Texas Single Local Use Tax Rate Option for Remote Sellers

Texas allows an eligible remote seller to elect a single local use tax rate instead of determining local use tax from each Texas delivery destination. This option is limited to out-of-state sellers whose only Texas activity is remote solicitation of sales. It is not available to Texas businesses or marketplace providers collecting tax for marketplace sellers.

The election can simplify local tax handling, but it is not a transaction-by-transaction choice. Once elected, the single rate applies to all of the remote seller’s sales of taxable items until the election is revoked. A seller that does not make the election must collect the applicable local use tax based on the Texas destination where an order is shipped or delivered.

Who Can Use the Single Local Use Tax Rate?

Start by confirming that the business qualifies as a remote seller for this option. Texas describes a remote seller as an out-of-state seller whose only Texas activity is the remote solicitation of sales. A business operating from Texas does not qualify, even if it makes online or mail-order sales to customers throughout the state.

Marketplace status also matters. A marketplace provider collecting for marketplace sellers cannot use the single local use tax rate. A remote seller whose Texas sales occur exclusively through a marketplace provider that certifies it collects and reports Texas tax on the seller’s behalf does not have to hold a Texas tax permit. That exception is narrow: it applies when the seller’s Texas sales are only through the certifying marketplace provider.

Businesses still deciding how their activity should be classified can review the distinction in Texas Sales Tax Permit vs Texas Use Tax Permit: Which Do You Need.

How the $500,000 Safe Harbor Affects Registration

The single-rate decision generally becomes relevant when a remote seller has a Texas collection obligation. Under Texas’s economic-nexus safe harbor, a remote seller with less than $500,000 in total Texas revenue during the preceding 12 calendar months is not required to obtain a permit or collect, report, and remit state and local use tax.

For this calculation, total Texas revenue is broader than taxable retail sales. It includes taxable and nontaxable sales, specified related charges, sales for resale, and sales to exempt entities. A seller should therefore avoid measuring the safe harbor solely from the taxable transactions shown in its checkout system.

After a remote seller exceeds the $500,000 safe-harbor amount, it must obtain a permit and begin collecting and remitting Texas use tax no later than the first day of the fourth month after the month in which it exceeded the threshold. For a closer look at what enters the calculation, see Texas Economic Nexus: The $500,000 Threshold for Remote Sellers.

Choosing Between the Single Rate and Destination-Based Tax

The central choice is administrative: use one permitted local rate for all taxable-item sales covered by the election, or determine applicable local use tax from each Texas delivery destination. The right operational fit depends on how the seller records delivery addresses, configures tax software, handles order changes, and reconciles returns.

Scenario 1: Direct sales to many Texas destinations

An eligible remote seller ships taxable items directly to customers in many Texas cities. If the seller elects the single local use tax rate, the election applies to all of its taxable-item sales and cannot be limited to destinations that are difficult to configure. If it does not elect, it must collect the applicable local use tax according to the Texas destination where each order is shipped or delivered.

Scenario 2: Marketplace sales plus direct website sales

A remote seller uses a certifying marketplace provider but also accepts orders through its own website. The marketplace-only permit exception does not describe this seller because its Texas sales are not exclusively through the marketplace. The seller should separately account for its direct Texas revenue and activity when assessing registration and the single-rate option. The marketplace provider’s role does not automatically extend to the seller’s independent website transactions.

Scenario 3: Marketplace-only seller

A remote seller makes all Texas sales through a marketplace provider that certifies it collects and reports Texas tax on the seller’s behalf. That remote seller is not required to hold a Texas tax permit. With no independent Texas sales to report under this exception, there is generally no separate single-rate election for the seller to apply to those marketplace transactions.

Before choosing a collection method, map the information available for every order channel. A destination-based setup needs reliable Texas ship-to or delivery data, while the single-rate option requires consistent application across all taxable-item sales after the election takes effect. Sellers comparing destination-based handling may find additional context in Texas Sales Tax Rates by City: State Plus Local Breakdown.

