Texas House Excludes Internet Hosting as Doing Business

 By Paul Masters

By unanimous consent, the Texas House passed HB 1841 which establishes that the sole activity of placing a web page on a server of a third party in Texas does not constitute doing business in Texas. Further, the bill provides safe havens for persons providing Texas host services, by ensuring no such person has a duty to (i) examine a user’s data to determine applicability of the sales tax to a user, (ii) report to the Comptroller the user’s activities, or (iii) advise a user as to the applicability of the sales tax in Texas. The Senate is expected to pass similar legislation.

Since late last year, there had been concern that the Texas Comptroller would begin to consider a person to be doing business inTexasby merely hosting its web page on a computer server inTexas. This concern arose as a result to a modification to 34 T.A.C. 3.286. This caused a great deal of concern for companies such as Rackspace and HostGator, with significant host server operations inTexas.

The Texas Comptroller denied that the revised rule had changed the nexus definitions, and has pointed to the clarification provide by its Subcommittee on Nexus, that a remote (outside of Texas) seller that stores its web page on a third-party server does not constitute nexus, by itself.

Explore posts in the same categories: Sales and Use Tax, SALT

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