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Texas Tax Responsibilities & Resources for Sellers after Wayfair
As a result of the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Texas businesses selling items or services into other states may be required to collect taxes for those states. Additionally, sellers outside of Texas who were previously not required to collect and remit Texas sales and use tax may need to collect Texas tax on their sales into Texas effective Oct. 1, 2019. The Texas Comptroller of Public Accounts has updated Rule 3.286, Seller’s and Purchaser’s Responsibilities, to address the permitting and collection requirements of sellers because of the Wayfair decision. These changes became effective on Oct. 1, 2019. The Comptroller also updated Rule 3.586, Margin: Nexus, for franchise tax reports due on or after Jan. 1, 2020. In addition, the 86th Legislature (2019) adopted HB 1525, which creates new tax responsibilities for marketplace providers and marketplace sellers, and adopted HB 2153, which provides a single local tax rate for remote sellers. These two laws became effective Oct. 1, 2019.
Remote Seller Tax Collection Obligations and the Single Local Tax Rate
Effective Oct. 1, 2019, the Comptroller enforces the collection obligation on sellers whose only activities in the state are the remote solicitation of sales. The Comptroller will not require remote sellers with total Texas revenue of less than $500,000, in the preceding twelve calendar months, to obtain a permit or collect and remit sales and use tax. The 86th Legislature also eased the burden on remote sellers by enacting HB 2153 (codified at Texas Tax Code 151.0595), which provides a single local tax rate (currently 8%) for remote sellers. A remote seller may choose to collect this single local tax rate and notify the Comptroller's office of its election using Form 01-799, Remote Seller's Intent to Elect or Revoke Use of Single Local Use Tax Rate by email or mail instead of calculating and remitting local tax based on the total local tax rate in effect at the destination.
Marketplace Providers and Sellers
A marketplace provider is an entity that owns or operates a marketplace and processes sales or payments for marketplace sellers (third-parties). Examples include Amazon, eBay, Walmart Marketplace, and Etsy. The law requires marketplace providers to collect and remit state and local sales and use tax on all third-party sales. Marketplace sellers are not responsible for collecting and remitting sales and use tax on their sales through the marketplace, but they must retain records of the sales.
Texas Purchasers Tax Requirements
Taxable purchases from remote sellers have always been subject to Texas sales and use tax. If the seller has a sales tax permit, the seller must collect the tax. If the seller does not have a permit or the seller fails to charge tax, the purchaser must pay the tax directly to the Comptroller’s office on either a use tax return, (if they do not have a Texas Sales and Use Tax Permit) or a sales tax return (if they do have a permit).
If you have any questions regarding Texas State & Local Tax including proper reporting methods and potential tax savings, please feel free to contact Jason Creel at jasonc@gmpcpa.com
Jason Creel is a Tax Manager at GMP. He also handles State & Local Tax issues.
