Memorial Day weekend Texas sales tax holiday

There are lots of good reasons to be in Texas in May. Wildflowers and festivals abound; the weather is usually warm but not humid; and you can buy appliances and water-efficient products tax free during the Texas sales tax holidays for Energy Star and water-efficient products.

Read on to learn:

• What is a Texas sales tax holiday?
• How many tax-free weekends are there in Texas?
• What items are sales tax exempt during the Texas Energy Star and water-efficient products tax-free weekend?
• Do sales tax holidays in Texas affect online sales?
• Will my online marketplace or ecommerce platform handle the sales tax holiday for me?

A sales tax holiday is a limited period of time when retail sales of certain products that are normally subject to sales tax are exempt from sales tax. 

Approximately 18 states typically offer one or more sales tax holidays. Some last as little as a day, others can run for as long as a few months or even a couple of years. In Texas, sales tax holidays usually last for one weekend, so they’re often called tax-free weekends (or tax free weekends).

Texas provides four sales tax holidays each year, two of which take place during the same weekend. 

The 2023 Texas tax-free weekends are:

• Texas emergency preparation supplies sales tax holiday, April 22–24, 2023
• Texas Energy Star sales tax holiday, May 27–29, 2023
• Texas water-efficient products sales tax holiday, May 27–29, 2023
• Texas annual sales tax holiday, August 11–13, 2023

These four sales tax holidays are annual, meaning they’ll occur every year unless the Texas Legislature repeals them. 

It’s not uncommon for a state to establish a new sales tax holiday. Florida doesn’t have an annual tax-free period but usually enacts one or more sales tax holidays each year. Tennessee has an annual sales tax holiday for clothing and school supplies but also periodically creates one-time sales tax holidays, like the sales tax holiday for gun safes and safety devices that runs July 1, 2022, through June 30, 2023, or the grocery tax sales tax holiday set for August 1 through October 31, 2023.

Texas lawmakers have proposed a number of new sales tax holidays over the years. For example, the Texas Senate passed a sales tax holiday for firearms and hunting supplies in 2015, but the bill didn’t make it into law. A similar tax-free weekend was put forward in 2017 with the same results. As of this writing, the only sales tax holidays in The Lone Star State are the four listed above.

The upcoming sales tax holidays are really a two-in-one tax-free weekend: The Texas Comptroller devotes one page to the Energy Star sales tax holiday and one page to the water-efficient products sales tax holiday. 

These Energy Star products qualify for the sales tax holiday:

• Energy Star air conditioners priced at $6,000 or less

• Energy Star refrigerators priced at $2,000 or less

• Specified Energy Star products, no price restriction

  • Ceiling fans, clothes washers, dehumidifiers, dishwashers, incandescent and fluorescent light bulbs

For the most part, the tax-free weekend is for retail sales to final consumers. However, certain contractors or taxable service providers can buy qualifying Energy Star products tax free (without an exemption or resale certificate) to keep in their inventory. Contractors and taxable service providers can also sell qualifying Energy Star products tax free, provided the products are incorporated into real property under a separate contract.

These water-efficient products qualify for the water-efficient products sales tax holiday:

• Any WaterSense-labeled product may be purchased (for business or personal use)

• Certain water-conserving products (for residential use only) that are used or planted for conserving or retaining groundwater, recharging water tables, or decreasing ambient air temperature; for example:

  • Compost, mulch, and soil; grasses, plants, and trees

  • Moisture control for a sprinkler or irrigation system

  • Permeable ground cover surface that allows water to reach underground basins, aquifers, or water collection points

  • Rain barrel or an alternative rain and moisture collection system

  • Soaker or drip-irrigation hose

  • Water-saving surfactants

Certain contractors, landscapers, or other service providers can buy WaterSense products tax free (without an exemption or resale certificate) to keep in their inventory. However, lump-sum contractors must pay tax on these items. Contractors, landscapers, and other service providers can sell qualifying WaterSense products tax free to both business and residential customers, so long as they’re under a separate contract.

This year, these Texas sales tax holidays start at 12:01 a.m. on Saturday, May 27, and conclude at midnight on Monday, May 29. Both apply to local and state sales tax. For retailers selling affected products, participation is mandatory.

Sales tax holidays in Texas and other states affect all businesses that are registered to collect and remit sales tax. Brick-and-mortar retailers, mail-order retailers, online sellers, and other businesses are not permitted to charge customers sales tax on qualifying sales during the sales tax holiday.

You’re required to collect sales tax in states where you have nexus, which is a connection that establishes a sales tax obligation. There are several ways for a business to establish nexus with a state:

• Physical presence (e.g., employees, inventory, or an office)

• Economic activity (e.g., $100,000 in sales or 200 transactions in the current or previous calendar year)

• In-state affiliates 

• Referrals from businesses or individuals in the state

Likewise, you’re required to comply with all sales tax laws and regulations, including sales tax holidays.

Be sure to register for sales tax before you start collecting it from customers. If you’re new to sales tax, here’s what you need to know about sales tax registration.

Many online marketplaces are required to collect and remit sales tax on behalf of their third-party sellers. If you only sell through one of these marketplaces, which include Amazon, eBay, and Etsy, it should handle the sales tax holiday for you.

If you sell through a small marketplace and are responsible for collecting and remitting Texas sales tax yourself, you’ll need to be sure to exempt all products that qualify for the tax-free weekends. 

And if you sell through a different type of ecommerce platform, you’ll need to determine whether it will handle the sales tax holiday on your behalf. Some ecommerce platforms take care of certain aspects of sales tax compliance for sellers automatically, but others require sellers to sign up and/or pay extra for sales tax services. 

Sales tax holidays tend to be quite popular among consumers, for obvious reasons. For retailers required to identify which of their products and transactions qualify for a sales tax holiday, tax-free weekends can be a real burden. Indeed, certain tax experts question whether sales tax holidays make good cents.

To learn about other sales tax holidays on the horizon, see our list of 2023 sales tax holidays.