AUSTIN (KXAN) — A proposed amendment by the Texas Comptroller's Office has some Texas businesses concerned over how they can be taxed.
Texas Comptroller Glenn Hegar announced in September his proposal to update the comptroller's rules regarding taxable data processing services, as the existing laws were created in 1987. The updated rule aims to clarify what falls under such services.
The proposal defines a data processing service as a "computerized entry, retrieval, search, compilation, manipulation, or storage of data or information." This definition has raised concerns to some businesses on potentially being double taxed.
Currently, businesses already have to pay a sales tax when they sell a product. The language in proposal suggests Texas businesses could now also pay a tax to list the product on an online marketplace if the marketplace doesn't already include such taxes in the fees they charge sellers.
Chief operating officer of the Austin-based company Pretty Thai, Robert Strong, said 35-40% of his company's revenue stream comes from selling his products online. Strong is concerned having to pay another tax on top of the sales tax could negatively impact his business.
"Fees are difficult with a product like ours, so even the thought of adding more costs to our product is a huge red flag," Strong said. "We have very tight margins as it is."
Such concerns were also highlighted by a group of Texas small business, as they wrote a letter to Hegar to reconsider the proposal, stressing how a "double taxation will seriously hurt [their] businesses."
In an op-ed, Hager said the proposed rule is "an effort to help online marketplaces navigate the realities of the tax statures."
Hager also said he understood concerns raised by businesses, and as a result, his office "helped draft a workable bill" to "exempt [such] fees from tax" in the 2023 Texas legislative session. Such efforts did not make it too far in that legislature session.
Hager emphasized in the op-ed that legislators have the "ability to change the law," but until the law is revised, he must continue to enforce the current taxation rules.
