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Online Purchases Might Get Taxed, After All

Photo by alancleaver_2000

Texans may soon have to pay sales tax on many of the products they buy online, despite an attempt by Governor Perry to stop that from happening. Last week, Governor Perry vetoed a bill that would have required internet retailers with a physical presence in Texas to charge sales tax.

But now that same provision has found its way into House Bill 1, a sweeping fiscal matters bill being considered during the special legislative session. Perry would not have line-item veto power on House Bill 1, so he would have to veto the entire spending bill to block the internet tax provision he already vetoed when it was House Bill 2403.

HB 2403 had become informally known as the “Amazon law”, because online retailer – which has consistently opposed collecting sales tax – closed a distribution center in suburban Dallas last year after the state comptroller slapped Amazon with a $269 million tax bill.

In an exchange among lawmakers on the Texas House Appropriations Committee yesterday, Democratic lawmakers seemed surprised to learn that a provision vetoed by the Governor had crept back into a bill crafted by Republicans.

State Rep. Helen Giddings (D-DeSoto) asked about the section in HB1.

Giddings: Yes, there was a bill that was vetoed that had to do with sales tax. And it had quite a price tag on it, and I’m just wondering.

House Appropriations Chairman Jim Pitts (R-Waxahachie):The Amazon bill? Is that the one?

Giddings: That’s the one

Pitts: You will see that in House Bill 1.

Giddings: We will see it in House Bill 1?

State Rep. Sylvester Turner (D-Houston):What does that mean?

Giddings: And so it’s coming back to us in an insulated kind of way.

Pitts: When we passed [it] out on this floor, and what the Senate passed out, there was what Representative Otto’s nexus bill [HB 2401]. And we put the nexus bill in House Bill 1.

Turner: Is it the intent of the chair to amend HB1 to pull out that section?

Pitts: It’s not my intention, unless Representative Otto wants to take it out.

Turner: Is it chairman Otto’s intent to pull out that section

State Rep. John Otto (R-Dayton):No.

Giddings: What was that question Mr. Chairman? So I can understand the answer.

Turner: My question, whether or not it was the intention of either chairman to put forth an amendment to pull out the Amazon section in HB1.

Otto: It’s not the Amazon section. It is a nexus bill.

Turner: Is it in HB1?

Otto: It is in HB1. It was in Senate Bill 1811.

Turner: Right, but now that we know the Governor has taken action on it.

Otto: He took action on HB 2403.

Turner: Is that the same thing?

Otto: That was a standalone bill.


Turner: No I got that. I got that. But is it your intent for it to remain in the bill that is before us today.

Otto: Yes.   

So how much money would the state gain by taxing online sales by retailers with a physical presence in Texas? According to a fiscal note attached to HB 2403, about $16 million in revenue over the next two years.

California’s state assembly advanced a similar law this week, and Bloomberg Business Week reports on a new proposal in the US Senate that could require online retailers like Amazon to charge sales tax.

Such measures have been proposed and disregarded by Congress for years, but [Senate Majority Whip Dick] Durbin believes the winds are shifting. "This idea is overdue," he says. "Online retail sales are now very fulsome and are growing at the expense of local units of government." Many state budgets are bleeding red, despite some recent revenue upswings around the country, and Internet sales-tax revenue has the gleam of found money. In many states, customers are supposed to declare their online purchases on their income tax forms but rarely do. A University of Tennessee study recently estimated that states will collectively lose $10.1 billion in uncollected online sales-tax revenue this year and $11.3 billion next year.

Nathan Bernier is the transportation reporter at KUT. He covers the big projects that are reshaping how we get around Austin, like the I-35 overhaul, the airport's rapid growth and the multibillion dollar transit expansion Project Connect. He also focuses on the daily changes that affect how we walk, bike and drive around the city. Got a tip? Email him at Follow him on Twitter @KUTnathan.
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