Texas Provides Economic Nexus Guidance after Wayfair

Texas expects to amend its sales tax nexus rules to include an economic presence standard in the wake of the decision in Wayfair v. South Dakota. Guidance issued by the Comptroller advises that the state will keep using the physical presence nexus standard until early 2019.

What happened in Wayfair?

In South Dakota v. Wayfair, the U.S. Supreme Court held that physical presence is no longer required to establish sales and use tax nexus. As a result, out-of-state sellers with no physical presence in South Dakota may be subject to sales and use tax if:

  • the seller’s gross sales from the sale of taxable items delivered in South Dakota exceed $100,000; or
  • the seller sold taxable items for delivery in South Dakota in 200 or more separate transactions.

How is Texas Reacting?

Until further notice, Texas will continue to follow the physical presence nexus standard. All related guidance previously released by the Comptroller’s office is still valid. So, for right now, nothing changes.

However, the Comptroller expects to amend Texas’ rules to establish an economic nexus standard for remote sellers. He expects the new rules to be based on gross sales, and also possibly on the number of transactions. The anticipated effective date for new rules is early 2019.

The Comptroller also stated that there will be no retroactive application of new economic presence rules to remote sellers.

The complete newsletter is available at https://comptroller.texas.gov/taxes/tax-policy-news/.

Tax Policy News, Texas Comptroller of Public Accounts, July 2018

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Learn about the decision in South Dakota v. Wayfair and get CPE Credit at Quill Overturned: Understanding State Tax Issues.

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