Last year Texas joined most other states in levying sales tax on Internet purchases ordered by residents.
Now there is a battle under way on just who gets that money.
The lion’s share goes to the state government, of course. But there is a sliver of local sales tax in the overall rate, and the question is whether that cash should go to cities where the ecommerce business is located or to the city where the purchaser lives.
For example, Dell Computer is headquartered in Round Rock. If a Texas resident buys a Dell online through the company, that city gets the local share of the sales-tax pie instead of the municipality where the customer lives and the product is delivered.
What’s more, because of a deal Dell made with Round Rock, the company gets a piece of that sales tax revenue back as a rebate. That’s because of a state law meant to aid cities in attracting companies. There are dozens of such deals between cities and companies across Texas.
The Texas Comptroller’s Office is proposing to change that with a rule directing local sales-tax revenue to the place where the order is delivered.
State lawmakers heard testimony last month from cities for and against the proposed rule change. The Comptroller’s Office is considering whether to implement the new rule.
We certainly understand cities with more customers than companies being in favor of the change. More money without raising taxes on residents is a dream come true for politicians.”
Nevertheless, the cities that made these deals — which may seem unfair but are legal and even encouraged under state law — did so in good faith and shouldn’t have the rug pulled out from under them.
In our view the solution is same online or off. At brick-and-mortar stores, the sales tax is levied at the location of the store. It doesn’t matter where the customer lives.
We see no reason Internet sales should be any different.