Over the weekend, Gov. Rick Perry essentially threw fellow Republican Susan Combs under the bus when he second-guessed her decision to try to collect sales taxes from Amazon, which has a big distribution center in Irving.
In case you missed the story, here’s one version:
Perry disagrees with Combs’ decision to charge Amazon millions of dollars in sales taxes, and to let the company leave the state of Texas. Amazon’s decision to close its Irving distribution center and cancel plans to expand operations in Texas will result in job losses as well as the loss of tens of millions ofinvestment dollars to the state.
“That is a problem and I would suggest to you that we need to look at that decision that our comptroller made,” said Perry. “The comptroller made that decision independently. I would tell you from my perspective that’s not the decision I would have made.”
Perry added that Combs shouldn’t have pinned the sales taxes on Amazon’s Dallas distribution center, since it doesn’t have a storefront and is not responsible for such matters.
“You couldn’t go in and buy anything out of that store, and that, historically, has been the way we defined whether you pay taxes or not - if you had a storefront,” said Perry. “This obviously didn’t have a storefront. It was specifically there to manage products that need to be shipped out.”
Perry is looking to get the legislature involved to keep Amazon in Texas, but it may already be too late. Amazon’s Dave Clark, vice president of operations, has announced that the company will close its Irving distribution center on April 12, and will cease all plans to expand operations in the state of Texas, which will eliminate 1,000 potential jobs and cut tens of millions of potential investment dollars to the state as well.
“We don’t want to be onerous on tax policy where businesses and I would say I’m having a hard time getting my hands around this one,” said Perry. “Texas should be a bastion for businesses, not one where they’re sitting there going ‘we’d rather go over to Oklahoma where we could get a better deal.’ Texas doesn’t want to make itself less competitive with its tax decisions.”
According to Spelce, Texas loses about $600 million in online sales taxes annually. Currently, a case is pending before the State Office of Administrative Hearings regarding the $269 million in sales taxes from Amazon.
Since the beginning of the session, I’ve been wondering about Susan Combs’ record of tax collection. I know absolutely nothing about how she has structured her office to be effective, but it occurred to me that she was in a tough position politically – she’s got ambition for higher office as a member of a political party that strongly advocates low taxes and small government. Will Republican voters reward her for cracking down on businesses trying to skate on state taxes – when the money goes to fund government services (that many conservative voters are leery of to begin with)? Can you imagine Susan Combs sending squads of tax enforcers, in the mold of Bullock’s Raiders, to shut down scofflaws and confiscate inventory for the Texas treasury?
I posed the question to Finance chairman Steve Ogden, who disagreed with my thesis. He argued that a “pro-business philosophy” when it comes to tax collection means “consistency and fairness” – not sloppy collection. And he added that he believes Combs is correct in collecting the tax from Amazon.
“The comptroller’s position is correct,” he said. “Amazon has a nexus in this state. Lots and lots of vendors complain” that out of state companies are gaining an unfair competitive advantage by not having to pay sales tax.
If someone owes a tax and finds a way to skirt that responsibility, “it’s not pro-business to let them get away with it,” Ogden added.
As lawmakers struggle to write a balanced budget with a shortfall, why would Perry not want to get his hands on $269 million? One possible reason: the loss of jobs will destroy a key applause line in his speeches – the one about Texas adding more jobs (here I’m going from memory) than all the other states put together.
But given the public denunciation of her leadership by Perry, is it unfair to wonder whether her collection efforts have anything to do with the poor performance of the state margins tax we keep hearing about? Since businesses are allowed to deduct costs of goods sold, does the Comptroller need more aggressive auditors keeping them honest on that calculation? Is there a chilling effect against aggressive tax collection – as it relates to Combs’ desire to run for lieutenant governor?
“If you were more aggressive in disallowing (deductions), would it make a difference?” Ogden said, rephrasing my question as he thought about it. “I don’t know.”