Mexico’s Sales Tax Hike Sends Business to America

Border states in Mexico are sending business to American border towns, like El Paso, after a vote from the Mexican Congress that raised VAT, roughly equivalent to our sales tax, from 11% to 16%, nearly double the 8.25% of Texas. Already, Texas stores are seeing an influx of shoppers from Mexico, getting ready for Christmas. If you do business near the Mexican border, you need to be prepared for more customers than before now that sales tax is even more in your favor. For sales tax filing, this could have a big effect on border town businesses. Since prices in Mexico are often lower in any case, the previous sales tax difference often didn’t increase the Mexican price higher than the U.S. price.

Now that the sales tax difference is almost double, it’s making a difference for Mexican consumers. And that could make a difference for you. Increased revenue might bump you up in filing frequency. Texas has low thresholds so almost everyone files monthly. If you have $500 or more in sales tax per month in Texas, you need to file monthly. At 8.25%, that’s roughly $6,000 in sales that are subject to sales tax, to give you a better idea of what that means. If you collect less than $500 per month in sales tax or less than $1500 per calendar quarter, you can file quarterly.

That’s around $18,000 per quarter in revenue if all of it is taxed at 8.25%. If you collect less than $1000 per year in sales tax, or around $12,000 annually in revenue at 8.25%, you can file yearly. However, never go by revenue numbers for Texas since the thresholds are based on sales tax collection amounts, not revenue. Texas still uses paper forms that they mail out to businesses shortly before sales tax is due for businesses that have less than $10,000 due to the state in a combination of categories. Businesses, however, that collect $10,000 or more in a combination of certain payment categories during the preceding state fiscal year (September 1 through August 31) are obligated to file and pay online.

If your sales tax rates are tempting south-of-the-border shoppers for holiday shopping with you, it could be a great opportunity for your border town stores. Be sure to offer great customer service during the holiday season to build relationships with new customers coming across the border to shop so they’ll return long after the holiday season is over. Are you ready for more customers and more revenue if your business sells to Mexican customers? If not, we can help. Schedule a demo of our software to see how it can help you through the holiday season.


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