Combs defends Amazon sales tax fight

AUSTIN (KXAN) - The Texas Senate Finance Committee threw out tough questions Wednesday at the Capitol for some of the state's top leaders about their agencies' cost-cutting measures and how they plan to ease the state's budget crisis. Of greatest interest for members was testimony from the state's accountant, Comptroller Susan Combs.

Beyond talk of an underperforming business tax and financial adjustments within her own department, Combs had to explain her fight against cyber-shopping giant, Amazon.com. It came down to a choice between hundreds of millions of dollars or a chunk of new jobs for the Texas workforce.

"Recently, you and Amazon.com have been in the news,” said Sen. Steven Ogden, R-Bryan, who chairs the committee. “I understand they're getting ready to take their warehouse and go home or something.”

Combs said the company owes a lot of money in past-due sales tax - almost $270 million, according to FCC filings. Some on the committee questioned whether sending that bill is such a good idea.

While the case is now tied up in other hearings and possibly eventual court proceedings, Amazon has threatened to shut down its warehouse in Irving, forfeiting the state a thousand future jobs. Even the governor has spoken out against the comptroller's decision.

Physical sales or online sales - the point is, Combs says even e-retailers must obey the law.

"It is our belief that this is a very, very clear issue about nexus,” she told the committee. “As I say, this started probably because of catalog sales 47 years ago in 1963.”

The argument for Amazon – e-retailers should not have to pay sales tax because the actual sale is not physically happening in the state, rather online. Plus, its warehouse is merely a distribution center, not a place where sales take place.

Combs cited a Texas statute to back up her own argument against the company concerning that point.

"A retailer is engaged in business in this state if the retailer: 1.) maintains, occupies, or uses in this state permanently, temporarily, directly, indirectly or through a subsidiary or agent, however named, an office, place of distribution, sales or sample room or place, warehouse, storage place, or any other place of business.”

Combs’ deputy explained the process ahead for Amazon to the committee. Since the comptroller’s office has sent the company its bill, Amazon can file for a redetermination, which means the case would go to a hearing at the State Office of Administrative Hearings. If the taxpayer loses at that level and it feels strongly enough about the issue, they it could take the case to a district court. Eventually, it could head to the Third Court of Appeals, the Texas Supreme Court, and possibly even the U.S. Supreme Court.

This week, Rep. Elliott Naishtat, D-Austin, filed a bill to make sure this question about e-retailers is never raised again. The legislation would let companies like Amazon know they have to collect and pay sales tax in Texas if sales are made here – physical or not.

Comb said this company is not the only one like it using this loophole in the law.

"Conceivably, this could exist for any remote seller,” she said. “…no they (Amazon) probably aren't the only one but certainly the one that gets the most attention. We constantly look for situations like this.”