The evolution of online sales has rendered the laws surrounding sales tax collection inapplicable and/or unenforceable. The state has been losing a lot of money, and really it was no one’s fault.
Despite this, over the last couple of years, Texas has kept a watchful eye on sales tax evasion, and this year when and how to pay your business sales tax to the state is becoming more complicated. Worse, you can expect the crackdown on business tax evasion we saw surfacing around this time last year to continue into the foreseeable future.
Your best next move if you don’t know the basics surrounding tax collection yet? Learn them – fast!
Texas Sales Tax Laws for Businesses
The most important thing to remember is that Texas wants (read: needs) you to stay in business. You are an important financial contributor to your community. It is in the state’s best interest to work things out.
Most of the time, the issue with sales tax collection is a simple mistake by the business owner – not outright tax evasion. Here are three basic rules on tax collection that every person running a business should know:
- Business owners owe the state 6.25 percent sales tax on every retail transaction, nearly every lease or rental, and for many services
- Local jurisdictions (the actual city, county, or other special-purpose districts) are allowed to impose an additional two percent tax on your business sales
- Some businesses are required to file more than just annually; they may also need to file and pay monthly or quarterly taxes
Of course, this in no way encompasses the depths of Texas tax law, and you should always hire a tax professional to ensure proper collection, filing, and payment procedures. It’s complicated, and you’re busy running a business. It makes sense to leave taxes to the experts.
Right now, in fact, Texas legislators are turning back to the law and discussing what the state can do better in terms of regulation. We expect additional complications.
Texans Are Currently Answering a Tough Legal Tax Question
The question they are attempting to answer: what does “local” mean in the phrase “local sales tax”? The discussion is centered on whether the local sales tax you collect as a business owner should go to your city or the customer’s locale.
Right now, there is a legal loophole that makes it possible for businesses (and municipalities) to direct all sales tax to a single locale.
The diversion of sales tax collection from areas that depend on those taxes that used to come from point-of-sale transactions to where the businesses are located is causing discord. The ultimate response among tax legislators could make your job as tax collector more complex.
Again, though, remember: Texas wants you to stay in business. It is in the state’s best interest to work things out. There’s negotiating power in that.
Texas Wants Your Contribution to the Economy
If the state chooses prosecution, it could ultimately cause you to shutter your business. That means the state loses your tax support. No one wants that. For that reason, they investigate signals of tax fraud carefully, only prosecuting when they believe there is true fraudulent activity.
When businesses communicate openly and honestly (under the advisement of sound legal counsel, of course), the Texas Comptroller is generally willing to help in any way they can.
If you are accused of sales tax evasion in Texas, don’t fret. You explain your financial situation and negotiate terms to square up.
When the Texas Comptroller Knocks, Let Your Tax Evasion Attorney Answer
Here at Hampton Law Firm, we understand the financial strains of keeping a business afloat. When the Texas Comptroller has turned its focus on you, those pressures can seem crushing.
Paying for an experienced Texas criminal attorney can seem like one more financial worry, but this is one you shouldn’t skimp on. Do so and it could cost you your life’s work.
We are committed to providing the financial flexibility that makes the most sense for our business clients. Call us when you need help!
About the Author:
After getting his Juris Doctor from the University of Houston Law Center, Jeff Hampton began practicing criminal law in Texas in 2005. Before becoming a defense attorney, he worked as a prosecutor for the Tarrant County District Attorney’s Office – experience he uses to anticipate and cast doubt on the arguments that will be used against his clients. Over the course of his career, he has helped countless Texans protect their rights and get the best possible outcome in their criminal cases. His skill has earned him recognition from the National Trial Lawyers (Top 100 Trial Lawyers) and Avvo (Top Attorney in Criminal Defense, Top Attorney in DUI & DWI, 10/10 Superb Rating), and he is Lead Counsel rated.