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Texas faces internal municipal lawsuits

On Behalf of | Aug 23, 2022 | Municipal Law |

Texas is facing legal heat from no less than six of its own cities. These suits are coming hot and fast due to a number of municipal matters. These are issues that no other type of measure seems able to quell. As a result, real estate, financial, and legal authorities are strapping in for what could receive wide publicity.

Sales taxes are the focal point

While quite complex and contentious, the affair does seem to boil down to a recognizable focus. This is basically an issue of municipal law regarding where sales taxes can and can’t be levied. The Texas Comptroller of Public Accounts has recently filed an amendment to levy taxes at the point of purchase.

This is a change from the traditional place of taxation, the point of sale. To make this alteration would be to give the state’s blessing to a major change in the way taxes are collected. Many financial experts argue that such a change is completely unwarranted. Of course, many legal experts will also argue that such a change is unconstitutional.

The rationale behind introducing change

The present struggle began in 2020 when the Texas Comptroller proposed an amendment to administrative Rule §3.334. The point of the change would be to move the point of taxation from where a company does business to where the buyer actually lives. This could alter the areas where sales taxes for online purchases are paid.

Such a move is similar in many ways to recent state initiatives to secure federal grants for satisfying certain requirements. However, in this case, the change is also geared toward keeping the proceeds collected in the areas that they were collected in. This is a change from the present arrangement, in which proceeds from taxation are spread around the state.

The argument made by the suit is that this deprives many areas of much needed revenue through taxation. The Comptroller and his supporters will have to prove that such a change is constitutional. The final resolution of this issue remains to be seen.



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