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Comptroller Circulates Draft of Rule Revision in Response to Wayfair Ruling

By John Kennedy
Texas Taxpayers and Research Association (TTARA)

(September 6, 2018) - In response to the U. S. Supreme Court’s South Dakota v. Wayfair decision overturning its five-decade-old stance that a seller must have an in-state physical presence before being required to collect use tax, a proposed draft revision of Rule §3.286 concerning seller’s and purchaser’s responsibilities is being circulated to the Texas Comptroller’s Business Advisory Group (BAG) and Tax Advisory Group (TAG). The agency had earlier hosted a roundtable meeting with various groups, including TTARA, before completing the draft.

As previously announced, the draft rule amends the current definition of “engaged in business” to delete any “physical presence” requirements and, instead, tracks the relevant statutory language in Tax Code §151.107. Except for deleting the physical presence test, no substantive changes are intended in what constitutes doing business in-state.

However, a proposed “safe harbor” provision has been added to provide clear guidance as to what will give a remote seller nexus. The current definition of “sufficient contact with or activity within the state, as determined by state and federal law” is replaced with a sales volume threshold of $500,000 of gross revenue from in-state sales for the preceding twelve calendar months to trigger registration and collection. In setting this compliance threshold the Comptroller considered such factors as: avoiding an undue burden on interstate commerce, safe harbor thresholds established by other states, and maintaining a “level playing field” between in-state and out-of-state vendors.

Publication in the Texas Register, which begins the formal 30-day comment period, is scheduled for the end of October. The rule’s planned effective date is January 1, 2019. There will be no retroactive enforcement; compliance will be postponed until October 1, 2019 to provide time for affected remote sellers to prepare for new collection and reporting obligations.

Republished from the TTARA newsletter of Sept. 6, 2018 with the gracious permission of the Texas Taxpayers and Research Association (TTARA).




The current planned schedule for adopting and implementing the amended rule is:

  • January 2019 – New rules likely to be finalized