etsy is collecting and remitting the tax on your behalf, those sales still count toward your individual $500,000 threshold.
Here is a concrete example. Suppose you sold $300,000 through your own Shopify store and $250,000 through Etsy to Texas customers over the past 12 months. Your total is $550,000, which means you have exceeded the threshold and triggered economic nexus. The fact that Etsy collected tax on the $250,000 portion does not reduce your total for threshold purposes.
Once you cross the threshold, you must begin collecting sales tax on the first day of the second month following the month in which you exceeded $500,000. If you crossed the threshold in June, your collection obligation begins on August 1.
The Marketplace Facilitator Rule and What Etsy Handles
Here is where it gets more practical for most Etsy sellers. Texas has a marketplace facilitator law that requires large online marketplaces to collect and remit sales tax on behalf of their sellers for sales made through the platform. Etsy qualifies as a marketplace facilitator under Texas law.
This means that for every sale you make through Etsy to a Texas customer, Etsy is responsible for calculating, collecting, and remitting the correct Texas sales tax. Etsy charges the combined state and local rate based on the buyer’s delivery address, which in most Texas cities is 8.25 percent. You do not need to take any separate action for these sales because the marketplace handles the tax end-to-end.
This applies equally to Amazon, Walmart Marketplace, eBay, and other large platforms that meet Texas’s definition of a marketplace facilitator. If you sell exclusively through one or more of these platforms and have no direct sales channel, the practical reality is that you are likely not collecting or remitting Texas sales tax yourself because the platforms are doing it for you.
When You DO Need to Register and Collect
The marketplace facilitator rule covers sales made through the platform, but it does not cover your direct sales. If you also sell through your own website, at craft fairs in Texas, or through any channel outside of a marketplace facilitator, those sales are your responsibility.
You need to register for a Texas Sales Tax Permit and collect Texas sales tax on direct sales if any of the following apply to you.
You have physical nexus in Texas. This means you have an office, warehouse, storage facility, employee, or contractor located in the state. If you use a third-party fulfillment center in Texas, including Amazon FBA warehouses, that counts as physical nexus. Physical nexus triggers a collection obligation from the first dollar of sales, with no revenue threshold required.
You have exceeded the $500,000 economic nexus threshold in the preceding 12 months. Remember, marketplace sales count toward this threshold. Once triggered, you must register and begin collecting on your direct sales, even though the marketplace continues handling its own sales.
You attend trade shows, craft fairs, or pop-up events in Texas. Even temporary physical presence can create nexus in some cases, especially if you make sales at the event.
How to Register for a Texas Sales Tax Permit
If you determine that you need to register, the process is straightforward and free of charge. Registration is done online through the Texas Comptroller eSystems portal. You will complete Form AP-201, which takes approximately 20 to 40 minutes. You will need your Social Security number or federal EIN, your business name and address, a description of what you sell, and your NAICS code.
After submitting the application, allow two to three weeks to receive your permit. Once approved, you will receive your Texas sales tax permit number and instructions on your filing frequency. Most small businesses are assigned a quarterly filing schedule, but higher-volume sellers may be placed on monthly filing.
Texas does not charge a fee for the permit itself. However, there is a key compliance rule: even if you have zero taxable sales during a reporting period, you must still file a return. Filing a zero-dollar return is required to avoid penalties and keep your account in good standing.
What Rate Do You Charge
As a remote seller shipping into Texas, you charge the combined rate at the buyer’s delivery address. In most major Texas cities, that rate is 8.25 percent. For deliveries to rural or unincorporated areas, the rate can be as low as 6.25 percent.
Texas offers an alternative for remote sellers: the Single Local Use Tax Rate. Instead of calculating the specific local rate for every delivery address, you can elect to use a single statewide local use tax rate published by the Comptroller. This simplifies compliance but may result in slight over-collection or under-collection compared to address-specific rates. The election applies to all your Texas sales consistently, and you cannot pick and choose which transactions use which method.
For most small sellers using platforms like Shopify or WooCommerce, sales tax plugins can automatically look up the correct destination rate for each order. If you sell on Etsy and also have a direct website, Etsy handles the platform sales while your website needs its own sales tax calculation solution.
Penalties for Non-Compliance
Texas takes sales tax compliance seriously. If you have nexus and fail to register or collect, the Comptroller can assess the uncollected tax against you personally, plus penalties and interest. Late filing penalties start at 5 percent of the tax due and increase to 10 percent after 30 days. Interest accrues from the original due date.
Texas also participates in information-sharing agreements with marketplace platforms, and the Comptroller has been increasing enforcement activity since the Wayfair decision. Sellers who are clearly above the threshold and have not registered may receive a notice from the state, and discovering your obligation through a letter is never the ideal way to find out.
The safest approach is to monitor your Texas sales quarterly. If you are approaching the $500,000 rolling threshold, begin the registration process early so you are ready to collect on the first day of the second month after you cross it.
Frequently Asked Questions
Does Etsy collect Texas sales tax for me automatically?
Yes. Etsy is classified as a marketplace facilitator under Texas law and collects and remits Texas sales tax on all sales made through the platform. You do not need to register or collect separately for Etsy sales.
What is the Texas economic nexus threshold for online sellers?
Texas requires registration and collection when your total gross revenue from sales delivered into Texas exceeds $500,000 in the preceding 12 calendar months. This includes marketplace sales even if the platform collects the tax.
Do I need a Texas sales tax permit if I only sell on Etsy?
If you sell exclusively through marketplace facilitators like Etsy and have no direct sales channel, you generally do not need to register for a Texas permit because the marketplace handles collection. However, marketplace sales still count toward your $500,000 threshold for purposes of determining nexus on any future direct sales.
Is there a transaction count threshold in Texas like other states?
No. Texas only uses a dollar-amount threshold of $500,000 in gross revenue. Unlike some states that also count the number of transactions, Texas bases nexus purely on revenue.
What happens if I have been selling into Texas without collecting sales tax?
If you have nexus and have not been collecting, you should register with the Texas Comptroller as soon as possible and begin collecting going forward. You may owe back taxes plus penalties and interest on past uncollected amounts. Consulting a tax professional can help you evaluate your exposure and options.