On May 13, 2011, the Texas Senate joined the House by passing H2403, which provides that online subsidiaries or affiliates of retailers with stores or other facilities in Texas have nexus with the state. The bill, which has not yet been sent to the governor, would be effective January 1, 2012 and would affect tax liability that accrues on or after that date.

Retailer engaged in business in Texas. The proposed legislation expands the definition of a “retailer engaged in business in Texas” to include a retailer that holds a substantial ownership interest in, or is owned in whole or substantial part by, a person who maintains a location in Texas from which business is conducted and if:

• the retailer sells the same or a substantially similar line of products as the person with the location in Texas and sells those products under a business name that is the same as or substantially similar to the business name of the person with the location in the state; or
• the facilities or employees of the person with the location in this state are used to advertise, promote, or facilitate sales by the retailer to consumers, or perform any other activity on behalf of the retailer that is intended to establish or maintain a marketplace for the retailer in Texas, including receiving or exchanging returned merchandise.

The legislation also provides that a “retailer engaged in business in Texas” includes a retailer that holds a substantial ownership interest in, or is owned in whole or substantial part by, a person maintains a distribution center, warehouse, or similar location in Texas and delivers property sold by the retailer to consumers.

“Ownership” includes direct ownership, common ownership and indirect ownership through a parent entity, subsidiary, or affiliate. “Substantial” means ownership of at least 50%.

“Seller” and “retailer.” The legislation expands the definitions of “seller” and “retailer” to include a person who, under an agreement with another person, is entrusted with possession of tangible personal property with respect to which the other person has title or another ownership interest, and authorized to sell, lease, or rent the property without additional action by the person having title to or another ownership interest in the property.

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