Proposed Sales Tax Change Could Impact Your Business
To all of our Coppell business partners, we wanted to make you aware of a pending state rule regarding the collection of sales tax that could have an impact on your business.
If you take orders at your business or ship products from your business, you could be impacted.
The rule, known as Texas Administrative Code 3.334, is currently under review and open to feedback —- we want to get you involved!
Here is a link to the January 14, 2020 Coppell City Council Meeting. Please click on #11 to see our City Manager Mike Land explain Code 3.334……….
Here’s the bottom line: TODAY: If our Coppell business owners take an order or complete an order for another entity in Texas, the Coppell company (known as the “origin source”) keeps the sales tax. The proposal in Code 3.334 recommends that the “Destination” city or the city receiving the item retain the sales tax. A simple scenario could be:
(The below example is also dependent on how your place of business is classified).
A Plano based company orders a box of paper from a Coppell company. The Coppell company completes the order and retains the sales tax income.
If Code 3.334 passes, the Plano based company (or the destination city) would get the sales tax income.
WHY IS THIS IMPORTANT TO OUR CITY AND BUSINESS OWNERS?
- 60% of our sales tax income comes from scenarios like the one above. As you know we have a lot of distribution centers on the West side of town that fulfill thousands or orders. If this proposal goes through, the sales tax income for these companies is drastically reduced.
- Our general fund alone would be reduced by $12 MM per year if this change goes through.
- As business owners, you should keep an eye on this proposal and be thinking through the impact to your company. How you currently collect sales tax and remit it will be extremely different if this gets approved.
- Coppell has 400 businesses that collect sales tax — we need to get the word out about this change and get our business community to think through options if the new rules come into play. The current recommended implementation date is 4/1/2020 so you will have a short window to react if it goes through by then.
WHAT ACTION IS UNDERWAY TO PUSH BACK ON THIS CHANGE?
- The proposal came out in early January with a 30 day comment period. Our City leadership has asked for a 60 day extension to give us time to respond.
- The city asked that a public hearing be scheduled in Austin — City Leaders will be in attendance when it is held in early February.
- Our City leaders are talking to other Texas cities who will also be hit hard (Round Rock, Frisco). We are partnering where it makes sense to get the word out on the negative impact of this proposal.
- Our city finance team is running various scenarios to see how we can adjust our budget for 2021 with this loss of income.
More information will be coming in the following weeks – please be thinking about the impact to your business:
- Do you ship product?
- Do you take orders for products?
- Do you fulfill orders for other Texas companies and people?
- Do you provide business to business work — could one of your partners be impacted?
- Do you order product from another Texas company — the sales tax from those orders could off set this change.
- Can you offer your voice and call your state representative to share your concerns?
Thank you for your partnership – more information to come. If you want to read the entire code, here’s a link: