Texas Taxes on Texas Based E-commerce Servers

I came across this article that discusses a new Texas tax code for e-commerce being run on servers physically located in Texas. From reading the post it seems like any transaction that take place on a Texas based server and involve a Texas customer will be treated as intrastate commerce and there will be a Texas tax liability.

Seeing that a lot of people use Racksapce to host their e-commerce I think it would be a good idea to find out what state your server farm are located in. Or, ask a legal mind to review the law and see if cloud-based computing is impacted by this tax code change. I would imagine that Rackspace is going to be all over this and figure out how to protect customers by leveraging the could to distribute transaction across various server farms to usurp this issue.

In general this is just myopic on the part of Texas. It discourages businesses from wanting to set up server farms on their soil and those who are there may loose business unless they can find a technical solution to routing E-commerce transaction through another off-geography farm or via the cloud and claiming that it is impossible to track. I just wonder what comptroller wunderkid came up with this bad idea.

http://news.ycombinator.com/item?id=1784744


Here's a response from Rackspace:http://su.pr/2gCe3k

"Rackspace comments on changes to Texas Sales Tax Rules

Rackspace has been in discussions with the Texas Comptroller’s Office and its tax advisors to address the recent changes to the state rules governing Texas sales tax.

The new controversial language states, “A person is engaged in business in Texas if the person has nexus with the state as evidenced by, but not limited to, any of the following: [...] derives receipts from a rental or lease of tangible personal property that is located in this state or owns or uses tangible personal property that is located in this state, including a computer server or software;[...]“

The Comptroller’s Office has indicated that the language was not intended to be construed as so broad as to extend nexus to anyone using a server in Texas. William Hamner, Director of Tax Administration indicated that the agency’s intent is not to extend nexus to a person simply using a third-party server in Texas for an activity such as webhosting. However, since taxable items are subject to taxation in both electronic and physical form, the sale of data, such as music files, housed on a Texas server could create nexus for the owner of the data.

Because of the unintended confusion that has resulted from this change, we understand that the Comptroller’s Office will issue a new rule proposal in order to properly clarify the intent of the rules change and more clearly state agency policy on this matter.

We will continue to actively pursue a positive outcome on this issue with the Comptroller’s Office and will continue to monitor and report on any new developments that we believe to be important to our customers."

Comments

[Inventory Skills]

The economy gives power to the country. The leading source which give rise to the economic standard of the country is E-commerce which globally connect people to the world.The extra duty is imposed on people who are practicing eCommerce across the world.