Retailers Allowed to Pay Sales Tax on Products Sold to Customers in Texas

In a significant change from not only Texas but most states’ policy, Texas has enacted legislation allowing retailers to pay the sales tax on behalf of their customers on products they sell. Effective October 1, 2019, retailers may directly or indirectly advertise, hold out, or state to a customer or to the public that the retailer will pay the tax for the customer if:

• The retailer indicates in the advertisement, holding out, or statement that the retailer is paying the tax for the customer;
• The retailer does not indicate or imply in the advertisement, holding out, or statement that the sale is exempt or excluded from taxation; and
• Any purchaser’s receipt or other statement given to the customer listing the sales price paid or to be paid by the customer separately states the amount of the tax and indicates that the tax will be paid by the retailer.

A penalty applies if a retailer advertises, holds out, or states that tax is not part of the sales price but does not comply with the above requirements. A retailer who advertises, holds out, or states that the retailer will pay the tax is required to remit the tax to the state. Previously, Texas legislation held that a penalty would apply in all instances where a retailer advertised, held out, or stated to a customer or the public that the retailer would assume, absorb, or refund a part of the tax; or would not add the tax to the sales price of a taxable item sold, leased or rented. (H.B. 2358, Laws 2019)