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How do I use the Texas flat rate for Remote Sellers?

Overview

Beginning October 1, 2019, Texas enforced their economic nexus regulation on remote sellers.  Remote sellers into Texas can use a single local tax rate instead of calculating and remitting various local tax rates for jurisdictions. Find more information in this Avalara blog post.

If you are a remote seller that meets the economic nexus thresholds in Texas and want to use the single local tax rate, follow the instructions below to configure AvaTax so we know how to apply the single local tax rate where applicable.

Environment

Avalara AvaTax

Resolution

Setting up AvaTax for accurate calculation

  • In order to honor the 8% flat rate, a rate override rule needs to be created for Texas.
    • For information on creating custom tax rules in your AvaTax account, please review Create a custom tax rule.
      • Please have an Admin User log into AvaTax and go to Settings Manage advanced company settings > Manage custom tax rules > Import your tax rule.
      • Download and save the Texas custom rule template:  Rules-TX-Flat8.xls
      • Open the file and adjust the start date to align with the date you began participating as a remote seller.
      • Browse and upload or drag and drop the Texas custom rule template that you previously saved.
  • Next, because the combined remote sellers rate is applied at the state level only and local jurisdictions are not individually calculated, the nexus selections in your AvaTax account need:
  • Lastly, if any transactions were created prior to implementing these changes, they will need to be recalculated on.
    • This will update the state rate to 8% and remove any localities that previously were used in calculation.
      • Please note this may change the amount of tax that was originally calculated on the transaction.
    • To recalculate on an individual transaction
      • In AvaTax Update, go to the Transactions tab, search for your transactions, and click on the DocCode
      • Click on the transaction
      • Click Calculate Tax (in the middle)
      • Click Save
      • Select an Adjustment Reason
      • Click Yes, save and commit changes
    • To recalculate on several transactions at once using the transaction import
      • Review the import guidelines, Add or import transactions.
        • Use process code 4 to adjust a transaction that was already created and to allow AvaTax to calculate the new tax amount
      • Import your new file by going to Transactions > Import Transactions.

NOTE: If you are a remote seller and want to change your election and collect the full local rate at destination, you must notify Texas by October 1 of the year before the change would take effect.

For example, if you are a remote seller who begins collecting on April 1, 2020, and elects to collect the single local tax rate, you must notify the Texas Comptroller by Oct. 1, 2020, to change your election to collect based on the destination location beginning Jan. 1, 2021.

If you are registered as a remote seller

Once the above changes have been made, add TX 01-114 01-116 (Texas Sales and Use Tax Return) to your scheduled returns

  1. You will need:
    • Filing frequency and first filing period
    • Address
    • Legal Entity Name
    • Phone Number
    • Company EIN/FEIN
    • Texas Webfile Number
    • Texas Taxpayer Number
  2. When scheduling the return, select Yes for "Are you a remote seller and collect at a single state and local Texas rate regardless of where you sell into Texas?"

ATNRT-TX-Y.png

You have not yet registered as a remote seller

If you have not yet registered, please see the Texas Comptroller Sales and Use Tax page.