August 22, 2011 | Authored by: Vindicia Team Blogs
Hosting Nexus in Texas
It’s always been a bit of a grey area about whether simply hosting servers in Texas exposed an online business to the obligations to collect sales and use tax for Texas residents.
A recently enacted law that took effect in July aimed to clarify that if you’re only buying/renting software and hosting services from an internet provider in Texas and don’t have other classic components of nexus, then you have no tax obligation. This was passed to keep people like RackSpace and content delivery networks (CDNs) who host in Texas competitive. However, the Texas Comptroller of Public Accounts was out this week reminding online businesses that if they own hardware hosted in Texas, they have nexus.
Pity the digital service provider who has chosen to be PCI compliant on its own and hosts its commerce servers in centrally located and well connected Texas. With not a single Texas-based employee, the company will still have nexus because owning hardware (instead of renting it from, say, RackSpace) is a PCI necessity as the company has to able to destroy drives that have Cardholder Data on them. As a result, he’ll also have to collect Texas sales tax for his Texas end users.
Did I mention that Texas has probably the most complex sales tax rate structure in the world?
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