Not located in Texas? Then your business does not need to pay a state sales tax if a Texas resident buys your product, right? In the past, this was true. The application of a state sales tax to online transactions was essentially limited to those businesses that had a physical presence within the state. No physical presence, no sales tax.
Times have changed.
It all began at the Supreme Court of the United States (SCOTUS). Last year, SCOTUS held states could begin to collect sales taxes from online transactions. This holding led states to propose legislation to begin collecting taxes from online shoppers.
Will Texas take part in this new tax? In a way, it already is. The Texas Comptroller has required certain sites, like Amazon and Wayfair, to pay state and local sales taxes.
Texas lawmakers are currently considering two options to expand the collection of online sales tax.
- Option #1: The first option allows for the Texas Comptroller to put a single tax rate on remote sellers. The lawmakers behind this proposal state it will simplify the process for online vendors.
- Option #2: This one is more complex. The tax would apply to certain transactions purchased from online marketplaces. The proposal defines a “marketplace” as a website, software application that serves as a central online location for vendors to sell goods. The marketplace would be responsible for collection of the state sales tax.
What will happen? It is likely Texas will have an online state sales tax in the near future. Which proposal moves forward is yet to be determined. As noted in a recent report by The Texas Tribune, the state will likely need to put together a committee review the potential impact of each proposal.
The proposals highlight the evolving nature of this area of law. Businesses that consider Texans as part of their clientele are wise to review their tax planning strategies to make sure they account for these changes.