In my previous post, I explained the ongoing dispute between Amazon and Texas in the state’s ongoing attempt to force Amazon to collect sales tax on goods it and its affiliates sell to Texas residents.
One reason that the state is trying to make Amazon collect the tax because thousands or even millions of its citizens are breaking the law. That’s right, you heard me correctly. A multitude of Texans are breaking the law. In fact, it wouldn’t surprise me if most the people reading this post are lawbreakers.
A little known fact is that Texas doesn’t just have a sales tax. It really has two related taxes, a sales tax and a use tax. The importance of making this distinction is that Texans aren’t only subject to paying a sales when they buy good, they are subject to a tax when they use a good that they have purchased.
The reason for this is that it is long established law that a state cannot tax a transaction that takes place outside of its borders. Among other things, it runs afoul of the commerce clause in the U.S. Constitution, as articulated by the U.S. Supreme Court in Quill v. North Dakota.
To get around this, Texas established the use tax. As the Texas Administrative Code describes it, a “[u]se tax is due on taxable items purchased out of state that are stored, used or consumed in Texas.” So even though the state cannot tax the sales of a good purchased out of state by a Texan, the state can tax the Texan for using the good in Texas.
The Texas Comptroller further explains our responsibilities, “In general, if you purchase a taxable item from an out-of-state retailer without paying Texas tax and use the property in Texas the purchase is subject to use tax and must be reported.”
Perhaps instead of enacting the “Amazon tax,” the state should consider simply enforcing existing law.