Proposed changes would create confusion and additional costs and lead to higher prices for consumers.
NFIB State Director Annie Spilman will go before the Texas House Ways and Means Committee on Thursday to speak out against potential legislation that would change how and where sales taxes are collected across the state.
“Currently, if a customer places an order from your business, you know the sales tax charged to the customer will be 8.25 cents on the dollar regardless of where they live. Some members of the Texas Legislature want to change that to something called ‘destination sourcing,’ which bases the sales tax on where the customer is located, not the business.
“Supporters say destination sourcing would help local governments,” Spilman said. “They don’t think local governments benefit from taxes collected and remitted by the businesses in their jurisdiction, but by the customers who buy the product.
Current system is working
The business community argues that these cities and counties have a mutually beneficial relationship and it’s working.
“The primary reason I am against it is because my city and so many others have done an excellent job of creating a pro-small business community,” said Sunni Petty, owner of Petty Tile, an NFIB member business in Round Rock. “It has been done with much intention by the mayor, city manager, city council, and staff, and the city deserves to reap the rewards of creating such a vibrant community to work, live and play!
“If you strip away origin sourcing,” Petty said, “you strip away incentives for programs like these that carried hundreds of small businesses through the pandemic. It also reduces the incentive for people to shop local; their tax dollars are going to their place of origin regardless of where/who they purchase from.”
Additional costs for small businesses
Spilman said, “Changing the rules would create a lot of confusion and additional costs for businesses,” she said. “It would saddle businesses with an additional administrative burden and create an additional expense because of having to collect and remit sales taxes to multiple jurisdictions — over 1,600 in Texas alone!
“Small businesses already are dealing with a labor shortage, higher fuel prices, supply chain disruptions, and soaring inflation,” she said. “Switching from origin sourcing to destination sourcing would only make things worse and inevitably lead to even higher prices for consumers.
“That’s why we’ll be asking the committee to keep sales tax collections the way they are and say no to destination sourcing.” The Texas Legislature isn’t in session, but the committee’s work will set the stage for next year’s legislative session, Spilman said.