HomeMy WebLinkAbout(0003) IR 10355 - Recent Legislative Changes Relating to Sales Tax SourcingINFORMAL REPORT TO CITY COUNCIL MEMBERS
No. 10355
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To the Mayor and Members of the City Council
January 14, 2020
Page 1 of 2
SUBJECT: OVERVIEW OF RECENT LEGISLATIVE CHANGES RELATING TO
SALES TAX SOURCING
This Informal Report to the Mayor and City Council presents information regarding recent legislation
passed during the 2019 legislative session relating to sales tax sourcing.
Changes in State Law
In response to the United States Supreme Court decision in South Dakota v. Wayfair (2018) and
recent Wayfair-related legislation passed during the 2019 legislative session, the Texas Comptroller
of Public Accounts ("Comptroller") published proposed rule changes in the Texas Register on January
3, 2020. For Texas cities, the proposal changes the sales tax sourcing of certain internet marketplace
purchases from the point of distribution to the destination city.
The Wayfair opinion concluded that state and local sales taxes may be collected from online, or
"remote," sellers that have no physical presence in a state. In order to fully implement Wayfair, the
Texas legislature passed two bills during the 2019 legislative session:
H.B. 1525 requires online marketplace providers (Amazon, eBay, UberEats, Door Dash, etc.)
to collect and remit sales taxes on marketplace sales. Prior to this change, individual sellers in
the marketplace would collect and remit the sales tax. Additionally, it requires the sales taxes
associated with marketplace sales to be sourced to the delivery destination.
H.B. 2153 gives remote sellers the option to either: (1) collect and remit the actual sales taxes
owed based upon the shipping destination; or (2) collect a simplified "single local use tax rate"
of 1.75 percent on all sales. Remote sellers who collect the single local use tax rate send the
money to the Comptroller. The Comptroller remits the revenue to local taxing entities based
upon their proportion of the local sales tax base.
The table below illustrates the effect of H.B. 1525 on marketplace purchases from providers such as
Amazon, eBay, Uber Eats or, Door Dash.
Prior to H.B 1525
Responsibility
Local
Responsibility
Local
for Collection &
Jurisdiction
for Collection &
Jurisdiction
Remittance of
Credited with
Remittance of
Credited with
Sales Tax
the Sales Tax
Sales Tax
the Sales Tax
Collection:
Individual Seller
Seller's Location
Marketplace Delivery Location
Remittance:
Seller
* Delivery charges by third party carriers are not subject to sales tax as long as the third party carrier only provides transportation and does not sell
the taxable item being delivered (Texas Administrative Code Section 3.303).
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS
INFORMAL REPORT TO CITY COUNCIL MEMBERS
No. 10355
PRTEot
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To the Mayor and Members of the City Council
January 14, 2020
Page 2 of 2
SUBJECT: OVERVIEW OF RECENT LEGISLATIVE CHANGES RELATING TO
SALES TAX SOURCING
The proposed rules provide additional considerations for sales tax sourcing. For example, if a seller
fulfills an internet order at a place of business in Texas, the sale is completed at the place of business
where the internet order was fulfilled. Thus, the local portion of the sales tax collected would be
remitted to the jurisdiction where the sale was completed.
The proposed rules are in the 30-day public comment period. Additional changes may occur. Staff will
continue to monitor the rule -making process and provide updates to Mayor and City Council as
necessary.
Fiscal Analysis
The Comptroller estimates the changes to state law will result in a positive impact of $550,000,000 to
the State through the biennium ending August 31, 2021. The expected increases in tax collections are
attributable to greater efficiency of tax administration, convenience, and avoidance of undue burdens
for taxpayers when responsibility for collection and remittance rests with marketplace providers rather
than individual sellers.
H.B.1525 and 2153 are not expected to have any effect on the City's expense for current Chapter
380 Agreements since 380 programs are calculated on the basis of taxes actually received by the
City.
The City does not have access to the detailed sales tax collection records of private businesses so a
precise analysis of financial impact is impractical. The City's Planning and Data Analytics Department
estimated an overall increase of 4% in sales tax for fiscal year 2020 from the fiscal year 2019 total.
The estimated increase is primarily based on normal projected growth trends. Sales Tax revenues
will continue to be closely monitored and reported to the City Council on a monthly basis.
The Comptroller conducts audits of businesses in Texas to ensure that Texas tax laws are applied
uniformly, deter tax evasion, promote voluntary compliance, and educate tax payers. The City's
Planning and Data Analytics Department utilizes summarized sales tax information provided by the
Comptroller to formulate sales tax revenue trends and projections. The summarized sales tax
information is confidential, and is not to be made available to the public. A city may use the
summarized information for the purpose of economic forecasting (Tex. Tax Code 321.3022(c)).
If you have any questions, please call Terry Hanson, Assistant Director of Planning and Data
Analytics, at 817-392-7934 or Reginald Zeno, Director of Financial Management Services / Chief
Financial Officer, at 817-392-8500.
David Cooke
City Manager
ISSUED BY THE CITY MANAGER
FORT WORTH, TEXAS