Who's up on the TX sales tax code??

[Mike1951]

Got into a discussion this evening about whether out of state businesses should charge sales tax, ie. Midway, Sportsmansguide, Natchez, etc. that we're familiar with and other out of state companies as well.

I had always heard that the criteria was whether the business has an operation in Texas. Therefore, items bought online from Cabela's and Bass Pro would have sales tax added.

This argument got me to reading the tax code and it appears to go much further than that.

151.107 (1) is the criteria I believed was correct.

151.107 (4),(5) seem to indicate that any company that distributes catalogs or mailings within the state or even runs TV commercials like Midway on Wednesday night, is required to collect the sales tax.

The 151.107 was last amended in 1991, so it can't be a recent change.

I'm no lawyer and certainly not a tax lawyer. Someone please interpret this for me!

It is not happening yet on any of the out of state vendors that I buy from. Is it just a matter of time?

§ 151.103. COLLECTION BY RETAILER; PURCHASER'S
RECEIPT. (a) Except as provided by Section 151.052(d), a retailer
engaged in business in this state who makes a sale of a taxable item
for storage, use, or consumption in this state shall collect the use
tax that is due from the purchaser and give the purchaser a receipt
for the tax payment. When the amount of use tax is added:
(1) it becomes a part of the sales price;
(2) it is a debt of the purchaser to the seller until
paid; and
(3) if unpaid, it is recoverable at law in the same
manner as the original sales price.
(b) The purchaser's receipt must be issued in the form and
manner prescribed by the comptroller.
(c) When several taxable items are sold together and at the
same time, the use tax is determined on the sum of the sales prices
of the items sold exclusive of any item the storage, use, or other
consumption of which is exempted by this chapter.
(d) Repealed by Acts 2007, 80th Leg., R.S., Ch. 1266, §
15(2), eff. September 1, 2007.

Acts 1981, 67th Leg., p. 1552, ch. 389, § 1, eff. Jan. 1, 1982.
Amended by Acts 1993, 73rd Leg., ch. 587, § 12, eff. Oct. 1,
1993; Acts 2001, 77th Leg., ch. 397, § 2, eff. Sept. 1, 2001;
Acts 2003, 78th Leg., ch. 1310, § 100, eff. July 1, 2004.

Amended by:
Acts 2007, 80th Leg., R.S., Ch. 1266, § 15(2), eff.
September 1, 2007.



§ 151.107. RETAILER ENGAGED IN BUSINESS IN THIS STATE.
(a) For the purpose of this subchapter and in relation to the use
tax, a retailer is engaged in business in this state if the
retailer:
(1) maintains, occupies, or uses in this state
permanently, temporarily, directly, or indirectly or through a
subsidiary or agent by whatever name, an office, place of
distribution, sales or sample room or place, warehouse, storage
place, or any other place of business;
(2) has a representative, agent, salesman, canvasser,
or solicitor operating in this state under the authority of the
retailer or its subsidiary for the purpose of selling or delivering
or the taking of orders for a taxable item;
(3) derives rentals from a lease of tangible personal
property situated in this state;
(4) engages in regular or systematic solicitation of
sales of taxable items in this state by the distribution of
catalogs, periodicals, advertising flyers, or other advertising,
by means of print, radio, or television media, or by mail,
telegraphy, telephone, computer data base, cable, optic,
microwave, or other communication system for the purpose of
effecting sales of taxable items;
(5) solicits orders for taxable items by mail or
through other media and under federal law is subject to or permitted
to be made subject to the jurisdiction of this state for purposes of
collecting the taxes imposed by this chapter; (6) has a franchisee or licensee operating under its
trade name if the franchisee or licensee is required to collect the
tax under this section; or
(7) otherwise does business in this state.
(b) Notwithstanding any other provision of law, a
broadcaster, printer, outdoor advertising firm, advertising
distributor, or publisher that broadcasts, publishes, displays, or
distributes paid commercial advertising in this state that is
intended to be disseminated primarily to consumers located in this
state and is only secondarily disseminated to bordering
jurisdictions, including advertising appearing exclusively in a
Texas edition or section of a national publication, is considered
for purposes of this section to be the agent of the person placing
the advertisement and that person placing the advertisement is
considered a retailer engaged in business in this state. The agency
relationship recognized by this subsection is for the sole purpose
of providing a presence in this state for the imposition of a tax on
out-of-state advertisers or sellers. The agent has no
responsibility to report, or liability to pay, a tax for the
out-of-state advertiser or seller and is not restricted by this
subchapter from accepting ads from out-of-state advertisers or
sellers.


