City of Round Rock files lawsuit against Texas Comptroller for changes to sales tax rules

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Such a rule change would reallocate those local sales tax funds, which the city uses to fund essential city services, to locations in the state where products are delivered. (Claire Ricke / Community Impact Journal)

The town of Round Rock has filed a lawsuit against Texas Comptroller Glenn Hegar for a change in the state’s sales tax procurement rule.

A July 12 press release of the city’s changes to Texas Administrative Code 3.334 “Would Produce Sales Tax Revenue from Online Purchases to Buyer’s Location Instead of Seller’s Place of Business.” .

The rule would come into effect at the start of the city’s next fiscal year, October 1, 2021.

For Round Rock, which Dell Technologies calls home, the change will result in a significant loss in sales tax revenue, the statement said.

The city has been fighting the rule change for 18 months, the statement said, with Mayor Craig Morgan and City Attorney Steve Sheets speaking at a hearing held by the Texas Comptroller in February 2020. Sheets also took speaking at a Texas House Ways meeting. and the Means Committee that month.

“This rule change is bad for the state of Texas, bad for Round Rock and bad for our businesses,” Morgan said in the city’s July 12 news release. “This kind of fundamental change should only be made by our elected leaders to the Texas Legislature, not by the Comptroller. If this rule comes into effect, it will eliminate an economic development tool that was the basis of the “Texas Miracle” championed by former Governor Rick Perry and current Governor Greg Abbott. “

Community impact journal previously reported that the city’s budget is capped at 20% of Dell sales tax, which means the budget can only rely on the company’s sales tax to represent 20% of the total budgeted revenue of the city. city ​​in a given fiscal year. Sales tax represents 43% of the City’s planned budget for the 2020-2021 fiscal year.

Such a rule change would reallocate local sales tax revenue – which the city uses to pay for essential city services – to locations in the state where products are delivered, the statement said.

In February 2020, Community impact reported that the loss of sales tax could cost Round Rock $ 20 million in revenue per year.

At the July 8 Round Rock City Council meeting, officials voted to amend an engagement letter with the Bourland law firm, which represents the city in the lawsuit, to allow 300 $ 000 be spent on litigation. This is an increase from the previously established $ 150,000.

Sheets told the meeting that the increase was necessary if the case was to go through the court system all the way to the Texas Supreme Court.

Community impact journal will update this developing story as more details become known.

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