Category: Texas State Tax

What Should Texas Do About Sales Tax – The Wayfair Decision

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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.

Due Today: Your Franchise Tax Report and Public Information Report

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If you have state law protection in any of these forms, then you will need to file your 2018 Texas Franchise Tax Report by May 15, 2018: C Corporation; S Corporation; Professional Corporation; Professional Association; Limited Liability Company; Limited Liability Partnership; Professional Limited Liability Partnership; Professional Limited Liability Company; Limited Partnership; and there are more.

If your gross revenues are below $1,130,000, then you may use the No Tax Due Report, and you will not owe any tax—but you still must file the report. If your revenues are over that amount, then you must file the forms and pay the tax. The rate is .0075%, or three quarters of one percent. If you are a service company, then you can deduct salaries and benefits. If you are a manufacturing company, then you may deduct cost of goods sold (COGS). Be sure to look at the instructions online to see all the items to include in COGS. It is more inclusive than the COGS on your federal return. If you can’t file by the due date, then you may file an extension and if you owe tax then you must pay at least 90% to avoid any penalty. The rules are very complicated, so try to get it done as soon as possible. Good Luck.

That is all today. I look forward to visiting with you next week. Let me know if you have a question—you can send an email to robert@robertstevensoncpa.com or call (713) 785-8939. You can also leave a comment on this post.