On August 31, after a day of arguments before the 250th Civil District Court, the Texas Comptroller of Public Accounts, Glenn Hegar, agreed to a temporary injunction (PDF) to delay enforcement of certain new local sales tax rules that were set to become effective October 1.
The injunction effectively delays the implementation of those provisions until the trial or further order of the court.
Earlier this year, the City of Coppell and partner cities filed suit against Glenn Hegar in his official capacity as the Texas Comptroller of Public Accounts arguing that in issuing the new rules the Comptroller has arbitrarily and capriciously tried to change a long-standing Texas practice based on state law that governs how cities receive local sales tax revenues from Internet sales to the detriment of cities such as Coppell and others. The five cities involved in the lawsuit argue the new rules conflict with the Texas Tax Code and violate the Texas Administrative Procedure Act. Further, the new rules are expected to result in an approximate $26 million loss to Coppell, while also creating substantial confusion for local businesses.
“We are pleased that the Comptroller has agreed to not move forward with the changes to the rules applicable to the allocation of local sales tax that would have resulted in Coppell and the other cities that have sued the Comptroller seeing a sharp reduction in the local sales tax they receive,” said Coppell City Manager Mike Land.
As a result of the temporary injunction, the rules currently in place will remain in effect statewide. Businesses across Texas should continue their current approach to assigning the local portion of Texas sales tax to a local taxing authority.