Taking a stand against Internet retailers like Amazon.com, the Texas House moved Tuesday to tighten the state’s rules on when online businesses must collect sales tax.
By voting 122-23 to pass House Bill 2403 by Rep. John Otto, R-Dayton, lawmakers made their clearest statement to date that they are siding with state Comptroller Susan Combs in her push to force Amazon and other online retailers to collect taxes on sales made to Texans.
Otto’s bill aims to eliminate what he has called loopholes in the law about what constitutes a physical presence.
The bill amends the state tax code to clarify that a “seller or retailer” is required to collect sales tax if:
• The business “maintains, occupies, or uses in this state permanently, temporarily, directly, or indirectly or through a subsidiary or agent by whatever name, an office, distribution center, sales or sample room or place, warehouse, storage place, or any other physical location where business is conducted.”
• The seller is “entrusted with possession of tangible personal property” through an agreement with another business or entity and is authorized to sell, rent or lease the property.
The bill also clarifies that a person or business is considered to be a retailer if they hold a “substantial ownership interest” in any entity that conducts those activities in Texas.
The final version of the bill removes language from the original version that would have designated the use of a website on a server in Texas as an activity that established physical presence.
Here’s HB2403. By my count, four Democrats voted against it. I don’t know if that’s because they agree with the position that Amazon should not be subject to sales tax, or if they wanted a bill that went further, like Rep. Elliott Naishtat’s HB1317. For what it’s worth, Naishtat was listed as a coauthor of HB2403, and voted for it. Otto’s bill doesn’t have a Senate sponsor yet, but Sen. Royce West’s companion bill SB1798 – which doesn’t yet have a House sponsor – was approved on Friday after sitting on the intent calendar for a couple of days, so now it’s just a matter of one of these bills getting voted on by the other chamber. I think one way or another this will get done, but the clock is ticking.