Texan Senate Passes SSUTA Law

by Glen Shapiro, LawAndTax-News.com, New York

21 May 2003

According to reports in the national media, the Texas Senate has passed SB 823, a piece of legislation designed to bring the state's sales tax rules into partial compliance with the Streamlined Sales and Use Tax Agreement (SSUTA).

However, experts have suggested that the decision by the Texan authorities to retain an origin-based rule for the sourcing of sales of tangible property could mean that the state will not be admitted to the Agreement.

In order to work effectively, the SSUTA must be adopted by at least 10 states, with residents representing at least 20% of the populations of states that collect sales tax. At nearly 8% of the nation's population, Texas's streamlining effort has been welcomed, but its decision to retain an origin-based sales sourcing system is likely to conflict with the SSUTA, which calls for destination-based sourcing.

Writing at the weekend, e-commerce tax expert, David Hardesty pointed out some of the potential problems, observing that:

'Retention by Texas of an origin-based sourcing rule will likely impose a double tax on out-of-state purchases from Texas sellers. For example, if Dell Computer sells to an out-of-state buyer, its home city of Round Rock, Texas, will impose a tax.'

'However, under the SSUTA's destination-based sourcing rule, the buyer's city will also seek to impose a tax. It seems unrealistic to expect those administering the SSUTA to admit Texas to the agreement on this basis, since it defeats the entire purpose of the effort to streamline and simplify the nation's sales tax.'

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