Stripe Tax helps businesses automate sales tax collection, but when selling to Texas customers, things get more complex. Texas not only imposes a 6.25% state sales tax, but also adds up to 2% in local sales tax. Does Stripe handle this for you? Here’s how Stripe Tax manages local rates and what Texas sellers need to double-check in 2025.
Sales Tax Structure in Texas
Texas follows a destination-based sales tax model, meaning:
- The total sales tax is based on the buyer’s location (not the seller’s)
- State tax: 6.25%
- Local tax: up to 2% (city, county, or transit authorities)
Example Total Rate:
Selling to Austin, TX = 6.25% (state) + 2.00% (local) = 8.25%
How Stripe Tax Works in Texas
Stripe Tax uses geolocation and customer billing details to calculate and apply accurate tax rates , including Texas’s local jurisdictions.
Features:
- Automatic rate lookup by ZIP+4
- Charges combined state and local tax
- Registers you in Texas if you opt in and exceed nexus thresholds
- Files returns automatically if you use Stripe’s AutoFile service (optional)
Key Reference:
Texas Tax Code §151.101 – Authority to impose and collect state and local tax
Who Needs to Collect Tax in Texas?
You must collect Texas sales tax via Stripe Tax if you:
- Have a physical presence in Texas, or
- Exceed $500,000 in sales to Texas buyers (economic nexus under §151.107)
This applies even if you’re located out of state but serve Texas customers.
Example: SaaS Firm Using Stripe Tax
Business: CloudPrompt, Inc.
Location: Delaware
Texas Revenue (2024): $620,000
Platform: Stripe with Stripe Tax enabled
How Stripe Handles It:
- Detects customer billing ZIP codes
- Applies full state + local tax rates
- Collects 8.25% for Austin-based customers
- Files sales tax reports monthly (if AutoFile enabled)
- Generates Form 01-117 equivalent via Stripe dashboard
Compliance Steps with Stripe Tax
- Enable Stripe Tax in your Stripe dashboard
- Confirm you’ve crossed the $500,000 Texas sales threshold
- Register with the Texas Comptroller (Form AP-201)
- Link your Texas tax ID in Stripe Tax
- If using AutoFile, verify local rates and review filings quarterly
Conclusion
Stripe Tax is a powerful tool, but Texas local tax rates are not one-size-fits-all. Sellers must register properly, validate customer locations, and review Stripe’s automated filings to ensure compliance. Trust but verify.
Call to Action
Book a Stripe Tax compliance review with Anshul Goyal, CPA, EA, FCA to ensure you’re charging the right local Texas rates, filing returns correctly, and meeting nexus registration requirements.
Disclaimer:
This blog is for educational use only. While Stripe Tax automates rate application, the responsibility to register, collect, and report sales tax in Texas remains with the business. Always verify Stripe’s tax automation with a qualified professional.
Top 5 High-Searched FAQs
1. Does Stripe Tax include Texas local sales tax rates?
Yes. It uses ZIP+4 to apply full state + local rates.
2. Do I need to register in Texas if Stripe is collecting tax?
Yes. Stripe does not register you , you must file Form AP-201.
3. What if I don’t have a Texas office?
If you cross $500,000 in Texas sales, you still have economic nexus.
4. Can Stripe Tax file returns in Texas?
Yes, using the AutoFile feature, if enabled.
5. What is the total sales tax in Texas?
Up to 8.25% depending on the local jurisdiction.
About Our CPA
Anshul Goyal, CPA, EA, FCA helps eCommerce and SaaS companies navigate Stripe Tax, economic nexus, and Texas-specific tax compliance. As a cross-border tax expert, he supports Indian and U.S.-based digital businesses with state and IRS filings.