Texas Revises Local Sales Tax Sourcing Rule

Erik Wallin
February 3, 2023


In 2022, a Texas District Court held in Coppell v. Hegar and Round Rock v. Hegar that Texas failed to follow its own requirements in enacting Texas Tax Rule 3.334. In short, the court required the comptroller to re-amend or re-adopt the rule using proper Texas procedures.

The Texas Comptroller recently fulfilled the procedural requirements laid down by the court by re-amending and re-adopting Rule 3.334. The newly amended rule which has a stated effective date of 1/30/2023, modifies the definition of “place of business” as it applies to local sales and use tax sourcing. It would have required that sales personnel be present at a location for it to be considered a “place of business” for sales tax purposes. If the location only housed a computer server, IP address, domain name, website or software application it would not qualify. Please refer to the full text of the rule here.

It is important to note that although the newly adopted rule has a stated effective date of 1/30/2023, a hearing on the merits between the prior parties is scheduled for 5/1/2023. The parties had previously agreed to an injunction in August 2021 that prevented the amended rule from being implemented or enforced until “a final hearing on the merits” or further order by the court. The Texas Attorney General has not yet addressed whether the prior injunction applied to the newly adopted rule. Sovos will be monitoring closely and will provide any further update accordingly.

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Erik Wallin

Erik Wallin is a Senior Tax Counsel on the Tax Research Team at Sovos Compliance. Erik has been with Sovos Compliance since 2011, and his main areas of focus are on U.S. Transaction Tax Law which includes special expertise in the taxation of technology and the taxation mechanisms that apply throughout the Colorado home rule jurisdictions. Erik is a member of the Massachusetts Bar, has a B.A. from York College of Pennsylvania, a J.D. from New England School of Law, and an LL.M. in Taxation from Boston University.
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