Does the cost of the federal tariff get included into the total sales price?
Do you pay sales tax on top of the federal tariff in Texas?
In Texas, if a seller is the importer of record and passes the cost of a federal tariff to the customer, that cost must be included in the total sales price and is subject to sales tax. You do not charge “tax on top of tax,” but rather sales tax is calculated on the total amount the customer pays for the product.
Key Points for Texas Sales Tax and Tariffs
- Tariffs are considered a seller’s cost of doing business. When a seller incorporates the cost of the tariff into their price, it is treated like any other expense (e.g., labor, materials, shipping) that makes up the final sales price.
- The total selling price is taxable. Texas law defines the sales price broadly to include the total amount for which a taxable item is sold, without deductions for the seller’s expenses.
- Itemizing the tariff does not change taxability. Even if the seller lists the tariff as a separate line item or “surcharge” on the invoice, that amount is still considered part of the total taxable sales price if the underlying product is taxable.
- Sales tax is applied to the final amount. The state and local sales tax rate (up to a maximum combined rate of 8.25%) is applied to this final, all-inclusive price.
Exception
The only exception is if the purchaser is the official “importer of record” and pays the tariff directly to U.S. Customs. In that specific scenario, the tariff amount is not included in the seller’s sales price and is not subject to Texas sales or use tax.