Texas Comptroller proposing tweak to online sales tax revenues

Texas Comptroller Glenn Hegar is proposing a change in state sales tax policy that would tweak who receives sales tax revenues from online sales, an attempt to keep the money in local communities as opposed to exporting the revenues, Hegar wrote in a column this week.

The tweak would be in the interpretation of state policy.

“That’s why my office has proposed a change to Rule 3.334 to clarify that local sales tax is tied to the place of business from which internet orders are fulfilled or the location to which items are shipped or delivered,” Hegar wrote in a column in the Dallas Morning News.

“The tax code’s current definition makes it clear that a “place of business” is an actual location operated by the retailer for the purpose of receiving orders,” Hegar wrote. “It’s a place a customer can visit or call to place an order. This definition, or a version of it, has been in state law since before 1980. We don’t need to change the law, we just need some clarity in its interpretation.”

Online orders are typically placed through a website or software application, Hegar wrote, “neither of which meet the definition of a place of business in the way a traditional business does: You can’t call the internet. You can’t walk into the internet.”

A clarification in how the policy is interpreted “would ensure that Texas’ 1,600-plus cities and other local government entities receive the local tax revenue from online purchases

This clarification would ensure that Texas’ 1,600-plus cities and other local government entities receive the local tax revenue from online purchases to which they’re entitled.”

In cities such as McAllen, this issue has been discussed.

Former McAllen Commissioner Richard Cortez, now Hidalgo County judge, had raised the issue in years past. Cortez sought to initiate the conversation of collecting sales tax revenues from online sales — an increasingly popular marketplace for consumers — among other city commissioners and city staff.

The conversation came amid the city’s slipping sales tax revenues, which have long been a large source of revenue for the city. But at the end of 2018, sales tax revenues in McAllen rebounded and have been steadily growing since then.