Subsection (c) effective contingent upon federal legislation as
provided in Acts 1989, 71st Leg., ch. 291, § 5.

(c) Nonresident persons shall collect the tax imposed by
this chapter with respect to the sale of tangible personal property
to the extent authorized by federal law. Such taxes shall be
remitted quarterly to the comptroller pursuant to rules adopted by
the comptroller in conformance with federal law. This subsection
does not apply to nonresident persons whose activities would
subject them to a duty to pay, collect, or remit a sales or use tax
under this chapter or Title 3 of this code in the absence of federal
legislation.

Acts 1981, 67th Leg., p. 1553, ch. 389, § 1, eff. Jan. 1, 1982.
Amended by Acts 1987, 70th Leg., 2nd C.S., ch. 5, art. 1, pt. 4, §
19; Acts 1989, 71st Leg., ch. 291, § 2; Acts 1991, 72nd Leg.,
1st C.S., ch. 5, § 14.14.

[KaiserB]

This is a fun topic... I can tell you many states have provisions for collecting sales tax from out of state companies. For example: If I perform work in Florida, as a Texas contractor, I am required to pay sales/use tax to the State of FL for all goods and services installed. Hence If I buy 1000' of pipe from a Missouri company for delivery and installation in FL I have to pay a tax to the State of Florida.

The way states such as Florida do this is they charge a "use" tax [which is the same rate at the sales tax].

State of FL website: http://dor.myflorida.com/dor/taxes/sales_tax.html" onclick="window.open(this.href);return false;
Use Tax and Consumption
Use tax complements and is applied in the same manner as sales tax. The use tax rate and sales tax rate are the same, including discretionary sales surtax, if applicable. Use tax is due on purchases made out of state and brought into Florida within 6 months of the purchase date. Also, if you purchase a product tax-exempt that you plan to sell at retail, but end up using it at your place of business, the "use" of the product is subject to tax. If you purchase materials that are "consumed" in a manufacturing process to create your end product but are not part of the end product, those materials are subject to tax.


The same system applies in Texas see: http://www.window.state.tx.us/taxinfo/s ... q_use.html" onclick="window.open(this.href);return false;

3. Do I owe tax on goods purchased via mail-order catalogs or Internet merchandise?
Yes. A seller who uses catalogs or the Internet to sell goods is treated the same as any other seller of taxable items. If you purchase merchandise through a catalog or the Internet from a seller located in Texas, you owe Texas sales tax on the purchase. If you purchase merchandise through a catalog or the Internet from a seller located outside of Texas and use the taxable item in Texas, then you owe Texas use tax on the purchase. An out-of-state mail-order company or an Internet company may hold a Texas Sales and Use tax permit and collect Texas tax. If the out-of-state seller does not have a Texas permit or does not collect Texas use tax, the use tax is due and payable by the purchaser.

[KBCraig]

I don't know the answer to your question, but it's funny timing: just this morning our local paper had a letter to the editor complaining about the sales tax on vehicles. The writer had purchased a used truck for $5,500 to use on his farm, and when he took it to register was told he had to pay sales tax on $9,300. At a rate of 6.25% (I think that's the statewide rate), that's an extra $237.50 that he had to pay.

When he protested and offered to produce the canceled check, he was told the state determined what the truck was worth, and it didn't matter what he actually paid for it.

[Keith B]

I don't know the answer to your question, but it's funny timing: just this morning our local paper had a letter to the editor complaining about the sales tax on vehicles. The writer had purchased a used truck for $5,500 to use on his farm, and when he took it to register was told he had to pay sales tax on $9,300. At a rate of 6.25% (I think that's the statewide rate), that's an extra $237.50 that he had to pay.

When he protested and offered to produce the canceled check, he was told the state determined what the truck was worth, and it didn't matter what he actually paid for it.

We just ran into the same issue on my daughters car. It was purchased from my BIL, and was a rebuilt salvage. The DMV used black book on it and determined it was worth $2K more than we had paid. I offered to sell it to the lady for that, but she wouldn't buy it.

Just your typical bureaucratic garbage to figure an angle to tax you more.

[jmorris]

Got into a discussion this evening about whether out of state businesses should charge sales tax, ie. Midway, Sportsmansguide, Natchez, etc. that we're familiar with and other out of state companies as well.

