(The Center Square) – Some Texas cities each year give millions of dollars in local sales tax collections back to e-commerce giants, such as Dell Technologies and Best Buy, in exchange for them locating their headquarters or warehouse in the city, promising to bring jobs and revenue to the local economy.
Texas Comptroller Glen Hegar wants to curb those tax-sharing deals and instead give the local sales tax revenue to the city where the customer is located.
“Texas taxpayers are paying local sales taxes that are used in cities where they have absolutely no rights as taxpayers,” Hegar said at a recent hearing, according to Bloomberg Tax. “This is the ultimate case of taxation without representation.”
Hegar says those deals currently take away sales tax revenue from some cities and concentrate it in others.
The proposed changes are part of a wider regulatory proposal for out-of-state web-based retailers. The 2018 South Dakota vs. Wayfair ruling removed the requirement that stores had to have a physical presence in a state to collect sales tax.
The state's tax sharing-deals are similar to those in more than 20 cities in California. Last year, California approved legislation that required more transparency about the terms of the tax deals. A Bloomberg Tax investigation found that giants like Apple, Best Buy, Staples and others have collected tens of millions of dollars each year from local California governments. California Gov. Gavin Newsom vetoed a bill that would prevent companies and cities from striking new tax deals altogether.
As an example, a 1993 deal between Dell and the city of Round Rock gives Dell 62.5% of the city's local sales tax revenue until 2053. This deal kept the company from moving to Nashville or Ireland. City attorney Stephan Sheets told lawmakers that Round Rock gives Dell about $10 million each year. Under the proposed rules, Round Rock would lose $30 million in tax revenue from Dell each year. To make up the difference, the city may be forced to raise property taxes. Round Rock officials oppose the proposal.
Some cities are in favor of the proposed changes. Palestine Mayor Steve Presley told Bloomberg Tax, "If I sit in my living room and order something and have it shipped to my house my city should get the sales tax revenue.” Sales tax revenue in his city has stayed flat despite the addition of 1,600 new jobs from a chicken processing plant and a call center. He attributes this to the rise of online shopping and tax deals with other cities.
Hegar has extended the comment deadline for lawmakers to April 3.