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Amazon has entered into an agreement with the state of Texas to begin collecting and remitting Texas sales tax on July 1, 2012. Under the agreement, Amazon plans over the next four years to create at least 2,500 jobs and make at least $200 million in capital investments in Texas. The agreement resolves all sales tax issues between Amazon and the state. Both Amazon and the state showed support for the enactment of federal legislation to resolve the tax collection issue on a national level. Click here to see our previous news item on Texas's affiliate nexus bill. (News Release, Texas Comptroller of Public Accounts, April 27, 2012)


On July 19, 2011, Texas Governor Rick Perry signed a fiscal matters bill that includes affiliate nexus provisions for remote sellers. Effective January 1, 2012, the definition of a retailer considered to be engaged in business in Texas for use tax collection purposes is expanded. A retailer is engaged in business in Texas if the retailer holds a substantial ownership interest in, or is owned in whole or substantial part by, a person who maintains a location in Texas from which business is conducted and if the retailer sells the same or a substantially similar line of products as the in-state person and sells those products under a business name that is the same or substantially similar; or the facilities or employees of the in-state person are used to advertise, promote, or facilitate sales by the retailer to consumers or perform any other activity on behalf of the retailer intended to establish or maintain a marketplace for the retailer in Texas, including receiving or exchanging returned merchandise. Additionally, a retailer is engaged in business in Texas if the retailer holds a substantial ownership interest in, or is owned in whole or substantial part by, a person who maintains a distribution center, warehouse, or similar location in Texas and who delivers property sold by the retailer to consumers. In addition, the definition of “seller” and “retailer” is expanded to include a person who has been entrusted with the possession of property and has the power to sell, lease, or rent the property without further action by the owner. Click here for an update on Amazon's agreement to collect sales tax in Texas. (S.B. 1, Laws 2011, First Special Session, effective September 28, 2011, except as noted)


By attending trade shows in Texas to introduce and demonstrate dental equipment for the purpose of selling them in Texas, an out-of-state seller had the required physical presence in Texas to establish substantial nexus with the state. As a result, the taxpayer was required to collect Texas use tax on sales to Texas purchasers even if orders were received and filled outside Texas. Federal law prohibits states from imposing income tax on a taxpayer whose only contacts with a state are solicitation of sales of tangible personal property if the orders are processed and filled out of state and if the property is delivered by a common carrier; however, the prohibition does not apply to a transaction tax, such as sales and use taxes. (Decision, Hearing No. 46,628, Texas Comptroller of Public Accounts)


Texas Court of Appeals recently upheld a decision that Alpine Industries, Inc. was a direct sales organization and was responsible for collecting and remitting sales and use tax instead of its independent dealers. Under Texas law the Comptroller can treat a company as the retailer instead of its sales staff, if this will allow for more efficient collection and remittance of sales and use tax. Alpine Industries, Inc. challenged the court’s position citing conflicts with the commerce clause, due process, and equal protection. However, the court ultimately found that its position did not violate any issue raised by Alpine Industries, Inc. (Texas Court of Appeals (Third) At Austin, Alpine Industries, Inc. v. Carole Keeton Strayhorn, Comptroller of Public Accounts of the State of Texas and Greg Abbot, Attorney General of the State of Texas, Docket No. 98-12998, July 15, 2004.)


In a recent hearing involving a debt collection company Texas upheld that a company can create nexus through contract sales people soliciting business in the state. Furthermore, it was ruled that sales made by these contract sales people qualified the debt collection company as doing business in Texas regardless of the fact that the company is based outside of Texas. Another issue raised in the hearing involved the taxability of debt collection services. It was upheld according to the laws of the state that debt collection services are taxable and the debt collection company is liable for collecting and remitting taxes even when debtor are instructed to send their payments to the creditor instead of the debt collection company. (Texas Comptroller of Public Accounts, Hearing No. 39,829, February 24, 2004.)



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