Immediately before last Friday’s deadline for the filing of unrestricted bills, Texas lawmakers introduced a digital advertising tax bill and a bill that would expand sales tax to a wide array of services.
H.B. 4467, filed on March 12 by Rep. Trey Martinez Fischer (D-TX-116) would impose a tax on gross revenue from digital advertising services. The tax proposal closely resembles the recently enacted Maryland digital advertising tax.
The tax would apply to a taxpayer’s “assessable base” for a reporting period is at least $1 million, and gross revenue for the reporting period is at least $100 million. “Assessable base” means “the portion of gross revenue derived from digital advertising services in Texas.” Just as is the case with Maryland, the Texas proposal does not include a sourcing rule; rather the Comptroller “shall adopt rules for determining when business is done.” Oddly, the proposal directs the Comptroller to consider revenue recognized by a person according to generally accepted accounting principles.
The rates are the same as Maryland’s, ranging from 2.5% of a person’s assessable base if the person’s gross revenue is between $100 million and $1 billion, up to 10% of a person’s assessable base if the person’s gross revenue is more than $15 billion.
If enacted, the first payment is due (annually) on or before April 15, 2023, however the tax applies to revenue derived from business done on or after Jan. 1, 2022. This tax payment structure deviates from Maryland’s, which requires quarterly estimated payments.
S.B. 1711 filed on March 11, by Sen. Drew Springer (R-TX-030), would expand sales tax to a wide range of enumerated services, including advertising services, dating services, funeral services, and personal instruction services (such as individual coaching), among others.
Advertising services are defined as: (1) the provision of advertising space and time, including television and radio time, magazine space, newspaper space, and billboard space; or (2) the development of an advertising campaign or the content of an advertisement, including a television, radio, print, or Internet advertisement. The bill also does not contain any provisions for how advertising services would be sourced to the state.
S.B. 1711 bill would take effect on Jan. 1, 2022, but only if a constitutional amendment is approved by voters to authorize the legislature to exempt from ad valorem taxation by a school district a portion of the appraised value of an individual’s residence homestead in an amount equal to 150 percent of the median appraised value of all single-family residences in the state.