Texans who shop online could soon see purchase prices go up — filling the state treasury by roughly a half-billion dollars over the next two years — thanks to a proposed new mechanism for collecting sales tax on out-of-state sellers.
A pair of bills unanimously advanced by the Texas Senate on Friday would allow the state to collect sales tax on items sold by vendors who do not have a physical presence in Texas. A 2018 U.S. Supreme Court ruling in the case South Dakota v. Wayfair Inc. held that such taxes were constitutional.
One bill allows for the Texas Comptroller to identify a single tax rate to apply to remote sellers. Because local taxing jurisdictions in Texas have varying sales tax rates, ranging from 6.25 to 8.25 percent, lawmakers say the bill is intended to simplify online vendors’ sales tax calculations.
The bill would have no effect on the 2020-2021 budget that lawmakers are currently deliberating. That bill was agreed to by both chambers and heads next to Gov. Greg Abbott.
But another bill would require marketplaces such as Etsy, Ebay and Amazon to collect sales tax on third-party, out-of-state sellers and is expected to yield more than half a billion dollars for the state. If a Texan purchases an item online from a seller in another state using a “marketplace,” a definition that includes websites and software applications, the marketplace would be responsible for collecting and paying sales tax on those transactions. Officials estimate the bill would yield an additional $550 million in 2020 and 2021 above what lawmakers included in their budget assumptions.
While the House and Senate versions of the legislation, House Bill 1525, are largely similar, they differ on whether to direct the comptroller to study the fiscal impacts of exempting small marketplaces from the tax. That difference could lead to the creation of a conference committee to work out an agreement.
"This legislation paves the way for Texas to fairly collect online sales tax within the parameters outlined by the Supreme Court,” Senate Finance Chair Jane Nelson, R-Flower Mound, said last week in a prepared statement after the legislation passed through her committee. “These bills ensure that no undue burdens are placed on remote sellers.”
Correction: A previous version of this story incorrectly described two bills as implementing a new sales tax levy on out-of-state sellers. Texas law already levies a sales tax on such sellers; the bills would create a new mechanism for collecting the tax.