What Should Texas Do About Sales Tax – The Wayfair Decision

In 1992, the US Supreme Court ruled in North Dakota v Quill that a physical presence test must be met for a state to charge sales and use tax. Online sales by retailers with no nexus in a state were not required to charge sales tax.

That may change very soon.

On June 21, 2018 the US Supreme Court ruled in South Dakota v Wayfair that states can impose a sales tax on out of state retailers, even those that do not have a physical presence in the state. It leaves the decision to the various state legislatures: Do they stay with the Quill decision and forego millions in sales tax revenue, or do they adopt the Wayfair decision and require the out of state seller to collect and remit the sales and use tax? In 1992 online sales were in the millions and now they are in the billions and states and cities want the revenue. There will probably be a threshold for small retailers that will exempt them from sales tax reporting similar to Quill if annual sales are (for example) less than $100,000 or they have less than 200 transactions. Also, can you imagine filing and paying 50 sales tax returns every quarter (or month)? What should Texas do?  Should we lower the state rate?

In Houston, we pay sales tax at an 8.25% rate. The state portion is 6.25%, the city portion is 1.00%, and the MTA (Metropolitan Transit Authority) portion is 1.00%.

I support charging sales tax on online purchases because it will help level the playing field.

I believe this will broaden the base and allow for a reduction in the rate.

I will keep you posted.

That is all today. I look forward to visiting with you next week. In the meantime, please don’t hesitate to reach out if you have a question. You can call my office at (713) 785-8939.

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