Governor Perry (R-Texas) recently vetoed legislation (HB 2403) which would have forced out-of-state retailers (i.e. Amazon, Overstock, etc.) to collect sales tax on their items, even without a physical presence in the state. Unfortunately, though, Texas House lawmakers defied Governor Perry’s decision and voted to keep this provision in a must-pass omnibus spending bill. If the language is not removed in the conference committee, these new taxes would prove to be greatly detrimental to Texan taxpayers and kill jobs in a state which has been historically known for its ability to create them.
Such Internet taxes also raise many constitutional concerns. In a 1992 Supreme Court case, Quill v. North Dakota, the Court ruled that a company must have a substantive nexus in order for the state to collect taxes from said company. The Texas measure attempts to greatly expand what it would mean for a company to have a presence in a state, arguably reaching beyond the constitutional borders created by the Supreme Court. There are now three lawsuits challenging similar laws in New York, Illinois, and Colorado, where a federal court recently granted a preliminary injunction.
Of the proposed Internet taxes, Governor Perry stated:
"I will not put Texas job creation efforts in jeopardy, particularly as we continue to feel the effects of a challenging national economy. In the debate between jobs and taxes, I side with jobs."
While these taxes are, indeed, unconstitutional, the consequences that this legislation will have on the Texas economy are equally disturbing. With this legislation, the supporting lawmakers are presenting a complete lack of regard for their constituents by driving investment out of Texas and driving taxes higher.