Earlier this year, the Supreme Court handed down its landmark decision in South Dakota v. Wayfair Inc., which made it easier for companies to create nexus in states. In turn, this made it easier for states to collect revenue from companies doing business in these states.
In a previous blog, we reported that Texas is making plans to join many other states by jumping on board the economic nexus bandwagon. The Texas comptroller recently unveiled plans to move this legislation forward.
The New Legislation in Texas
Even though Texas has been moving cautiously in the move toward economic nexus, it is moving a little bit closer. Texas, one of the largest states and popular states for companies to do business in, has finally made plans to enact economic nexus legislation.
The Texas Comptroller recently released proposed administrative rule amendments in response to the U.S. Supreme Court’s decision overruling Quill’s physical presence standard. The Comptroller explains that these proposed amendments would restore state sales tax permit and collection requirements “that were unconstitutional prior to the Wayfair decision,” as well as establish a nexus “safe harbor” for remote sellers whose total revenue in Texas in the preceding twelve calendar months is less than $500,000.
However, these requirements will not go into effect until October 1, 2019. This is to provide remote sellers with additional time to prepare for their collection and reporting obligations. Texas Comptroller Glenn Hegar says, “We’re looking forward to working with those affected businesses to ensure this is a smooth transition and a successful partnership.”
The Texas legislature has recently drafted legislation that outlines the state’s proposed economic nexus law.
Just like South Dakota’s economic nexus law prohibits retroactive enforcement, Texas’ law will do the same. As a reminder, the economic nexus rules in Texas and other states may not technically be retroactive, but if a company had physical presence nexus prior to these new rules, that can result in retroactive exposure. We emphasize to clients to still review the full nexus picture, particularly in aggressive states like Texas, before simply starting to file. Providing the accurate “nexus start date” on registration documentation is very important.
Miles Consulting Group Can Help!
Due to the complexities surrounding the U.S. Supreme Court Decision, it is helpful to consult with tax professionals, like Miles Consulting Group, to assist you. Stay tuned to our future blogs to hear about further information on the enactment of the proposed legislation. We are here to help with all of your multistate tax needs!
