Texas might have to revise its sales tax collection rules and procedures in the wake of the U.S. Supreme Court’s ruling last week that tax must be collected on all online sales, officials with the Texas state comptroller’s office say.
The comptroller’s office is responsible for enforcing the state’s sales tax collection rules, and for collecting and dispersing sales tax revenue to local cities and counties.
Among the potential rule changes being considered is whether out-of-state sellers would have a minimum sales threshold to meet before they would be required to collect and remit tax for sales made to Texas residents, a comptroller’s office spokesman said.
The comptroller’s office is aiming to implement any rule changes by early 2019, and a spokesman said the office is examining whether the Texas Legislature would have to play a part in order for new collection rules to be set.
“It’s up to my office to implement those principles in the way that best serves the state of Texas, our citizens and the businesses operating here,” Comptroller Glenn Hegar said in a written statement.
The comptroller’s office said it would be hearing from retailers, remote sellers, trade associations and other stakeholders as the new ruling is implemented, and that it would discuss the proper enforcement protocols with taxing agencies.
“We have started reaching out to state leaders and legislators and will ensure they’re kept fully briefed on our progress,” Hegar said.
For years, Amazon and other online retailers had been required to collect and remit sales tax only in states that they have a warehouse, office or some type of other physical facility in. Amazon has been collecting tax made on Texas sales since 2012, when it reached an agreement with the state
Hegar’s office said it is still assessing the potential revenue gain for the state as a result of the Supreme Court’s ruling. The comptroller’s office in 2014 estimated the combined amount the state and local governments could gain if all online purchases were taxed at $1 billion annually. But an office spokesman said this week that a new, revised estimate likely will be significantly lower, in part because most retailers that make online sales have started collecting and remitting sales tax to the state since that initial estimate was made.
Just for the final quarter of 2017, the comptroller’s office reported that more than $53 billion was subject to sales and use tax from the state’s retail sector. The office did not break out how much of that amount represented tax collected on online purchases.
Small businesses could be most affected by the high court’s sales tax ruling, because most big retailers have physical spaces around the country, so they have already put in place systems to collect sales tax. But that’s not the case for many small businesses, which will have to change their procedures to comply with the ruling.
“You’re effectively raising your prices, but you don’t get the benefit of those raised prices,” said James Shein, a business professor at Northwestern University. “There will be some fallout for awhile from this."