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Texas exempts remote retailers’ first $500,000 in annual sales from tax liability

Texas has set the nation’s highest “safe harbor” threshold for remote online sales.

“If in the preceding 12 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,” the Sales Tax Institute reports.

The remote sales-tax rule established by the Texas Comptroller of Public Accounts took effect Jan. 1 but won’t be enforced until Oct. 1, 2019. Once a seller exceeds the $500,000 threshold, it must obtain a permit and begin collecting sales taxes within four months.

Texas is one of several states taking action in 2019 following the U.S. Supreme Court’s 2018 ruling in South Dakota v. Wayfair allowing them to collect sales taxes from remote sellers. The decision cleared the way for states to eliminate a price advantage enjoyed by remote businesses that take orders online and ship products directly to customers without charging a sales tax.

A $500,000 exemption, however, could protect that advantage for most online purchases made by Texas residents.

“I do not get a $500,000 first sales pass on my business,” says HFA member Chris Pfeifer, owner of Homestead House in Conroe, Texas. “I pay tax out of the gate.”

All other states set a lower threshold.

The New York Department of Taxation and Finance published a notice in January saying: “A business that had no physical presence in New York State but has both made more than $300,000 in sales of tangible personal property delivered in the state and conducted more than 100 sales of tangible personal property delivered in the state in the immediately preceding four sales tax quarters is required to register as a sales tax vendor and collect and timely remit the applicable state and sales tax.” The edict is effective immediately.

The state of Virginia pre-filed a bill in the 2019 legislative session that would require online sellers to register and collect sales taxes if they exceed $100,000 in gross revenue or engage in 200 or more separate retail transactions.

California, where online sales-tax requirements take effect April 1, set its threshold at $100,000 or 200 transactions.

The HFA supports federal legislation that would set consistent rules across the country for sales-tax collections and create a level playing field for brick-and-mortar retailers.

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