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Recent updates in Texas franchise and sales tax regulations have left taxpayers grappling with uncertainty and adapting to evolving policies. From the state’s alterations in No Tax Due Reporting, and the ongoing dispute over taxation of marketplace and sales sourcing, the terrain is shifting. As taxpayers navigate these updates, understanding the nuances becomes crucial. So, let’s delve more into some of these updates. If you have any questions for our experts, schedule a call!
Texas Franchise Tax: Legislative Changes to No Tax Due Reporting Effective for 2024
Senate Bill (SB) 3 brings significant changes to Texas’ No Tax Due Reporting starting January 1, 2024, simplifying reporting, and reducing burdens. The bill raises the revenue threshold to $2.47 million, exempting entities below it from filing. New veteran-owned businesses no longer need to submit reports during their initial 5-year exemption. Consequently, the Comptroller no longer accepts No Tax Due Reports for 2024 and beyond, requiring the EZ or long franchise tax form. Previously eligible entities must now use prescribed tax forms.
Texas Sales and Use Tax: Double Taxation on Marketplace Sales?
In recent years, the Texas Comptroller has implemented a controversial taxation policy for marketplace sales. They argue that each transaction involves two taxable events: the marketplace provider’s sale of the taxable item to the consumer and the marketplace provider’s sale of data processing services to the marketplace seller. This approach has led to confusion and legal challenges, as it results in inconsistent taxation and raises questions about federal tax law compliance. Despite legislative attempts to address these concerns, the complexity persists, leaving businesses and regulators at odds over the proper taxation of marketplace transactions.
Texas Sales and Use Tax: Sourcing of Sales
The Texas Comptroller and cities have clashed over how to tax intrastate online sales. Traditionally, taxes were based on where orders were received, benefiting cities with fulfillment centers. In response to concerns, the Comptroller changed sourcing rules in 2020, leading to legal challenges from affected cities, in which a district court ruling sided with the affected cities. The Comptroller again amended the rule in 2023, and again, another proposed change aims to clarify when an order is considered received by the seller. Litigation continues, with a trial scheduled for May 2024.
In summary, the recent changes in Texas tax regulations reflect a shifting landscape for businesses. With alterations in tax sourcing, enforcement, and reporting requirements, staying compliant in Texas has become more complex. Leyton’s state and local tax consultants stand ready to provide the guidance needed for your company to answer your questions and ensure its journey towards stability and growth.
