Texas State Comptroller of Public Accounts Susan Combs bearded the lion in his den and not only lived to tell about it, she increased state sales tax revenues and Texas jobs in the process.
Several years ago, Combs sent Amazon.com, the online retailing giant, a bill for $269 million in delinquent state sales taxes. A Texas law required that any business operating a physical location in the state must collect sales taxes on items sold. At that time, Amazon operated a warehouse in the Dallas area. In response to Combs’ demand, Amazon closed its Texas operation but continued to sell products to Texans. Unbeknownst to most residents, Texans also are required by law to report any purchases made on the Internet and pay the appropriate sales tax. Unknown to many and generally disregarded by those who knew, the law was extremely difficult to enforce.
So Combs went to bat for Texas, its retailers and its residents. Last week, Combs and Amazon.com announced the company will begin collecting sales tax on purchases made in Texas and forward them to the state on the first of July. Amazon.com also agreed to create at least 2,500 new jobs in Texas during the next four years and spend $200 million in capital investments in the state, presumably on building warehouse and distribution facilities.
One of the allures of making an online purchase has been the idea that buyers would receive an automatic discount by avoiding sales tax, 6.25 percent in Texas. However, local merchants and retailers that maintain an online presence and also have locations in Texas, a number of who operate in Angelina County, were at a distinct disadvantage. This levels the playing field for local merchants who employ local residents and also adds needed revenue to the state. The majority of state revenues are generated by sales taxes.
Despite comments from the blogosphere about Texas being greedy, even Amazon.com agrees with the plan. What’s fair is fair. There is no reason an online seller should have an unfair advantage over local retailers. That is exactly what avoiding collecting sales taxes on merchandise sold was. Both Combs and Amazon.com officials noted congressional action to establish an equitable framework on the federal level to further protect all sellers.
We applaud Combs’ efforts. This is a win/win for Texas, the state’s retailers and in the final analysis, the residents of the state, even the ones who purchase goods online.