My guess is that they ultimately won’t do anything this session, but it’s good to see the matter discussed by the Ways and Means Committee. If nothing else, it may lay the groundwork for a future session.
House Bill 1317 by Rep. Elliott Naishtat, D-Austin, and House Bill 2403, by Rep. John Otto, R-Dayton are aimed at finding ways to force Amazon and other retailers to collect taxes on online sales that involve Texas consumers or so-called affiliate marketers in Texas, who make a commission by steering customers to Amazon’s website.
Both bills seek to address what constitutes having a physical presence in the state. Under a 1992 U.S. Supreme Court decision, retailers with a physical presence in a state can be required to collect sales taxes, legal experts say.
The committee heard pleas from retailers who said they increasingly can’t compete with online sellers who don’t collect sales tax.
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Naishtat said his bill is “a method by which we, the legislators, can level the playing field between law-abiding Texas retailers who collect and remit sales tax and those out-of-state retailers who do not. Not only will this clarification of law help our troubled Texas retailers, it will also generate revenue for Texas without new taxes or a tax increase.”
A fiscal note released Monday from the Legislative Budget Board projected that Naishtat’s bill would have no significant affect on the state budget, because it anticipates “major online retailers” would cancel their agreements with Texas affiliates.
Otto said his bill would establish a “fair and equitable” system by clarifying what constitutes a physical presence in the State of Texas.
“If this issue is not addressed, then we are inviting new and existing businesses to structure in avoidance of the collection of our sales tax,” Otto said. “To me, this is about making sure our tax laws are applied fairly and equally to all Texas businesses.”
The fiscal note on Otto’s bill projects that the state would collect an additional $6 million in 2012 and $10 million in 2013, rising to $18 million in 2016.
Noticeably absent from the hearing docket was House Bill 2719, a pro-Amazon measure filed by state Rep. Linda Harper-Brown, R-Irving. That bill would amend the state tax code to say that a company can’t be classified as a retailer required to collect sales tax if it, or a subsidiary, operates or uses “only a fulfillment center … or a computer server” in Texas.
I’ll say again, I think the ultimate solution to this is Congressional action. The original justification for exempting online retail from sales taxes has long been obsolete, and is now a real drag on local and state governments. One way to force Congressional action is for a bunch of states to implement their own solutions, thus making the case for a single standard to be applied. I don’t expect Texas to do anything about it now, but I believe it will eventually.