Sales Tax Fairness Moves Forward in Connecticut and Texas

In Connecticut and Texas, sales tax fairness legislative efforts made great strides in the past week.

Late last week, after weeks of negotiations with Democratic leaders, Connecticut Gov. Dannel P. Malloy announced a budget deal that includes an affiliate nexus tax, according to numerous media reports. The state has budgeted revenue of $9.4 million from the provision. The budget now must be approved by the full House of Representatives and the Senate.

“I think the Amazon tax is an important stake in the ground,” Malloy stated, as reported by the Hartford Courant [1]. “We need to have a national conversation, and I’m more than happy to participate in that, about changing our policies with respect to sales tax. We have given definitive advantage to certain types of retailers, and that is adversely impacting employment in a place like the state of Connecticut. I’m for leveling that playing field.”

The American Booksellers Association is calling on its Connecticut members to contact legislators in both their store and home districts to urge them to support the affiliate nexus provision in the budget. To help booksellers in this important advocacy outreach, ABA has prepared a template letter [2] that can be e-mailed to their legislators or be used as a source for talking points for their phone call.

“We are happy to hear that Gov. Malloy supports the affiliate nexus provision in the budget,” said ABA CEO Oren Teicher. “Clearly, he’s heard from many retailers, including independent booksellers, regarding this issue, and he understands how important sales tax fairness is to the state’s retailers. But this campaign is far from over. It is important that booksellers contact their legislators and urge them to support the sales tax fairness provision in the budget.”

Earlier this month, ABA member booksellers Suzy Staubach of UConn Co-op [3] in Storrs and Patience Banister from Bank Square Books [4] in Mystic, along with ABA Content Officer Dan Cullen, met with Tim Bannon, the governor’s chief of staff regarding sales tax fairness. In addition, this year, ABA has written to the governor’s office several times regarding the current sales tax inequity that is negatively impacting Connecticut bookstores.

In Texas, HB 2403, a sales tax fairness bill introduced by Rep. John Otto (R-Dayton), passed the Texas House of Representatives overwhelmingly by a vote of 122 - 23. In addition to a broad network of online affiliates, Amazon.com also has a distribution facility in the state, which it threatened to close after the state assessed the online giant for $269 in uncollected sales and use taxes, including penalties.

Rep. Otto told the Austin-American Statesman [5] that HB 2403 [6] “is not a new tax, is not subjecting anybody to a new tax, and is not increasing the rate of any tax. What this bill does is put into statute a clearer understanding of what constitutes physical presence,” the determining factor in when a retailer must collect sales taxes. At present, there is no companion bill in the Senate, the Statesman reported.

Otto’s bill amends the tax code to clarify which businesses are responsible to collect and remit sales tax.

The legislation would expand the definition of a retailer engaged in business in Texas to include a retailer holding a substantial ownership interest in an “entity” in Texas from which business was conducted. The bill would also clarify the definition of nexus so that companies that have direct or indirect “ownership” of a company within the state through either a parent entity, subsidiary, or affiliate would be required to collect and remit sales tax to the state.