TX- City of Farmers Branch Sues TX State Comptroller of Public Accounts

Texas: In September, the City of Farmers Branch joined partner cities in a lawsuit against the Texas Comptroller of Public Accounts to delay, modify or rescind proposed changes to local sales tax collection rules expected to effect October 1, 2021.

The 2018 United States Supreme Court decision, South Dakota versus Wayfair, Inc., allowed states to require remote businesses without a physical presence in Texas to collect State and local sales or use taxes on items delivered to their jurisdiction. The Texas legislature passed two bills in 2019. (Rule 3.334) This legislation adopted by the Texas Comptroller of Public Accounts is believed to have gone beyond the intent of the legislation and negatively impacted Farmers Branch and many other communities.

The current legislation is, If someone orders items from warehouses or fulfillment centers in Farmers Branch, the City receives the sales tax generated by the sale. However, under the Comptroller’s adopted rules, even though the sale is made in Farmers Branch, the sales tax would go to the city in Texas where the product is delivered.

The City of Farmers Branch believes that this change was not envisioned by the Texas Legislature when they passed the two bills in 2019. These additional provisions will have a significant negative impact on Farmers Branch and many other Texas cities. As a result, Farmers Branch and other cities have taken legal action to ask the Comptroller of Public Accounts to reconsider the current proposed rules.

After legal arguments, the Texas Comptroller agreed to a temporary injunction to delay enforcement of those provisions of Rule 3.334 scheduled to go into effect October 1, 2021. As a result of the temporary injunction, the rules currently in place will remain in effect statewide.


About Davis Davis & Harmon LLC – Sales Tax Experts: Headquartered in Dallas, Texas, Davis Davis & Harmon LLC – Sales Tax Experts specializes in sales/use tax refund recovery and audit defense. Our team of consultants is comprised of former Big 4 sales tax consultants and state sales tax auditors. Each of our consultants has 15 to 20 years of experience, providing our clients with access to a highly specialized team of sales/use tax professionals. At Davis Davis & Harmon, LLC we are committed to maintaining the highest standards in our talent pool. We work hard to meet our clients’ needs by ensuring that you view our firm as an extension of your company and a member of your team.

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