SALT Blawg – State and Local Tax
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Chamberlain Hrdlicka Blawgs
By Paul Masters
On Tuesday, the Texas House easily passed HB 2403. The bill addresses the “Amazon” issue, by subjecting a person to tax if the person has a distribution center in Texas, but also expands the definition of doing business in Texas to include any person who “derives receipts from the sale” of tangible personal property in Texas. This would presumably include Amazon affiliates, an issue hotly contested by Amazon in New York and other states.
Specifically, the bill modifies the Texas Tax Code as follows:
(i) redefines "seller" and "retailer" under the Texas Tax Code to include any person who has possession of tangible personal property of another person and is also authorized sell, lease or rent such property without additional action by the other person;
(ii) redefines "engaged in business" to include a person who maintains a distribution center or any other physical location inTexas;
(iii) redefines "engaged in business" to include the derivation of receipts (not just rentals) from the sale of tangible personal property situated inTexas;
(iv) redefines "engaged in business" to include a person who holds at least 50% ownership interest in a person who maintains a location of business in Texas and if the retailer sells the substantially same line of products as the person outside Texas under a substantially similar name;
(v) redefines "engaged in business" to include a person who holds at least 50% ownership interest in a person who maintains a location of business in Texas and the Texas facilities or employees of the Texas person are used to advertise, promote, or facilitate sales by the out-of-state retailer or perform any marketplace activity on behalf of the out-of-state retailer, such as receiving or exchanging returned merchandise; and
(vi) redefines "engaged in business" to include a person who holds at least a 50% ownership interest in a person that maintains a distribution center in Texas and delivers property sold by the retailer to consumers.
In the case of the ownership interest provisions, the legislation treats ownership going either way (whether 50% ownership of, or 50% ownership by). Thus the legislation seeks to link one person to another if there is shared ownership to a substantial degree. A person would not be able to divorce the actions of a related party (50% or more ownership) from the actions of the other entity.
The Texas Senate has not yet voted on its version of the bill.