Sales Tax Regulations
Background Information: Rule 3.334
A 2018 United States Supreme Court decision, South Dakota versus Wayfair, Inc., allows States to require remote businesses (without a physical presence in Texas) to collect State and local sales or use taxes on items that are delivered to their jurisdiction. The Texas legislature passed two bills in 2019 to address this issue. With the adoption of this legislation, the Texas Comptroller of Public Accounts implemented rules that go far beyond the intent of the legislation and additional policies that substantially negatively impact Coppell and many other communities.
Currently, if someone orders items from one of the many warehouses or fulfillment centers in Coppell, the City receives the sales tax generated by the sale. Under the Comptroller's adopted rules, even though the sale is made in Coppell, the sales tax would be designated for the city in Texas where the product is delivered. Remember, Coppell, and other cities like Coppell, provide all the public services required for these warehouse operations, including police, fire protection, streets, and utilities.
The City of Coppell believes this is a radical change, not envisioned by the Texas Legislature when they passed the two bills in 2019, and that these additional provisions will have a significant negative impact on Coppell and many other Texas cities. This approach disrupts decades of established local sales tax sourcing rules. Coppell and other cities have taken legal action to ask the Comptroller of Public Accounts to reconsider the current proposed rules.
The City of Coppell is committed to serving the community and will continue to do so.
While many things may change, the City of Coppell mission remains the same. Our purpose is to provide for the health, safety, and quality of life for our citizens, and in doing so, provide a foundation for building a better community.
How the City is Approaching the Issue
The Council and City Manager are taking a two-pronged approach to this issue.
One step is to work with other cities, legal counsel and legislators to delay, modify or rescind the rule change. The Council has authorized the hiring of experts to assist with this issue, and the Mayor and City Manager have gone to Austin to testify on behalf of the City. The City is currently in litigation.
City staff continues to review the budget to determine how to best maintain a high level of City services and continue to operate in a conservative and responsible fiscal manner while taking into account the possibility of a substantial reduction in sales tax revenue.
Staff has put in place a three-step analysis to best determine how to meet this objective:
- Find opportunities to increase revenue from other sources, such as user fees, with the goal of increasing potential income while keeping fees at the middle of the market for similar services.
- Adjust the timing of city purchases and projects to reduce yearly expenditures but continue to provide needed services by stretching out implementation and the time period utilized to pay for projects.
- Adjust service levels where appropriate. Utilize data to determine whether there are opportunities to reduce expenses.