Even though cities have the opportunity to share comments and concerns, Coppell officials believe the comptroller’s proposed sales tax rule is more than likely to stay as written.
Tuesday, the comptroller held a public hearing to receive comments about the rule, which is slated to go into effect on April 1. Last week, Coppell officials met in person with the comptroller to learn more about the possible impact the new rule could have on the city.
In Texas, sales tax sourcing is origin-based and sent to the location of the seller. When the seller doesn’t have a “place of business” that the sale can be sourced, the sale reverts to the destination or the location of the buyer.
The comptroller is proposing to change the way sales tax is collected by tightening the definition of “place of business,” which could cost some cities millions of dollars annually.
Mike Land, city manager, said officials asked what kind of data was used to determine the impact of the proposed rule on municipalities but were told the comptroller’s office didn’t do that kind of evaluation because it views the rule from a state-wide impact.
Land said from the comptroller’s perspective, some cities may lose sales tax and other cities may gain it, but at the end of the day it’s still the same selection of sales tax.
While the comptroller’s office didn’t have data on the impact on municipalities, it should be able to provide information that will give Coppell more insight into its business community as far as who they should be having conversations with about the proposal, Land said.
During the meeting, officials were given clarity on the reason behind the proposal.
“The comptroller views some bad players out there that have done some things that they believe are not in the best interest of cities as far as how or where sales tax is collected,” Land said. “Therefore they (the comptroller’s office) have developed this rule to specifically prevent those kinds of deals from being struck.”
Land said the city has a approximately 447 businesses that are registered and pay taxes. Many of those businesses are just retail/restaurant businesses, but the majority is possible business to business establishments, and those are the ones Coppell is concerned about, Land said.
“If we could have a better idea of what kind of sales tax they collect and how they collect it, it will give us a better opportunity to understand the real impact of the implementation of the rule,” Land said.
The city staff has started to have meetings with some of the businesses to better understand their sales tax collection process. Land businesses that fit the comptroller’s new definition of a place of business will be a win for the city since it won’t lose sales tax from that business. For the ones that don’t fit, the city will work to help them meet the new definition so Coppell can keep that sales tax.
Land said this is an important step for the city, but the process will be a tough one.
“There are so many nuances as to how a business determines their place of business,” he said. “It’s going to be really time-consuming to go that through that process."
Cities and the community have until Feb. 17 to share comments and concerns about the proposed rule.