How to Run E-commerce in Texas and Stay Tax Compliant (2025 Update)

With the acceleration of global e-commerce, more and more entrepreneurs, international sellers, and companies are setting up shop in the United States, especially in Texas. Texas is a prime destination due to its zero state personal income tax, business-friendly environment, and strategic Amazon fulfillment network. However, for all e-commerce operators, tax compliance is non-negotiable and directly determines your business’s sustainability and growth. Here, ZLin CPA provides a practical guide to help e-commerce businesses, whether domestic or international, navigate tax compliance when operating in Texas.

1. Choosing the Right Legal Entity in Texas

When launching an e-commerce business in Texas, registering a local company is strongly recommended. Common options include:

• Limited Liability Company (LLC):

  • Flexible, easy to manage, and passes income through to owners for tax purposes.

  • Suitable for startups and smaller e-commerce teams. Read this for more info: Form & Run a U.S. Company as a Non-Resident | ZLin CPA Accounting & Consulting

• Corporation (C-Corp/S-Corp):

  • Ideal for those planning for rapid growth, future investors, or separate business taxation.

  • S-Corp has special requirements (including U.S. residency for owners).

• EIN Application:

  • After registration, apply for an EIN (Employer Identification Number) from the IRS; necessary for tax filing, bank accounts, and payroll.

2. Major Tax Categories for Texas E-commerce Businesses

1. Sales Tax

• Texas State Sales Tax: The base sales tax rate is 6.25%. Local jurisdictions may impose additional sales tax.

  • If you ship physical goods to buyers in Texas or store inventory/fulfill orders from within Texas (e.g., with Amazon FBA), you have “nexus” and must collect remit sales tax.

  • Register for a Texas Sales Tax Permit with the Texas Comptroller before collecting sales tax. Returns are typically monthly or quarterly.

2. Federal Income Tax

• All U.S. entities must file annual federal tax returns, the forms depend on the entity type (e.g., 1120 for C-Corp, 1065 for partnership, Schedule C for single-member LLCs).

• Report all U.S.-sourced revenues, deduct eligible expenses, and retain solid documentation.

3. State Franchise Tax

• Texas does not have a personal income tax, but does levy a franchise (“margin”) tax on most businesses above a revenue threshold.

• Make sure to check if your gross receipts require annual reporting or payment.

4. Accounting Compliance and Recordkeeping

• Track every order, payment gateway deposit (Amazon, PayPal, Shopify, Stripe, etc.), returns, shipping, and advertising costs.

• Use accounting software to reconcile sales channels and bank statements.

• Retain invoices, receipts, supplier bills, and documentation to support all declarations in case of IRS or Texas Comptroller audits.

5. Common Compliance Mistakes to Avoid

• Myth 1: If my company is outside the US, I’m not liable for US taxes.

  • If you sell to US customers, fulfill from within Texas, or bank with a US entity, you have tax obligations.

• Myth 2: Amazon handles sales tax, so I don’t have to do anything.

  • While Amazon (and some other platforms) auto-collects/remits sales tax for Texas under “Marketplace Facilitator” laws, you still need to register for a permit and file zero returns where required.

• Myth 3: I only have to file taxes once per year.

  • Texas requires periodic sales tax returns even for zero sales; missing filings may lead to penalties.

6. Practical Compliance Recommendations

1. Register ASAP: Form your entity, get your EIN, and secure a Sales Tax Permit before launching.

2. File Regularly: Stay on top of monthly or quarterly filings, even if no sales are reported (“zero returns”).

3. Use Professional Help: Partner with a CPA firm familiar with Texas and e-commerce for bookkeeping and compliance.

4. Stay Informed: US and Texas tax laws can change, so subscribe to reputable tax newsletters or blogs like ZLin CPA.

Conclusion

Building a successful e-commerce business in Texas is about more than just making sales. It’s about understanding and following all registration, tax, and compliance rules. If you’re unsure about any step: company structure, reporting requirements, or detailed sales tax rules, then consult with a local CPA who understands e-commerce. For tailored advice and one-on-one service, reach out to ZLin CPA or leave a comment below with your questions.

This article is compliant with current 2025 Texas and US tax law. For updates, check Professional Accounting & Tax Services in DFW | ZLin CPA Accounting & Consulting.