If I remember correctly, NY just recently tried (is trying?) to go after Amazon.com for sales tax. Their point of view is that the person's computer that Amazon is being viewed on creates a point of presence in NY.

[BigBlueDodge]

I don't know the answer to your question, but it's funny timing: just this morning our local paper had a letter to the editor complaining about the sales tax on vehicles. The writer had purchased a used truck for $5,500 to use on his farm, and when he took it to register was told he had to pay sales tax on $9,300. At a rate of 6.25% (I think that's the statewide rate), that's an extra $237.50 that he had to pay.

When he protested and offered to produce the canceled check, he was told the state determined what the truck was worth, and it didn't matter what he actually paid for it.

We just ran into the same issue on my daughters car. It was purchased from my BIL, and was a rebuilt salvage. The DMV used black book on it and determined it was worth $2K more than we had paid. I offered to sell it to the lady for that, but she wouldn't buy it.

Just your typical bureaucratic garbage to figure an angle to tax you more.

Of course you know the reason for this... it's because people buy vehicles in a private transaction, and the buyer asks the seller to write him a receipt saying he bought the vehicle for $5000 when in fact he really bought the vehicle for $15000. That way he is able to cheat the state out of tax money. I'm sure the state started looking at the number of title transfer requests for 1 year old vehicles being "sold" for pennies on the dollar, and this was changed out of necessity, and not because the goverment wanted to steal more of your money.


And for those naiive enough to think this doesn't happen, you must not have sold a vehicle in a private sale. I've sold numerous vehicles and almost all of the buyers asked for me to write a bill of sale with a sales price less than what I sold the vehicle for.

[KBCraig]

I don't know the answer to your question, but it's funny timing: just this morning our local paper had a letter to the editor complaining about the sales tax on vehicles. The writer had purchased a used truck for $5,500 to use on his farm, and when he took it to register was told he had to pay sales tax on $9,300. At a rate of 6.25% (I think that's the statewide rate), that's an extra $237.50 that he had to pay.

When he protested and offered to produce the canceled check, he was told the state determined what the truck was worth, and it didn't matter what he actually paid for it.

We just ran into the same issue on my daughters car. It was purchased from my BIL, and was a rebuilt salvage. The DMV used black book on it and determined it was worth $2K more than we had paid. I offered to sell it to the lady for that, but she wouldn't buy it.

Just your typical bureaucratic garbage to figure an angle to tax you more.

Of course you know the reason for this... it's because people buy vehicles in a private transaction, and the buyer asks the seller to write him a receipt saying he bought the vehicle for $5000 when in fact he really bought the vehicle for $15000. That way he is able to cheat the state out of tax money. I'm sure the state started looking at the number of title transfer requests for 1 year old vehicles being "sold" for pennies on the dollar, and this was changed out of necessity, and not because the goverment wanted to steal more of your money.


And for those naiive enough to think this doesn't happen, you must not have sold a vehicle in a private sale. I've sold numerous vehicles and almost all of the buyers asked for me to write a bill of sale with a sales price less than what I sold the vehicle for.

I'm not so naïve as to think this doesn't happen, but anyone who thinks it is restricted to private sales is truly living ostrich-style. Trade-in values and sales prices are rather notoriously skewed by licensed car dealers in "TTL paid" deals, and the difference in tax paid is a well-known profit item for dealers.

I bought a used truck from a dealer in 2000 for $2,000 cash, but I noticed on the paperwork that he reported a trade-in of $1,200, for a net price of $800. Umm, yeah, except I didn't trade anything, and I laid twenty $100 bills in his hand. You betcha I called the state and reported him. The $75 sales tax on the $1,200 difference was chump change, but I hate a petty thief more than a one who commits grand larceny.

The state is legally entitled to sales tax on the true value of the purchase, but blue book value has nothing to do with the actual value. The LTE I cited was about a used pickup for farm use. Blue book doesn't keep up with rapidly crashing prices, like we see when fuel prices soar. They also don't take note of "used and abused" values for banged-up vehicles, such as one might purchase for farm use. Instead, the tax office punches in the VIN and declares the "real value" without seeing the banged-up work truck sitting outside.

I own a conversion vehicle, so I know the silliness of relying on VINs; according to the state, my van was a plain cargo van worth about $15k new, when it actually sold for $38,500, highly customized. When I bought it used (4 years old) in a private sale, they were quite happy to declare the sales price as the "value", even though blue book said it was worth several thousand less.