It’s no surprise that buying from e-vendors such as Amazon has an advantage — no sales taxes are collected.
What consumers may not know is that state law still requires them to pay the state an occasional use tax, which is imposed on goods and services that are purchased for personal or business use, storage or consumption in Texas.
Enforcing the law is virtually impossible at the consumer level, and the state comptroller’s office ensures compliance only for businesses that make large out-of-state or online purchases.
“My suspicion is that most people probably aren’t aware of” the use tax requirement, said Alex Winslow, executive director of Texas Watch, an Austin-based consumer advocacy group.
Examples of items subject to use tax include purchases made over the Internet or over the telephone from an out-of-state vendor that does not collect sales tax. State law requires consumers to pay the tax and to report their purchases to the state comptroller.
“I’ve never done it, and you probably haven’t done it, either,” said John Eliason, a Dallas-based tax attorney with Gardere Wynne Sewell LLP. “There’s not really a good collection mechanism that’s set up there, but that doesn’t mean the taxes aren’t owed.”
Ultimately, the responsibility of collecting sales tax should fall on businesses, said R.J. DeSilva with the state comptroller’s office. Texas Comptroller Susan Combs has estimated that the state loses about $600 million per year in uncollected sales tax on online sales.
“If companies are engaged in business, they need to collect sales tax,” DeSilva said. “They are required to if they’ve got store fronts, distribution centers, employees in the state.”
Several bills in the Legislature are attempting to clarify tax collection rules and what constitutes a physical presence for retailers in the state to determine whether they are required to collect taxes here.
Two similar bills would amend the tax code to require Amazon to collect sales tax if it keeps a distribution center in Irving. One of the bills — House Bill 2403, filed by Rep. John Otto, R-Dayton, advanced to the full House for a vote that is set for today.
But a third bill would amend the state tax code to say that a company can’t be classified as a retailer required to collect sales tax if it, or a subsidiary, operates or uses “only a fulfillment center … or a computer server” in Texas.
The opposing bills come as Amazon fights efforts to compel it to collect taxes in the state — it had announced plans to shut down the distribution center after the state comptroller demanded that it pay $269 million in uncollected sales tax revenue from 2005 to 2009.
The retailer did not return requests seeking comment Monday.
Competitors say the retail giant should be forced to collect taxes because not doing so allows it to have lower prices and, ultimately, an unfair competitive edge over brick-and-mortar vendors.
“It really does disrupt the balance of the market,” said Eric Bearse with the Alliance for Main Street Fairness, a group of retailers who are banding together in a political campaign to push states to require Amazon.com Inc. and other e-retailers to collect sales tax.
Still, San Antonio resident Michael Antinarella said that he likely would not stop shopping online if Amazon started collecting sales tax because the movies he buys through the vendor still would be cheaper there.
But “I’m glad the state doesn’t audit regular customers,” Antinarella said. “That would turn me off from online shopping completely.”