TX bill expanding online sales tax collection OK’d

By CHRIS TOMLINSON, Bloomberg Businessweek

The Texas House approved a bill on Tuesday that would expand the number of Internet companies required to collect sales tax.

The bill, which passed on a 122-23 vote, would change the definition of what it means to have a physical presence in Texas. State Rep. John Otto, R-Dayton, said it would force Internet-based companies like Amazon.com to collect sales taxes if they pay marketers in Texas to advertise for them.

Under a U.S. Supreme Court ruling, a company does not have to collect state sales tax if it does not have an office, or some other physical presence, in that state. The tax is still due on those transactions, but the customers are supposed to pay it. They usually don’t.

Local retailers complain this gives Internet retailers an unfair price advantage. While Internet sales have gone up, local stores have seen a drop in revenues and blame the sales tax issue. State lawmakers also face a $27 billion budget shortfall over the next two years, and many want to see more efficient collection of taxes already on the books.

The Alliance for Main Street Fairness, a coalition of traditional retailers, praised Tuesday’s vote.

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