TMCNet:  Texas House OKs revenue bill with Internet tax attached

[June 12, 2011]

Texas House OKs revenue bill with Internet tax attached

Jun 11, 2011 (El Paso Times - McClatchy-Tribune Information Services via COMTEX) -- Gov. Rick Perry might have to accept an increase in the amount of state tax collected on Internet sales -- an idea he already vetoed.

The House of Representatives on Friday passed a $7.5 billion revenue bill that included a tax on Internet sales.

In May, Perry vetoed a standalone bill with similar language approved by the Legislature during its regular session. And earlier this week, he warned lawmakers to remove the language from the $7.5 billion revenue bill now under consideration in a special session. The Internet tax provision would raise an estimated $16 million over two years for the state.

"I believe this provision risks significant unintended consequences, including a loss of Texas job opportunities and weakening of our state's competitive advantage," Perry said in a statement.

"I will not put Texas job creation efforts in jeopardy, particularly as we continue to feel the effects of a challenging national economy. In the debate between jobs and taxes, I side with jobs." Perry asked the Legislature to give him time to build a consensus on the issue among lawmakers, consumers, retailers, technology experts, other state officials and "even the federal government." But that language remained in the bill on Friday. It now must pass the Senate before it reaches Perry's desk.

"The governor will thoughtfully review the bill that makes it to his desk in its final form before taking action," said Lucy Nashed, a deputy press secretary, responding by email to a request for comment.

Supporters of the measure say it would remove some of the loopholes used by out-of-state merchandisers with Texas operations.

That, they say, will even the playing field for Texas vendors whose products are more expensive because they must charge the tax. The money would go into the Property Tax Relief Fund, according to the bill amendment, which was authored by Rep. John Otto, R-Dayton, just west of Beaumont.

State losses on untaxed online sales amount to as much as $600 million a year, according to an estimate by the Texas Comptroller of Public Accounts.

Only a fraction of that, about $16 million, would be recouped under the proposed Internet tax measure.

Current law requires out-of-state sellers to collect state taxes if the seller has "Texas outlets, Texas salespersons, or otherwise comes into Texas to conduct business." But some companies "attempt to skirt the statutory definition of doing business in Texas through creative corporate and ownership structures," says a House Research Organization bill analysis.

It was reported that Texas Comptroller Susan Combs sent the Internet retail giant Amazon.com, which was operating a distribution center in a Dallas suburb, a letter stating that it owed $269 million in sales taxes for business conducted between 2005 and 2009.

Amazon reportedly said it would close its Texas distribution center. Amazon did not respond to an online request for comment Friday.

R.J. DeSilva, a comptroller's office spokesman, would not confirm the figure, but said Amazon is being audited.

Rep. Joe Pickett, D-El Paso, said he is not sure the provision will work because there are too many ways to disguise online transactions. He said any effective solution would have to go beyond state lines.

Meanwhile, the state comptroller would like Texas residents to do the right thing. Taxes are also due on merchandise that is used in Texas, whether the seller has an operation in the state or not.

When sellers do not collect sales tax, it is up to the buyer to pay the tax, according to an explanation of Internet sales tax requirements on the comptroller's web site.

"Reporting use tax that is due helps put out-of-state vendors on an equal footing with Texas vendors," its says.

Chris Roberts may be reached at chrisr@elpasotimes.com; 546-6136.

To see more of the El Paso Times, or to subscribe to the newspaper, go to http://www.elpasotimes.com. Copyright (c) 2011, El Paso Times, Texas Distributed by McClatchy-Tribune Information Services. For more information about the content services offered by McClatchy-Tribune Information Services (MCT), visit www.mctinfoservices.com.

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