Proposed Texas tax change could add costs for online sellers

HOUSTON - Small business owners in Texas, who sell online, are sounding an alarm about a proposed tax change they say could take a dangerous cut out of their finances. 

State Comptroller Glen Hager, who's responsible for collecting state taxes and estimating how much the legislature has to spend, has proposed changes to the tax code to clarify that the simple act of posting something for sale on a site like Amazon or Etsy is a taxable transaction. Small businesses that do that, are asking that he reconsider.

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Mohamed Sam and his wife started their company, Purifyou, almost 10 years ago, selling easy-to-carry glass beverage bottles that don't leach any foul tastes or toxins, "It's a simple product, but customers enjoy it; they enjoy the style; they enjoy how it looks." 

Now, their suite of environmentally-friendly products designed in their West Houston home is sold primarily on Amazon to customers around the world. 

"Platforms like Amazon kind of hand the globe to you on a silver platter," says Sam.

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That access may soon come with an additional price, above the fees that online marketplaces charge. The comptroller's proposal to impose a tax on digitally listing an item for sale has come as a surprise to online sellers, who have written to protest the move. Sam is among them. 

"It's, essentially, double taxation," he says. "The customer's paying tax on this purchase, and we, the seller, is also paying a tax on this digital transaction."

Hager's office defends the proposal, arguing it is simply clarifying what the tax code already requires as it relates to the growing digital online marketplace. 

But in a statement to FOX 26, a spokesman says, "We do not anticipate making any proposed rule amendment effective prior to the end of the upcoming 89th legislative session, and so ... the state legislature will also have an opportunity to consider changes to the underlying tax code."

Mohamed Sam hopes there's careful thought before making a move he believes could make a competitive marketplace too costly for some to continue. 

"We sell at, or in some cases 'lower' than we did 10 years ago," says Sam. "That's because of the competition, so while margins are shrinking, this essentially accelerates that shrinkage, and it could put people out of business."

In a September op-ed, Glen Hager said understands the complaints, but notes the last legislature did not approve a proposed exemption. Until they do, perhaps when lawmakers reconvene in January, this is another tax that must be collected.