Potential Impacts of Rule 3.334
The City of Coppell estimates a 60% reduction in sales tax collection in the General Fund, an approximately $12 million loss. In total, the fiscal impact is estimated to be approximately $26 million, or 18% of the City’s total revenue. This includes the fiscal impacts to the:
- Coppell Recreation and Development Corporation (CRDC)
- Crime Control and Prevention District
- General Fund
- Streets Sales Tax Infrastructure Maintenance Fund
Sales Tax Breakdown
Each purchase made in Texas is subject to sales and use tax. Local sales tax rates are made up of a base of 6.25% sales and use tax due to the state, and a sales tax rate that generates local sales tax revenue for a maximum rate of 8.25%.
The sales and use taxes in the City of Coppell are allocated as follows:
|City of Coppell Sales Tax Breakdown|
State of Texas
City of Coppell General Fund
Coppell Recreation and Development Corporation (CRDC)
Crime Control and Prevention District
TOTAL Sales Tax in Coppell
Impact to Businesses
In addition to the fiscal impacts to the City of Coppell, the rule also creates a significant burden and confusion for Texas businesses. Currently, the majority of businesses in Texas report state/local sales taxes to their sole place of business at a single rate. Texas has 1,659 sales tax jurisdictions, the most of any state in the United States. Under this rule, Texas businesses must begin tracking and reporting sales tax to up to 1,659 different jurisdictions within the state, based upon how an order was received. Businesses will be required to determine the sales tax rate and jurisdiction(s) involved at the time of invoice creation to ensure the seller is not liable for over/under sales tax collections. On each sales tax report the business must total and report to each separate locality the amount of taxable sales delivered into that jurisdiction. If the rule goes into effect, businesses must track sales tax calculations in a completely new way.
The State Comptroller has provided a free tool to businesses to address these concerns. While businesses may be provided this technology for free, future expenses must also be considered. It will be up to business to modify their programs to interface with the Comptroller’s solution, and businesses must make updates and upgrades to keep systems in compliance. Businesses, too, will face the additional accounting costs to file the necessary remittance reports.