LUFKIN, Texas (KTRE) - The city manager of Lufkin has testified at the state capitol in support of changing Texas law to return sales tax revenue from online purchases to the point of delivery, rather than returning it to the city where the distributor operates.
Lufkin city manager Keith Wright faced those with an opposing viewpoint when he stepped into a hearing room earlier this month in Austin.
“Me and the mayor of Palestine were the only two from our point of view," Wright said with a chuckle. “And most of them represent these cities that have these sweet-heart deals.”
The ‘deal’ is attracting a manufacturer or retailer with a tax incentive.
It works like this. You go into the Lufkin Best Buy and purchase a computer. The sales tax stays right here in Lufkin. Order that same computer online and the sales tax goes to the city of San Marcos.
Which is one of about five Texas cities that struck an economic development deal with retailers and manufacturers over internet sales tax collections.
"It all comes into that one city. They keep 25% of that sales tax and they give 75% back," explained Wright.
It goes back to the retailer. Wright credits the cities for ingenuity.
“I understand totally where these guys are coming from because it's revenue."
The same kind of revenue that cities like Lufkin could use to support their infrastructure and services. So, Wright believes the sales tax revenue should go to the point of the delivery locale.
“If you order online, your point of delivery is at your house. And I don’t think that sales tax that the residents and citizens of Lufkin are paying should go to another Texas city. I think it should go to this Texas city,” expressed Wright. “My problem is that it’s inequitable, it’s not fair,” said Wright.
Palestine Mayor Steve Presley agrees. He states, "We don’t know how much we are losing. but we do know five cities alone are collecting internet sales tax of about $100-million. About half of that is going to companies and the other half is going to those five cities. That is just not fair. I think that the amount should be dispersed to where the product is going. "
"We should get our share of that sales tax, that our residents are paying."
Texas cities are receiving a return from Amazon sales.
Comptroller Glen Hegar is proposing to change the law to stop those isolated deals and have the tax revenue go to the city where the purchaser lives. Cities that struck up economic deals stand to lose millions if the law is amended.
Wright said it’s his understanding that the comptroller’s office will take that into consideration and develop a transitional period for those cities receiving the millions of dollars in sales tax revenue under the current law.