Round Rock Sues Texas Comptroller Over Sales Tax Rule

Round Rock TX

14 July, 2021

1:42 PM

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ROUND ROCK, TX — The city of Round Rock has filed a lawsuit asserting that a change made by the Texas Comptroller to a sales tax sourcing rule "is invalid, void, and of no force and effect," and should be overturned. The Texas Comptroller's Rule 3.334 states it will source sales tax revenue from online purchases to the buyer's location instead of the seller's place of business. The rule is expected to go into effect on Oct. 1. The city filed a lawsuit Monday with the Travis County District Court, which is the mandatory venue for lawsuits challenging an administrative rule by a State agency, officials said. According to the lawsuit, the city points out that the rule change could cost Round Rock taxpayers millions of dollars a year in lost sales tax revenue, most notably from online sales made by Round Rock-based Dell Technologies. The rule change would also require businesses to determine the sales tax rates of customers across the state, where mailing addresses often don't line up with taxing jurisdiction boundaries, city officials said Monday. The rule also creates a significant burden for companies, especially small businesses, according to the Round Rock Chamber of Commerce. "Collecting taxes on internet sales at the buyer's location instead of the seller's place of business creates significant, unnecessary challenges for businesses," said Jason Ball, President of the Round Rock Chamber. "Businesses would have to track sales tax rates in more than 1,600 taxing entities across Texas, instead of the one rate where their business is located." The suit states that Texas Comptroller Glenn Hegar "attempts to unlawfully accomplish with rule making what the legislative branch of Texas government refused to enact," and that, in doing so, "the Comptroller has aggressively overstepped his rule making authority." "This rule change is bad for the state of Texas, bad for Round Rock, and bad for our businesses," Mayor Craig Morgan said. "This kind of fundamental change should only be made by our elected leaders in the Texas Legislature, not the Comptroller. If this rule takes effect, it will eliminate an economic development tool that has been the foundation of the 'Texas Miracle' championed by both former Governor Rick Perry and current Governor Greg Abbott." Ball said an administrative agency making this kind of fundamental change to tax laws hamstrings the community's efforts to attract new businesses to Round Rock. "Business leaders seek states and communities that provide stable tax environments that allow for incentive agreements based on long-term, mutually beneficial relationships with the private sector," he said. Officials said the city has been fighting the rule change for more than 18 months. Morgan and City Attorney Steve Sheets spoke at a Tuesday, Feb. 4, 2020, hearing held by the Texas Comptroller, and Sheets also testified at a Wednesday, Feb. 5, 2020, meeting of the state House Ways & Means Committee. View the Original Petition Here. RELATED COVERAGE: Round Rock Approves Street Maintenance For Forest Creek 2 Round Rock Teens Face Capital Murder Charge In 2020 Homicide Grand Jury Clears Pflugerville PD Sergeant In 2020 Shooting