02-06 tax hearing

Palestine Mayor Steve Presley delivers a speech during an public hearing in Austin about a proposed online sales tax regulation that could benefit cities like Palestine.

Tuesday, Palestine Mayor Steve Presley spoke with state officials in Austin, hoping to ensure online sales tax paid by the residents of Palestine stay in Palestine.

During a public hearing on a proposed new tax plan, Presley said sales tax money should remain in the communities where online goods are purchased and delivered.

“I order goods at my house,” Presley said Tuesday at a public hearing in Austin. “I have the goods shipped to my house, and the sales tax goes to another city. This is not fair.”

The state comptroller's office estimates that, under current sales tax regulations, five Texas cities, along with online retailers, rake in nearly $100 million annually in sales tax revenue.

State comptroller Glenn Hegar's proposed plan, however, aims to “even the playing field.”

Currently, all sales tax collected from online purchases go to cities with online warehouses, and e-commerce stations. For instance, taxes from Best Buy online purchases go to the city of San Marcos, where the electronics retailer's warehouse is located.

This means millions of dollars for San Marcos, but the cities where the products were ordered and delivered receive nothing.

Under the comptroller's proposed plan, sales tax revenue from online sales will be distributed among the cities where goods are purchased.

“We're trying to get our rules up to speed with the 21st century,” Kevin Lyons, a spokesman for the comptroller's office said.

State Representative Cody Harris (R-Palestine) supports the comptroller's new plan, saying it would benefit the majority of Texans.

“This proposed change would see net gains of sales tax revenues for cities across Texas,” he said. “[Currently] local tax dollars are getting syphoned to a few select cities in the state.”

In just over a decade, Presley said, Palestine has added more than 1,600 new local jobs. Sales tax, however, has remained unchanged.

“It seems impossible,” he said. “But, it coincides with the implementation of the current internet sales tax regulations. This money should instead be fairly distributed.”

Presley and a Lufkin official, the only two small-city representatives, were in the minority praising the change. Sales tax on local residents' purchases should stay at home, they argued; local money should stop subsidizing economic deals in other parts of Texas.

Presley said he would have liked to have seen more representation from small-town Texas, but many don't realize what they are losing under the current tax plan.

“When you're not getting something, it's hard to understand what you're really missing,” he said.

The majority of representatives at the hearing were, unsurprisingly, from larger cities who have benefited from the current sales tax plan.

Under the current plan, cities encouraged retailers into their areas by offering tax incentives.

San Marcos, for example, refunded 75 percent of its online sales tax revenue to Best Buy in exchange for housing its distribution center, and the promise of roughly 50 local jobs.

The comptroller's new plan could null-and-void the contract between San Marcos and Best Buy, costing the city not only the local jobs, but also millions from the San Marcos city budget.

More than two dozen cities statewide have similar contracts with online retailers.

It is unclear how much cities like Palestine would benefit from the proposed tax change, as no analyses have been done. Presley, however, said the change could only be positive.

Associate Deputy Comptroller Karey Barton said her office will consider all city officials' comments.

A ruling on the issue is expected by Feb. 17. If adopted, the proposed plan would go into effect April 1.

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