Texas Internet Sales Tax

By Brian Greer on Thu, May 19, 2011 @ 12:49 PM

Texas Map

I’ve been reading a lot about Texas House Bill 2403 lately.  The Texas Senate just passed this bill following the House passing it a couple of weeks earlier.  It now sits with the Governor who will most likely pass it as well.  This bill was aimed at closing a loop hole that allowed internet retailers to hide behind a thin veil of no physical presence in Texas.  Specifically, internet retailers have been making retail sales without collecting sales tax in situations where they have no presence in Texas but the retailer’s subsidiary does have presence in Texas.  This bill now closes this argument and states that if your subsidiary has presence in Texas then you do as well.  There are numerous complexities surrounding how subsidiary is defined but it’s pretty clear this was designed to increase sales tax revenues on internet transactions.

The contested part of the debate is really philosophical.  Is this a new tax or is it greater enforcement of existing statutes.  Let’s look at each side.  First, let’s look at the side that sees this as a new tax.  As a consumer, if I purchased goods from the internet retailer prior to the passage of this bill, the internet retailer would not charge me sales tax.  However, after passage, they are now going to be compelled to charge me sales tax.  Looks like a new tax to me.  Now let’s look on the flip side.  The purchase was never tax free.  Tax was always due whether the internet retailer charged me or I self accrued it and voluntarily paid it.  No new tax.  This is just a different way to collect the tax that was already due.

What do you think?  New tax or not?

Brian Greer

Written by Brian Greer