In the June 27 press release, Texas Comptroller Glenn Hegar issues initial guidance and a memorandum noting the following was taking place or will take place:
- Implementation will be done carefully and deliberately with ample input from the public
- Reviewing of rules for possible updates – for example, explain the amount of economic nexus in sales and/or transactions required to create a safe harbor for small sellers
- Early 2019 is the target effective date for rule amendments
- The law will NOT be applied retroactively to remote sellers that have no physical presence in Texas
- The Comptroller’s office expects the Texas Legislature to play an important role in addressing key issues when they return in January 2019
- With appropriate notice, and prior to legislative action, Tax Code § 151.107(a)(5) (Retailer Engaged in Business in the State) could be imposed on remote sellers to the extent they “[solicit] orders for taxable items by mail or through other media,” meaning, for example, sellers who solicit sales in Texas through catalogs and emails.
- Suggest the Legislature review: 1) amending the definition of “seller” or “retailer” to include marketplace platforms used by third-party sellers and provide adequate liability protection for the marketplaces that collect and remit for those sellers. 2) Amend Tax Code § 151.059 (Fee Imposed in Lieu of Local Sales and Use Taxes). 3) Amend Tax Code § 151.107(c), which is a companion provision to § 151.059.
- Of note, ” in order to avoid imposing an undue burden on interstate commerce, the state will likely relieve some out-of-state sellers from collection responsibilities.”
- Fiscal impact: “expect that state and local jurisdictions will see tax collections increase because of the Wayfair decision, but the amount depends on several questions raised by the decision that are yet to be resolved.”
Below is a copy of the enitre statement from the Comptroller’s Office:
In a June 27, 2018, press release, Texas Comptroller Glenn Hegar provided initial guidance on the implications of the recent U.S. Supreme Court decision in Wayfair v. South Dakota, commonly referred to as Wayfair. As the Comptroller explained in that guidance, “We’re going to make sure we do this carefully, deliberately and with ample input from the public, the Legislature and the business community.” Comptroller Hegar also stressed there would be no retroactive application of the new law to remote sellers that have no physical presence in Texas. We will add that, until further notice, we will continue to follow the physical presence nexus standard and all related guidance we have issued.
“We’re looking forward to working with those affected businesses to ensure this is a smooth transition and a successful partnership,” Hegar said in the press release. In addition, we have prepared a memorandum summarizing the decision and outlining what future actions we anticipate undertaking in response to Wayfair.
Under our existing rulemaking authority, we have started reviewing rules that may need updating. For example, we expect to amend the relevant sales tax rules to establish an economic nexus standard for remote sellers based on sales, and possibly on the number of transactions, in order to avoid imposing an undue burden on interstate commerce. This newly established economic nexus standard will relieve some out-of-state sellers from collection responsibilities.
Early 2019 is the target effective date for rule amendments; however, that could change pending issues that arise during the rulemaking process. It is highly likely that the target effective dates for collection requirements by remote sellers will be later in 2019. We intend to meet regularly to solicit input from interested parties, including retailers, remote sellers, trade associations and the Comptroller’s Taxpayer Advisory Group and Business Advisory Group. We also will consult with local taxing entities on potential impacts to local collections and allocations.
We also expect the Texas Legislature to play an important role in addressing key issues when they return in January 2019. For example, we will suggest the Legislature review and amend Tax Code Sections 151.059 and 151.107(c) to trigger the application of these provisions, which provide for the imposition and collection of a fee in lieu of local sales and use taxes by remote sellers. This would greatly simplify the collection of local taxes for remote sellers.
The agency anticipates that the state and local governments will see tax collections increase, but the amount depends on the implementation and resolution of several significant issues raised by the Supreme Court’s ruling. Gains from the ruling are likely to be lower than previous estimates of taxes uncollected by remote sellers. In the past year, for example, some remote sellers have volunteered to collect in anticipation of the Wayfair decision or for other reasons. Wayfair, the named plaintiff in this case, already collects Texas sales and use taxes. More specific estimates will be available as the implementation and legislative process continues.