Key figures
Texas payables
2026, with sources
No state 1099s
Texas has no personal income tax, so there is no state copy of Form 1099-NEC to file and no withholding on payments to nonresident contractors. The federal 1099 rules are the whole job for accounts payable here.
Use tax and classification
Because Texas taxes data processing services, including SaaS, a Texas company that buys software from a vendor that doesn’t collect Texas tax owes use tax on 80% of the price, plus local tax. It is the most common thing missing from a small company’s Texas sales tax return.
For unemployment tax, TWC treats a worker as an employee when the company directs or controls the work, and it audits classification from wage claims. The federal and TWC answers usually agree, but they are separate decisions.
The federal baseline
This page covers what Texas adds. The federal rules underneath it apply here too.
Common questions
Do we owe use tax on our software subscriptions?
Yes, if the seller didn’t charge Texas tax. A data processing service like SaaS is taxable in Texas, so software subscriptions bought from an out-of-state vendor that doesn’t collect owe use tax on 80% of the charge, reported on the company’s sales tax return or, without a permit, on a use tax return.
Which contractor test does Texas use?
TWC decides for unemployment tax by asking whether the company directs or controls the work, under its own rules rather than an ABC test. A worker TWC treats as an employee brings unpaid UI tax with them.
Do we report contractors to Texas?
No. Texas new-hire reporting covers employees, not independent contractors, and with no personal income tax there is no state 1099 copy either. The only state-level contractor question is TWC’s, if the worker later files for unemployment and TWC decides the relationship was employment.
Payables next door
- NMNew Mexico payablesVendors pass gross receipts tax through on services, and purchases without it owe compensating tax. 1099s with New Mexico withholding go to TRD.
- OKOklahoma payablesOklahoma classifies workers with a common-law control test, and use tax reaches tangible goods bought without Oklahoma tax rather than most SaaS.
- ARArkansas payablesArkansas wants state copies of 1099s with the ARW-3 by January 31. Use tax at 6.5% plus local reaches hardware and specified digital products, not hosted SaaS.
- LALouisiana payablesLouisiana wants every 1099-NEC by February 28, through CF/SF or LaWage, and since 2025 software purchases carry state and parish use tax when the vendor did not charge it.
Founder guides on this
- PeopleContractor or employee? Classification for startupsContractor or employee depends on control, not the contract. The IRS test, state rules, 1099s, payroll registration and the cost of getting it wrong.
- Sales taxSales tax nexus for startups: when you owe tax in a stateSince Wayfair, selling into a state can create a sales tax obligation. How economic nexus works, why SaaS is taxable in some states and when to register.
More of the Texas guide
- AccountingAccounting and state tax in TexasCorporate tax, conformity to federal rules, apportionment and what it does to your books
- ReceivablesReceivables and sales tax in TexasSales tax registration, economic nexus, whether SaaS is taxable, and collecting from customers
- PayrollPayroll taxes and employer rules in TexasWithholding, unemployment insurance, paid leave, minimum wage and the rules on paydays
- ComplianceCompliance and filings in TexasRegistering to do business, annual reports, franchise tax and the filing calendar
- AdvisoryAdvisory: credits and decisions in TexasCredits, incentives and the decisions that are cheaper to get right the first time
Sources
Checked against each agency’s own page on . Rates and thresholds change, usually on January 1.
General information for US companies, not tax, legal or accounting advice for yours. Rules and thresholds change; confirm the specifics with a CPA or the agency before you act on them.