Effective Date: January 1, 2019, but not enforced until October 1, 2019
Threshold: $500,000
Measurement Date: Preceding twelve calendar months
Includable Transactions: Gross revenue: including taxable, nontaxable, and tax-exempt sales; Marketplace sales included towards the threshold for individual sellers
When You Need to Register Once You Exceed the Threshold: The first day of the fourth month after the month in which the seller exceeded the safe harbor threshold
Remote sellers that exceed Texas’ economic nexus threshold of sales into the state will be required to collect and remit sales tax, effective January 1, 2019 and enforced starting October 1, 2019. In October of 2018, the Texas Comptroller of Public Accounts proposed to amend Texas Administrative Code rule §3.286 in response to the South Dakota v. Wayfair decision. The Texas Comptroller adopted the amendments, effective January 1, 2019.
The amendments establish a safe harbor for remote sellers. If in the preceding twelve calendar months, a remote seller’s total Texas revenue from the sale of tangible personal property is less than $500,000, the seller is not required to collect and remit sales tax. If a remote seller exceeds this threshold, they must obtain a permit and begin collecting tax.
Total Texas revenue is defined as the gross revenue from the sale of tangible personal property and services for storage, use, or other consumption in the state. It includes taxable, nontaxable, and tax-exempt sales.
After a seller exceeds the threshold, they must obtain a permit and begin collecting no later than the first day of the fourth month after the month in which the seller exceeded the safe harbor threshold. The initial twelve calendar month period for determining a remote seller’s total Texas revenue is July 1, 2018 through June 30, 2019. If a remote seller’s total revenue exceeds Texas’s threshold during that period, the seller must obtain a permit by October 1, 2019.
The initial twelve calendar months are chosen as a way to give remote seller more time to prepare for the changes brought about by the new economic threshold. The new amendments postpone tax collection and permit requirements until October 1, 2019.
A remote seller may terminate their collection obligations if their total Texas revenue falls below the threshold for twelve consecutive months. To terminate collection obligations, a remote seller must submit a form prescribed by the Texas Comptroller. A remote seller must resume collection on the first day of the second month following any twelve calendar months in which the remote seller’s total revenue exceeds the threshold.
The Texas Comptroller will not seek retroactive enforcement. We will keep you updated as the state releases more resources for sellers. Note that there is only a sales threshold and not a transaction threshold as featured in many other states that have adopted economic nexus rules. (Amendments to 34 TAC 3.286, Texas Comptroller of Public Accounts, Filed with the Office of the Secretary of State on October 8, 2018).
UPDATE: The Texas Comptroller has provided updated guidance regarding the economic nexus threshold calculation for remote sellers who make sales through a marketplace facilitator. Per the guidance, as of April 1, 2020, remote sellers must combine sales made through all mediums with delivery into Texas to determine whether they have exceeded the economic nexus threshold. Prior to April 1, 2020, marketplaces sales are not included when determining a remote seller’s total Texas revenue for purposes of the economic nexus threshold. As of April 1, 2020, if a remote seller’s combined sales (sales made directly through their own website plus sales made through a marketplace facilitator) exceed the $500,000 economic nexus threshold, then the seller is required to apply for a Texas sales tax permit and collect and remit tax on its sales into Texas that are not made through a marketplace provider. For additional information for remote sellers, visit the Texas Comptroller’s webpage. (Texas Tax Responsibilities and Resources for Sellers After Wayfair webpage, Texas Comptroller website)