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Set up Avalara to calculate and file the Texas flat rate for remote sellers

This article applies to:Avalara Returns

Beginning October 1, 2019, Texas enforced 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.

If you are a remote seller that meets the economic nexus thresholds in Texas and you want to use the single local tax rate, there are certain steps you must take so that AvaTax can accurately calculate the flat rate. 

Before you begin

  • If you have not yet registered as a remote seller, see the Texas Comptroller Sales and Use Tax page. If you are a remote seller that chooses to collect the single local use tax, you must notify the Comptroller’s office in writing of your election using Form 01-799, Remote Seller's Intent to Elect or Revoke Use of Single Local Use Tax Rate (PDF) by email or mail.
  • 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.

Steps

In order to set up AvaTax to accurately calculate the 8% flat rate, an Admin User must create a rate override rule for Texas.
  1. Import a custom tax rule to calculate the 8% flat rate in Texas:
    1. Download and save the Texas custom rule template.
    2. Open the file, adjust the start date to align with the date you began participating as a remote seller, and save the file.
    3. In AvaTax, go to Settings > All AvaTax Settings.
      The Settings page opens.
    4. Next to Custom Rules, select Manage.
      The Custom Rules page opens.
    5. Select Import Tax Rules.
      The Import Your Tax Rules page opens.
    6. Import the Texas custom rule template that you previously saved by dragging it into the Drag & Drop section, or select Browse Instead to find and import the file.
  2. Recalculate tax on any transactions that were calculated before you added the custom tax rule.
    If any transactions were created prior to implementing these changes, you must recalculate tax on the transactions to calculate the flat 8% state rate and remove any local taxes.

    clipboard_e2eae8147c091ea2dd4ed0b1209198ae3.png 

    Note

    This might change the amount of tax that was originally calculated on the transaction.

  3. Schedule the returns by adding the TX 01-114 01-116 (Texas Sales and Use Tax Return) form to your scheduled returns in Managed Returns.
    • You will need the following information:
      • Filing frequency and first filing period
      • Address
      • Legal Entity Name
      • Phone Number
      • Company EIN or FEIN
      • Texas Webfile Number
      • Texas Taxpayer Number
    • 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?"

See also

Set up Texas returns
Avalara blog post

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