March 21, 2020
Texas Comptroller Glenn Hegar reminds businesses that the sales tax collected in February 2020 was due by March 20, 2020. Although this may be difficult for businesses due to COVID-19, the tax represents money collected from individual Texans and expected to be available to provide emergency health care and support other emergency operations. The Comptroller urges businesses to make use of the agency’s online tools to meet deadlines.
On December 20, 2019, the Texas Comptroller of Public Accounts (Comptroller) finalized proposed amendments to Rule 3.586 to implement an economic nexus based on a threshold of $500,000 of gross receipts in Texas. Some months ago, the Comptroller’s office proposed making such amendments to the regulation to implement the decision in Wayfair which pertained to sales tax within the Supreme Court ruling; with the state extending such application to the Franchise tax.
In most states, corporate tax nexus standards is commonly applied using a “doing business” standard, often resulting in broad activities establishing nexus unless otherwise federally protected. In many cases, such activity includes deriving income attributable to sources within the state, or directing activities at state customers for the purpose of selling them goods or services. Although many states are unclear if they incorporate a sales type threshold in determining nexus, it is unquestionable that in many of these states, economic nexus could be triggered with sales sourced to the state.
In contrast to most states, previously Texas has explicitly applied a physical nexus standard for the franchise tax. Even after the Wayfair decision in 2018, the state expressed that they have not moved away from the physical presence requirement for franchise tax.
To learn more about the implications of this tax, click here.