Texas Sets New Rules for Online Sales Tax Collection and Fulfillment

The new Texas regulation provides that when an order is fulfilled from warehouses or when the order is made through an automated website, the location where an order is “received” is the physical location of the seller or third party, specifically:

“The location where the order is received by or on behalf of the seller means the physical location of a seller or third party such as an established outlet, office location, or automated order receipt system operated by or on behalf of the seller where an order is initially received by or on behalf of the seller and not where the order may be subsequently accepted, completed or fulfilled. An order is received when all of the information from the purchaser necessary to the determination whether the order can be accepted has been received by or on behalf of the seller. The location from which a product is shipped shall not be used in determining the location where the order is received by the seller.”

The language in the amended regulation is similar to that of the Section 3.10.1C5 of the Streamlined Sales Tax Agreement (“SSUTA”). While the state has not adopted the SSUTA, the Comptroller of Public Accounts stated that the amendment will “promote uniformity with those states that have elected or will elect origin-based sourcing.”

It is expected that Texas localities will continue to challenge the state on its interpretation, we will provide updates as litigation develops.

Please note that this is only an overview. For specific guidance, connect with our sales and use tax team here.

Amended Title 34 Tex. Admin. Code section 3.334