We just learned from the Texas Comptroller that they have been innundated with inquiries and are in the process of rewriting the above referenced cite, reversing their position.
Bottomline…. a server in TX will NOT create nexus.
I think we need to all say a thank you to ecommercetimes.com who first broke the story. Without this nationwide publicity, TX could have snuck a bad tax in on a lot of unsuspecting people.
Have you seen what Texas just did? If you have a website, you need to pay attention to this blog post. A recent revision to the sales tax rules in Texas states that if you use a server located in the state of Texas, you now have nexus in the state of Texas.
Before you dash away and figure this means nothing to you, think a minute. Where is your website really hosted? Some of the biggest server farms are located in Texas including Rackspace and Host Gator. You might be surprised to find out where your server really is. And that surprise might mean Texas nexus. And nexus generally means more tax.
Step One: Call up hosting company and find out where they are located.
If you have nexus with a state that means you have some kind of connection with the state. There are two types of nexus: sales tax and income. Texas is talking about sales tax nexus here. If you host your website in Texas, that means you now are responsible for collecting and paying sales tax for any sales (that are subject to sales tax) you make to residents in the state of Texas.
Step Two: Get registered to collect Texas Sales Tax.
You’ll need to get registered to collect Texas tax for state, counties, cities and transit districts. Here’s the Texas Sales Tax site to sign up.
Step Three: Learn what is subject to sales tax in Texas.
There’s one more step and it’s a little tricky. You now have to learn what is taxable in the state of Texas. There are some things that you might find a little unusual. For example, delivery and shipping charges are most likely subject to sales tax if you sell to someone in Texas. Plus, digital downloads are subject to sales tax.
It’ll be interesting to see whether Texas keeps with this hardline definition for websites. My guess is that it’ll push ecommerce sites out of the state and that’s not good for anybody, especially in economic times like this.
Want more info? Here’s a great article that deals with the history of physical presence nexus and goes into the laws in a few other states. New Texas Nexus Rules
If you’d like some help determining your own state nexus exposure, give us a call! We have CPAs trained in the latest laws. You can find out more about our programs by calling Richard at 866.829.2368 extension 1.