Wednesday, February 5, 2020

Hegar Correctly Confronts Obscure Corporate Welfare Loophole

"Dishonest scales are an abomination to the Lord,
But a just weight is His delight."
Proverbs 11:1

Oh wow:
The suits were assembled for a public hearing about city governments that pay businesses to locate in their cities — by effectively refunding sales taxes those companies have collected from their internet customers.

Those refunds go not to the customers who paid them, but to the companies that collected them for the state.

Some cities and businesses have figured out how to exploit the system — legally — by directing all of their internet sales to one locality and levying the sales taxes there, regardless of whether their customers are in El Paso or Texarkana. It also doesn’t matter where an item that's purchased online is picked up or delivered. So if someone in Texas buys a computer online from Dell, the sales taxes go to the city of Round Rock. If you purchase a refrigerator from Best Buy’s website, the city of San Marcos might be getting the local sales tax. And if you live in El Paso, buy a table saw online from Home Depot and pick it up at your local store, the tax could be collected 570 miles away in New Braunfels.

To attract that kind of revenue, the cities and companies take advantage of a state law that allows the cities to pay some of the sales taxes back to the company collecting them. For instance, the contract between San Marcos and Best Buy returns up to 75% of the local sales tax that the company collects from its online sales. That’s part of the local tax package that San Marcos used to attract and keep the company and fewer than 100 jobs at its operations center in the city.


Texas Comptroller Glenn Hegar wants to change the tax rules in a way that would upend some of those economic development deals. His proposal says sales taxes should go to the purchaser’s city instead of the city where the seller says its online sales are made.
Bottom Line: Sales tax "refunds" are one of the more obnoxious acts of petty larceny local governments inflict upon their citizens; good for Hegar.


Note: Hegar wrote a DMN op-ed on this subject a couple days ago.  It explains this subject in more detail.  We strongly recommend reading the whole thing.

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