How to Register and Make the Election

A seller may apply for a Texas permit online through the Texas Online Tax Registration Application or by mail using Form AP-201, Texas Application. Remote sellers located outside the United States may also email the application to sales.applications@cpa.texas.gov or fax it to 512-936-0010.

The election procedure depends on whether the remote seller is applying for a new account or already has one:

1. Confirm remote-seller eligibility. Verify that the business is outside Texas and that its only Texas activity is remote solicitation of sales.
2. Review the marketplace-only exception. Determine whether every Texas sale is made through a marketplace provider that certifies it collects and reports Texas tax for the seller.
3. Measure total Texas revenue. Use the preceding 12 calendar months and include all revenue categories covered by the safe-harbor calculation, not just taxable sales.
4. Apply for a permit when required. Select an available application method appropriate to the seller’s location and circumstances. More application context is available in Texas Sales and Use Tax Permit: How to Apply Through eSystems.
5. Make the election through the correct route. A new remote seller may select the single local use tax option on its Sales and Use Tax application. An existing remote seller beginning the option must submit Form 01-799 by email to sales.applications@cpa.texas.gov or by mail to the Comptroller’s Account Maintenance Division.
6. Coordinate the effective date. The effective date must be the beginning of a reporting period, and the seller must notify the Comptroller before it begins using the rate.
7. Apply the choice consistently. Once elected, the rate covers all taxable-item sales made by that remote seller until revocation.

Common Election and Setup Problems

Treating the option as available to every online seller. Online selling by itself does not establish eligibility. The option is specifically for qualifying remote sellers and excludes Texas businesses and marketplace providers collecting for marketplace sellers.

Counting only taxable sales toward the safe harbor. The Texas revenue measure also includes nontaxable sales, specified related charges, resale sales, and sales to exempt entities. Incomplete revenue mapping can cause the business to miss when it exceeds the safe-harbor amount.

Assuming marketplace activity covers direct orders. The permit exception applies when Texas sales are exclusively through a certifying marketplace provider. A seller with a separate website, sales team, catalog, or other direct-order channel should not treat those independent transactions as marketplace-collected sales without confirming how each order is processed.

Using the single rate before notification or mid-period. The seller must notify the Comptroller before using the rate, and the effective date must align with the beginning of a reporting period. Tax-system changes should be coordinated with that effective date rather than turned on informally.

Applying the election selectively. An electing seller cannot use the single rate for some taxable-item sales while applying destination-based local use tax to others. The elected rate applies to all taxable-item sales of that remote seller until revoked.

Overlooking the revocation timing rule. Revocation requires Form 01-799 by email or mail. If the notice is received before October 1, revocation becomes effective after the current calendar year. If it is received on or after October 1, the seller must continue using the option through the end of the following calendar year.

Decision Checklist Before Electing

• Is the seller located outside Texas, with remote solicitation as its only Texas activity?
• Is the business acting as a marketplace provider collecting for other marketplace sellers?
• Are all Texas sales made exclusively through a marketplace provider that certifies it collects and reports the tax?
• Has the seller calculated total Texas revenue for the preceding 12 calendar months using every included revenue category?
• If the safe-harbor amount was exceeded, has the seller identified the applicable registration and collection start date?
• Does the order system reliably identify the Texas destination where each direct order is shipped or delivered?
• Has the seller compared the operational impact of one local rate with destination-based local use tax handling?
• Can the chosen method be applied consistently to every taxable-item sale?
• Is the election being made on a new Sales and Use Tax application or through Form 01-799 for an existing remote-seller account?
• Will implementation begin at the start of a reporting period and only after notice to the Comptroller?
• If the seller may later revoke the election, has it accounted for the October 1 notice rule in its planning?

The election is most useful when it matches the seller’s actual order channels and tax configuration. Confirm eligibility first, separate marketplace and direct sales, calculate Texas revenue comprehensively, and select a collection method that can be maintained across all covered transactions.